House Buy No Sure Bet
Goldsmith, Vivien, The Independent (London, England)
THE misery of the becalmed housing market has made all home owners wary of making a false move - so they make no move at all.
House prices tell one story about the temperature of the property market and the balance of supply and demand, but reports of price movements can give a false picture when they are based on very thin trading.
Just as sticking a thermometer in a glass of liquid changes the temperature, the monthly house-price reports from the Halifax and Nationwide building societies affect the direction of house prices as well as reporting what has been happening in the previous month.
Over the past year or so both have been reporting small monthly rises and small monthly falls with rises just about managing to outpace the falls. But the over-optimistic housing gurus have all been predicting better times around the corner - so sellers have been holding back for fear of parting with their homes ahead of a surge. For those who also plan to buy a new property this strategy is clearly flawed.
But the effect of the fear of a premature sale has left the market with potential buyers unable to find their dream home. Second-rate property, including repossessions, remains unsold, giving the market a dull feel, while the few good buys that come on to the market are snapped up at perky prices.
Barclays Bank started publishing its new index of mortgage activity last week. This monitors the cash flows through solicitors' accounts to give a picture of how much trading there is about. It shows a gently rising trend and predicts 1994 will show house purchases 7 per cent ahead of last year.
It is dangerous to jump to conclusions about the effect this is likely to have on house prices. Threatened interest rate rises provide a gloomy backdrop. But the longer the pause in activity lasts, the more vigorous the return to "normal" activity is likely to be when greed and optimism drive out fear and pessimism. …