April 11th, 2010 
Emily Young 
There’s plenty of talk about house prices returning to their long-term average – well this Nationwide chart says they already have.
Below is Nationwide’s long-term real house prices graph taken from its March 2010 report – it plots the change in home costs adjusted for inflation.
(If you are now about to leave an angry comment, please read the PS at the bottom)
The graph shows that real house prices are already back at trend level, ie where they should be if you believe that things return to trend.
What hasn’t happened, which you would expect in the normal cycle of boom and bust, is that the real house price line has plummeted below that trend level before staging a slow and gradual climb back up to the long-term trend.
To the house price crash gang this is extremely troubling. They were looking for that red line to just keep on heading down – not have its fall sharply arrested before rising again in mid 2009. What stopped it was the slashing of the base rate to an unprecedented low of 0.5% and a huge package of support for banks in the form of £200bn of newly printed readies from Quantitative Easing and massive mortgage guarantees.
That stopped the wave of forced selling that usually arrives with a bust and those in charge have now given themselves a nice big pat on the back and appear to be relatively unconcerned about kick-starting another boom.
(Note the lack of concern over house price inflation being back at 9% annually and another bubble already gripping London and the South East).
But where next? Logic and common sense says that red line goes down soon: but the UK’s propensity for extreme property mania and the lack of a prolonged painful reminder against overextending says it will head up before it makes a substantial move down once more.
Whatever happens, buying a home in this country remains a high stakes gamble – personally I gladly swap that for stable prices and the decision over what size roof to put over your head being a little less like taking a punt in a casino.
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Tags: Already, House Prices