Our best chance of staying out of recession may be to back the Treasury against the Bank

Housing crashes are always worse than expected. A mood in which people believe that property prices only ever go up is usually a reliable leading indicator of a crash. The psychological factor in housing booms (and busts) is too little noticed, presumably because it is difficult to pin any kind of numbers on a zeitgeist. Still, it matters greatly.

Sean O’Grady, The Independent - Sunday, 27 July 2008

An only mildly muted state of irrational exuberance was, roughly, where we stood at the start of this year. The consensus among observers – City economists, the CBI, the mortgage banks and the academics – was that property prices over the next 12 months would be “broadly flat”.

The team at the Halifax, for example, put out a press release in the following confident terms: “The UK economy is in sound shape. Strong market fundamentals, a structural housing supply shortage and pent-up demand from a large number of potential first-time buyers will support house prices, preventing a sustained and significant fall.” Even allowing for a vested interest, that was a truly brave face - full article