The Halifax house price index for May is out, and like the Nationwide survey last week, it is positive. The 2.6 per cent jump in house prices during May was the sharpest month-on-month jump since October 2002 and is bound to fuel speculation that the housing market is turning.
Although, as Howard Archer of IHS Global Insight notes, it is not uncommon for there to be months of rising prices when house prices are trending lower. Indeed, the Halifax itself reported that house prices rose by 2.0 per cent month-on-month in January, but they then fell sharply during February-April. And remember activity in the housing market is very low.
Anyway, here are the key points.
• House prices increased by 2.6% in May. This increase followed three successive monthly declines of between 1.8% and 2.3%.
• Prices in the three months to May compared to the previous three months - a better indicator of the underlying trend - were 3.1% lower. The rate of decline on this measure has slowed however, from the 5-6% recorded consistently between June 2008 and January 2009.
• There are some tentative indications of a possible stabilisation in activity, albeit at a very low level. Bank of England industry-wide figures show that the number of mortgages approved to finance house purchase — a leading indicator of completed house sales - increased by 19% between the final quarter of 2008 and the first quarter of 2009, on a seasonally adjusted basis. Approvals in the three months to March were, however, 45% lower than in the same period in 2008.
• The house price to earnings ratio — a key affordability measure - has declined by from a peak of 5.84 in July 2007 to an estimated 4.36 in May 2009. The ratio is now at a level last seen in January 2003. The long-term average is 4.0.
