House prices could fall back a long way after their excessive rises

Last week the penny finally dropped about the housing market. The Halifax numbers were awful. A 2pc fall on the month was bad enough, but this came after earlier large falls.

Roger Bootle, The Times OnLine - 14 July 2008

Over the past three months prices have fallen by almost 6pc - which translates into an annualised rate of decline of over 20pc. That is the fastest on record. But how large will the total drop in prices be?

The place to start is with an analysis of why this is happening. The essential reason is that houses had become ludicrously over-priced, to the point where, in order to be able to afford one, you either had to own one already, to mortgage yourself up to the eyeballs or to win the lottery.

Many British people seem to believe that it is somehow inevitable that house prices rise by 10pc, 15pc or 20pc every year, thereby squirting money around for all who have been lucky or canny enough to position themselves under the shower - full article