Fool News: House Prices Stagnate
House price inflation has fallen to its lowest levels since November 2005. What's next for the housing market?
The annual rate of house price inflation fell below 5% in January, dipping to its lowest level since November 2005.
What's more, house prices remained broadly unchanged in January, with the average cost of a British home remaining stagnant at £197,244, according to the latest Halifax House Price Index.
The property market slowdown has led to annual house price inflation falling to 4.5%, more than half the levels of same period between January 2006 - 07 (9.9%).
In addition, the Bank of England reported that the number of mortgage approvals during the final three months of 2007 was 35% lower than the same period last year.
The reality of the slowdown in the housing market is also backed by Hometrack, which reported a 3.5% decrease in new buyers registering with agents compared to December. This was matched by a 2% month-on-month decrease in the number of properties being placed on the market.
This suggests that not only do fewer people want to buy a home, but also that fewer people are willing to put their property on the market in current conditions.
Still, it's worth remembering that house prices did stay stable in January, so we don't appear to be in a housing crash just yet. And although there was a slowdown in new buyer enquiries during the past three months, this is beginning to flatline, suggesting the downturn in activity is beginning to stabilise.
Halifax predicts that house prices will remain unchanged in 2008. It also forecasts two interest rate cuts this year, with one possible cut looming this Thursday.
It hopes the reductions will help prevent the economy slowing too sharply, and buoy the housing market to help prevent any sudden price drops.
So with the true picture of the housing market still unclear, the next question on everybody's lips is: To cut or not to cut?
We'll find that one out on Thursday.