Blanchard Consultancy – the independent construction consultant

The housing market could define Gordon Brown's leadership more than any other area of policy. Tony Blair promised education would be his priority; Mr Brown's slogan was not quite "housing, housing, housing" (he preferred some clever-clever guff about "passions" and "priorities") but at the outset he promised 3m new homes by 2020, that environmentally friendly eco-towns would be built, and that the planning system would be streamlined so all this could happen. No doubt about it: he would be the housing prime minister.

All those hopes are now so much dust, thanks to the credit crunch. Housebuilders are either going bust or downing tools, while mortgage lenders are barely lending. Mortgage approvals are down 70% from this time a year ago, according to a report yesterday - which will surely be reflected in sliding house prices over the next few months.

This is bad news for the housing prime minister; but it is terrible for the economy, whose strength he has boasted about so much. That the home-owning British feel wealthier when their houses go up in value may be regrettable, but it is also true. The housing downturn can already be felt on the high street - as it worsens it will keep sending shockwaves through the UK's lopsided economy. A drop in house prices and a calmer mortgage market are vital, as even ministers agree; but a headlong fall in prices and a near-shutdown of the mortgage supply naturally worries policymakers.

The government's interim report on the mortgage industry, published yesterday, is part of Mr Brown's attempt to thaw out the housing market. No other party has tried to tackle the problems in the mortgage market head on. The Lib Dems' Vince Cable is the patron saint of financial re-regulation, but even his policies are a bit thin here. Yet on any list of pressing problems that politicians need to think about, the mortgage drought must rank very high.

Article continues at Guardian Comment is Free

Labels: Gordon Brown, Housing Minister, housing policies, property analysis, property prices, property trends, uk housing, uk mortgage market, US house prices, Vince Cable

Housing is back in demand in the US - especially when homes can cost only £10,000, writes James Quinn

Other than being home to cereal giant Kellogg's, the town of Battle Creek is little known outside the Michigan bible-belt in which it sits.

Set on the western side of the "Great Lakes State", the 53,000-person municipality appears to have seen better days. Take a look at the Battle Creek Enquirer. Squeezed between small-town stories about flash floods are bleak economic tales. The local school board has voted to lay off 17 teachers from the start of next term as it tries to find $1.5m (£760,000) in savings due to a string of budget cuts, and residents are complaining about the state of "crumbling roads".

This is just one town in a state which has been in recession for the past five years, where unemployment is running at 10pc, and which in March was ranked at number six in a nationwide state-by-state foreclosure league table.

But Battle Creek is different. Home sales here are rising.

In May, the town saw a 13pc increase in existing home sales - against a 2pc rise nationally.

Although local records have not yet been compiled for June, there is no suggestion sales have slowed.

Matt Davis, of Rosemary Davis Realtors in the town, said: "I think that people are finding fair and good deals that suit them. Maybe that's an indication that people have a bit more confidence."

Mr Davis, president of the local realtors' association, added: "A lot of the problem in the housing market is negative perception. People's psyche gets affected."

The sales numbers in Battle Creek show that people's psyche is beginning to turn, albeit spurred on by low prices. The number of low-end sales has doubled in the past year, with houses offered at a staggering sub-$20,000 (£10,000) being the most popular. One house price was so low the purchaser used a credit card to buy it.

According to Lawrence Yun, chief economist at the National Association of Realtors, other towns experienced higher sales activity in May - the most recent month records are available for - including Sacramento and parts of the San Fernando Valley in California, and Sarasota in Florida.

Dennis Lockhart, president of the Atlanta Federal Reserve, believes the US housing market might finally be healing: "There are early and tentative signs that a bottom may be forming in some housing markets."

Before the green shoots of recovery are able to sprout, however, the economic landscape must be fertile enough to encourage growth.

Story continues at The Telegraph online

Labels: Battle Creek, James Quinn, property analysis, US house prices