Is The House Dip Healthy?

I am terrified to pick up the paper or switch on the news, are we facing housing market Armageddon????

According to Nationwide, the market has stalled.House prices falling 0.9% in August, but are still £3,000 up on the start of the year.

Are we all over reacting, prices rose at a heart fluttering pace only to come back down again, perhaps this is all just a healthy correction.

Nationwide said the average home is now worth £166,507 and the property market appeared to have stagnated following the past year's surprise rally in house prices.

Annual property inflation has slipped back to 3.9%, after hitting a recent peak of 10.5% in April, while over three months house prices are flat.

The building society said that while the market was easing, house prices were unlikely to fall rapidly as they did in 2008, with the evidence instead pointing to a period of stagnation which would improve affordability.

Recent market trends remain consistent with an unwinding of the supply-demand imbalance that drove up prices for much of the last year.

As more sellers have returned to the market, buyers have a greater selection of properties to choose from and more bargaining power with which to bid down asking prices.

There is little evidence of distressed selling, however, with the Council of Mortgage Lenders' second quarter figures showing another drop in mortgage arrears and possessions.

At present the trend for price decline is likely to remain modest.

A run of downbeat news emerging from the property market has led to renewed forecasts from some economists that prices will fall once more.

Howard Archer, chief UK economist at analysts IHS Global Insight suggests prices will be 10% lower than their mid 2010 levels by the end of 2011. His forecast was echoed this week by Andrew Goodwin, senior economic advisor to the influential Ernst & Young ITEM Club, who said annual price falls of between 3% and 5% will be seen over the next 12 months, before house price stabilise.

However, economists and property watchers agree that the effects of a slowdown will be felt differently across the UK. The threat of spending cuts and public sector cutbacks is more likely to affect areas outside London and the South East and hit them harder.

Meanwhile, in the more buoyant capital and commuter areas, good properties in desirable locations are likely to prove most resilient.

Last year, there was a major disconnect between the property market and the economy. House prices rose at a rate that was simply unsustainable and a degree of correction was always on the cards.