The housing market has seen difficulty in the beginning of 2011 and economists do not believe there will be large gains by the end of the year. The economy has been slow to get any momentum going in the recovery. An increase in taxes in the beginning of the year, warnings of interest rate hikes, public sector spending cuts, job losses, tight lending in the housing market, and growing inflation are all having an effect in lowering consumer confidence and it is impacting recovery. There are those that cannot obtain mortgage lending and others that are choosing to stay away from mortgage debt in such a difficult economy.

First time home buyers have been missing from the property ladder which has caused a slow down in those moving upward. Without the starter home buyers those that want to upgrade do not have buyers so they can do so. Despite more affordable house prices there have been very few that have been able to purchase due to constricted lending.

Economists at both Nationwide and Halifax have forecasted that 2011 will end with a flat market. Further decline in house prices of 2.0 per cent are expected nationwide. There has been a widening divide in sales and house prices in the North and South and it is expected there will be continued widening throughout the year with greater declines in the North.

Some economists expect there will be a larger decline in house prices believing that the housing market is still over-valued. Ed Stansfield, an economist with Capital Economics, said, "The housing market is still over-valued by 15-20%. The only question is how fast and by how much they fall.

"The public sector spending cuts are only just getting underway and private companies will not be able to pick up the slack from the public sector. Consumer confidence remains very low, so demand for mortgage products is not going to go through the roof and mortgage defaults rising is a cause for concern. Lenders are commercial organizations and can't afford to absorb losses.

"The slightest thing, a modest rise in unemployment or a change in sentiment, could be enough to undermine house prices at current levels. House prices are only going one way – down."