The numbers are just not there to give hope of not going into a double dip recession. House prices are slumping and home loan approvals are practically absent. Also, data from the Bank of England says, lending is about half the level needed for the market to be considered “healthy”.
Conditions are pointing more and more to the possibility of quantitative easing, which is pumping money into the economy to prevent a total meltdown.
Andrew Goodwin, senior advisor to the Ernst and Young ITEM Club, offered his insightful opinion, saying: “This provides further confirmation that the housing market is heading for a double dip.
“The figures for mortgage approvals, a proxy for activity, tend to be well correlated with prices and the latest figures clearly point to falling prices over the second half of this year and into 2011, particularly now that supply shortages have eased.
“Unemployment levels are high and could rise further as the public sector spending cuts begin to take effect, while household income growth and affordability are poor.”
With consumer confidence starting to stumble, the report coming in the next couple of days about house prices should be anything but encouraging. There has been a weakening trend in effect since the beginning of the year. The symptoms of falling house prices has been obvious over the past few months, and this month should end up being no different. New buyer inquiries are at their lowest since the end of 2008.
Even more disturbing news has been released by Capital Economics. They found that prices could drop by more than 25 per cent by the end of 2012. Pricewaterhousecoopers also has put odds on the fact that homes in the year 2020 will be less than in 2007.
Double dip recession or not, lenders must figure out how more first time home buyers are able to get through the lending criteria and jump onto the property ladder now versus later.