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Short Sharp Shock ?

Posted by: katalysis

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It isn’t that long since certain pundits were talking of a so-called “soft landing” for the housing market……hopefully none of them are airline pilots! As long ago as last August we predicted in these pages that the gathering turbulence in the credit markets would deprive the housing market of the buoyancy effect provided by cheap credit. This had allowed prices to reach stratospheric heights compared with incomes. Having observed the market first stall and then tip into a nosedive the question is how far and how fast it will fall before reaching a sensible cruising altitude. Unfortunately, the answers to these questions largely hinge upon behaviour in the Financial Markets. There the picture seems dire but is in reality somewhat mixed. Some Banks did not adopt the same attitude to risk that afflicted those at the helm of the likes of Northern Rock and Bradford & Bingley. Those who were more sensible are still making profits and once they have repaired their balance sheets will be ready to start increasing the volume of their lending. Realistically, next Spring is probably the earliest we can expect credit terms to start easing significantly. By then prices will have fallen some distance and may have a little way further to go. However, the bottom of the market is likely to be called rather faster than has been the case in previous cycles.
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