One of the UK’s largest building societies, Nationwide, reports that house prices dropped by 1.7% in May versus April, the biggest decline in eleven years.
On the face of it this looks critical and paves the way for big price falls in the coming months yet there is a big caveat or two here. Firstly, one set of numbers doth not a trend make and we’ve seen other oddities in the past where, for instance, the Halifax bank last year reported that prices had increased by 5% in one month alone. Clearly a skew and which prompted them to immediately alter their methodology for future indexes.
But also remember that the volume of mortgage applications from which the Nationwide take their data is currently way down on normal levels. Less than half in fact and therefore subject to all sorts of inconsistencies and wonky readings.
Don’t panic. Our expert’s view remains that in the medium term and certainly the long term, prices will go higher given pent up demand and the low cost of mortgage monies.
On Friday the Halifax reports on their index. Expect a similar scare story from their data on a parallel basis to today’s Nationwide figures.
But it’s a temporary scare.