John Fitzsimons is confident house prices will be higher at the end of 2009 than they were at the start of the year. But is this a recovery - or just a dead cat bounce?
Another week, another positive house price index.
This time it came from Nationwide, who recorded a 1.3% increase in house prices - the third straight month in which it has reported a jump in house prices.
Indeed, over the last three months - generally seen as a better indicator of long terms trends - house prices rose 2.6%.
Despite this, according to the survey, house prices remain 6% lower than last year, though again this is still an improvement on last month, when the decline was 9.3%.
The 'unthinkable' rise in house prices
However, for me the interesting thing is the following quote from Martin Gahbauer, Nationwide's chief economist: "For the first seven months of 2009 as a whole, prices have risen by a cumulative 1.3%, suggesting there is now a reasonable chance that prices could end the year slightly higher than where they started."
No doubt many of you disagree with this statement. We recently conducted a survey of 500 lovemoney.com readers to get your predictions for house prices over the next 12 months and found that four out of five of you (79 per cent) think that the housing market will fall over the next 12 months. In fact, over a quarter of you (26 per cent) said you think it will drop by a staggering 11 to 15 per cent.
But I, for one, completely agree with Nationwide's assessment. Despite my reservations earlier this year, I now think that house prices will finish the year up on 2008.
The recovery has some momentum
So why have I changed my mind?
Figures from the Council of Mortgage Lenders last month showed that gross mortgage lending in June jumped 17% to £12.3bn, up from £10.5bn in May. Yes, it's still very low compared to a couple of years ago, but it's certainly on the up.
There has also been positive news from the Bank of England, which reported mortgage approvals in June rose to 47,584, up from 44,169 in May, and the highest figure in over a year. It was the fifth straight monthly rise in approvals.
And the Royal Institution of Chartered Surveyors' monthly survey for June found that more surveyors expected price rises than falls - the first time there has been a positive balance in over two years.
This was followed by the Land Registry pronouncing house prices had risen for the first time since the start of 2008.
Even the forecasts for the number of repossessions likely to take place this year have also been slashed.
There have been positive rumblings about the housing market for some time now. Speak to an estate agent or mortgage broker, and most will be cautiously optimistic about business. Deals are starting to go through with a little bit of momentum, and hope is returning.
In other words, the housing market does seem to be recovering....
Dodgy foundations?
....BUT the scale of this recovery is significantly limited by the level of mortgage lending currently underway.
The fact remains that unless you are the most perfect of prospective borrowers, with a significant deposit and great credit rating, the mortgages available to you are pretty limited, and that's supposing you actually get past the lenders' stringent checks.
The Royal Institution of Chartered Surveyors has already reported that even when a sale is agreed, 10% fall through because the buyer is unable to get a mortgage.
The Council of Mortgage Lenders has described the mortgage situation as 'stagnant', highlighting that the adjusted net lending figure for June is virtually unchanged from May, which was itself the lowest adjusted figure on record.
Indeed, it was also far from alone in attributing rises in mortgage lending figures to seasonal factors, rather than being any real sign of a permanent pick up in housing market conditions. And as soon as business does start to pick up, lenders withdraw their most competitive products. They still can't - or don't want to - lend as much as they used to.
Of course, I'm not suggesting we should go back to the way things were in 2007 - it's no bad thing that some of the practices lenders were happy to employ back then have disappeared. And accepting that some people are simply not suited to homeownership is a move to be welcomed.
Another fall to come
So, the fact remains that the foundation for this current recovery is shaky at best.
Those potential borrowers with smaller deposits, or the odd missed payment on their credit rating, are still locked out of the housing market, and it doesn't look like that is going to change any time soon.
And with unemployment expected to continue to increase, those foundations are going to come under an awful lot of pressure in the coming months.
My colleague Cliff D'Arcy wrote earlier this month about just what an impact unemployment can have on the value of a property in How job losses affect house prices, which I would certainly recommend giving a read.
While we have undoubtedly reached the bottom of this house price crash, it would take a very ambitious person to predict that there will not be a second fall next year, once the unemployment figures really hit home.
But perhaps you disagree. Perhaps you think the recovery is safe as houses - or safe as something, er, safer. Whatever you think, don't hold back! Use the comments box below to tell us what you think the future really holds for house prices...
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