This month the Halifax House Price survey suggests that house prices dropped by 3.6%…

How can that be?

Well, it’s a handy headline, but Halifax also say that for the last quarter – Jul/Aug/Sept 2010 house prices fell by only 0.9%. That’s not very headline grabbing and it’s natural for journalists to grab the headline figure with no thought to the (fairly uninteresting)  background figures.

Halifax collect their data from mortgage applications from people buying houses who use Halifax.

Now, this data could be skewed a little by circumstances.

Here’s a couple of examples.

If Halifax have really good 1st time buyer rates and poor large mortgage rates they will have a larger number of smaller properties being mortgaged, than large, making the average seem lower.

Halifax have a better high street presence, with more branches in the North than the South (This partially explains why Nationwide always has different figures to Halifax becuase Nationwide have a bias towards the South). It may be that the ‘North/South’ divide is in action, it often is where house prices are concerned.

What do I think has really happened?

Well, the supply of houses increased a bit in the last quarter with the removal of HIPS, so that probably accounts for the slight fall in values.

I seem to recall that Halifax reported really quite large rises in house prices in Jul and August whereas Nationwide actually said the reverse – small falls. This could be the reverse of my ’1st time buyer’ point in action.

Anyway, if Halifax said 2 rises and then a fall, whereas Nationwide report a slight fall both months,  it seems to me that September’s Halifax figures are just correcting the last 2 months and although Halifax and Nationwide report different figures, over the quarter they will probably be close to each other.

Should you be worried?

I don’t know, but I’m not.