With Halifax announcing a dip of 1.5 percent in house prices between January and February 2010 and the continued slowness of the economic recovery, the housing market scene is all set for a "double dip". The announcement from the Halifax followed the one percent dip announced by the Nationwide and is bad news for homeowners. It increasingly appears that the dip is more fundamental than merely a correction of the December boom.

Both mortgages and house prices showed a strong surge in December 2009 as buyers hastened to take advantage of the stamp duty exemption before it came to an end so that some normal January activity was pushed back into December. A correction was indeed due but analysts now increasing believe that it was caused by more fundamental factors such as the increase in the supply of property being placed on the market. The reluctance of house owners to take losses last year actually helped to stabilise prices and the contribution of the easing of mortgage rates as a result of the cut in the Bank of England rate is not likely  to continue this year.

"The housing market recovery was already losing steam in late 2009, consistent with our views that it remains overvalued," noted Ed Stansfield, the chief property economist at Capital Economics. "Meanwhile, recent news from the rest of the economy, and the labour market in particular, has been mixed. And, although marginal, the short-term supply and demand imbalance in the market does appear to have eased in the past two to three months.

"The house-price recovery has run far ahead of the economic fundamentals. As such, the Halifax price fall may ultimately be an early sign that last year's house-price recovery is beginning to unwind."

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