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House price equity confusion

publication date: May 7, 2009
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House prices: the size of the slice served up as a loss of value on your house seems to depend on who you listen to. Latest figures from Nationwide and Halifax for April show very different falls; Nationwide says 0.4%, Halifax says 1.7%. On a house worth 300,000 In March that means £1,200 lost if you read Nationwide’s index and £5,100 lost if you prefer the Halifax research.

No wonder homeowners are sitting tight. We have become used to deciding roughly what our homes are worth and calculating what we can afford to do next – now you may just put a finger in the air.

"We think conditions will remain challenging over the next few months. The fact that the economy is in recession and unemployment is rising sharply is not a great recipe for demand," said Halifax chief economist Martin Ellis.

Fionnuala Earley, Nationwide's Chief Economist, said: “The price of a typical house fell by 0.4% in April. This reverses some of the rise seen in March, but is in line with our expectations, given the current economic conditions. April’s decline leaves the average price of a typical house at £151,861, down 15% from 12 months ago. The 3-month on 3-month rate of change, generally a smoother indicator of the short-term trend in prices, improved to -3.1% in April from -4.1% in March.”

Hometrack tells us not to be fooled by talk of green shoots. Richard Donnell, Head of Research at Hometrack, says that the recent increase in sales is good news but should be greeted with caution as the current figures indicate annual sales of 476,000 compared to the ‘normal’ market figure of 1-1.5m sales per year.

Their research also shows that the average vendor is accepting 88.8% of the asking price. Going back to the £300,000 house, that has just dropped 5,100 if you take Halifax’s figures, it would now be marketed at £295,000 with the vendor, if he is Mr Average, accepting £262,000. If you then take the figure of 15% as the fall in house prices since this time last year (Halifax), he may have set the sale price at around £345,000 in April 2008. Selling in May 2009, at £262,000, the vendor is looking at a loss of 83,000.