The housing market has been struggling and as long as it does the entire economy will continue to struggle as well.  Recovery could become stronger if there were a boost to the housing market but many have been pessimistic about the future.  However, Monetary Policy Committee member David Miles last week in a speech stated that this is likely a type of "painful transition from a position where the cost and availability of mortgage debt was unsustainable" versus an ongoing decline in the housing market.

He stated that the overall state of the housing market with its lack of buyers and dropping house prices was more of a transition than what most analysts view as consumer low confidence and the inability of buyers to obtain funding.  Most ails of the housing market have been blamed on tight lending, the inability to obtain deposits, and the lack of confidence in the economy keeping buyers away.

Miles said: “Neither of these hypotheses suggests things will be easy – but the first is less bad. On the first view, it is as though we have bad toothache but at least we are in the dentist’s waiting room. It is not a nice place to be, but we will not be here for too long. On the second, we have bad toothache and there is no dentist in sight.

“I believe the evidence is more consistent with the first – the less bad – of these interpretations. That does not mean that the situation is easy since the transition is difficult... and its length is measured in years.

“The impact on the housing and mortgage markets over the past few years has been greater than is usual even in a bad recession – even a recession that has been as deep as we have seen. And that is because this recession started with the near-collapse of the banking system.

“One piece of evidence that what we are seeing in the UK housing market is transitional and is seen by existing home owners as transitional – rather than a permanently new state of very sharply lower transactions and permanently reduced first-time buyers – is what has happened to house prices... In real terms they are about 20% lower.

“If housing demand were thought to be permanently down by as much as the decline in first-time buyers since 2007 I should expect the fall in house prices to have been far, far greater.”