The Housing Market: Reasons to be Cheerful

The Council of Mortgage Lenders Quarter 3 Report will not be available until the end of this month; however, with a  Quarter 2 report headline that reads Possessions Fall and Arrears Flatten, things looked good going into the third quarter.  We will, of course, be reporting in full when the latest figures are issued later this week; however there is optimism, albeit faint, in the the CML market commentary for October 2009 .

• We have seen some activity in the wholesale funding markets, allowing several highly rated institutions access to new funding.
• Confidence in the housing market and economy at large has improved, and house prices have now retraced much of the ground lost over in the past year.
• Unemployment has not risen by as much as might have been feared – we have seen the first slowing in the rate of increase in the current cycle.
• While the number out of work is rising, it is possible that the peak may be rather lower and earlier than previously expected.
• Low inflation figures support the view that monetary policy can remain supportive for some time to come.

Being realistic, however, recovery will be slow and, inevitably, work on rebalancing the public finances won’t start until after the general election.  This means that growth in the economy will be limited until Spring 2010.

The Job Market: More Reasons to be Cheerful

In the grand scheme of things, it is the job market that affects the housing market; in very simple terms, when people are fearful of losing their jobs they stop spending and there is less money in the economy.  People tend to ‘improve rather than move’ and the market stagnates.  And, of course, mortgage arrears rise, leading to an increase in the number of properties being repossessed.

For these reasons, the recent unemployment figures are encouraging.  Although the number of people out of work continues to rise – by 88,000 to 2.47 million in the second quarter of 2009 – this was the smallest increase in over a year.  Although due in part to employers and employees exploring alternatives such as pay freezes and reduced hours rather than redundancy, a lower likelihood of being made unemployed should boost consumer confidence.

The CML updated forecasts for the year, which will be released on 12th November, should make interesting reading.