May mean nothing
As a nation obsessed with house prices, we tend to use them as a barometer of economic optimism. With there not being that much optimism about these days, the announcement by the Nationwide building society that prices went up for the first time in a year and a half came as a welcome surprise.
"The price of a typical house increased for the first time since October 2007, rising by 0.9% during the month and reducing the annual rate of fall from -17.6% to -15.7%," said Fionnuala Earley, chief economist at Nationwide. "This brings the price of a typical house to £150,946."
Earley was quick to attach the requisite caveats, however. "The moderation in the annual rate of fall is somewhat distorted by conditions last year and so it would be unwise to draw strong conclusions from the significant slowdown in the annual rate of fall. Equally, while the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached," she said.
It was also revealed that the number of monthly approvals rose for the first time since May 2008 to 37,900. However this is still well below the monthly average since 1993 of 94,000.
While on one level this may be interpreted as potentially positive news, it must be remembered that it comes in the context of interest rates being at their lowest ever level. Given that the root of this recession was a housing bubble fuelled by low interest rates, increasing house prices can no longer necessarily be considered good news.
UPDATE - 10:15 3 April 2009:
The Halifax building society reckons house prices dropped by 1.9 percent in March. However it observes that the rate of decline appears to be slowing and the ratio of house prices to earnings is at its lowest since 2003. This means, in theory, that houses are more affordable than they've been for a while right now.
