It's bad news for homeowners, was the standard response to yesterday's revelation that house prices have fallen for the third month in a row. But not everything may be as it seems. It is true that house prices are at their lowest since September 2009, when prices began to recover strongly as Britain came out of recession. But even with last month's 0.1 per cent fall, according to the Halifax House Price Index, house prices are less than 1 per cent lower than at this time last year. So the first thing to say is that prices haven't fallen by as much as some economists predicted.
Moreover, though prices are down because people put off moving at a time of looming job losses and economic uncertainty, they are also lower because the banks are rationing mortgages, a situation which, in the longer term, will change. And current low interest rates for borrowers (the Bank of England kept them at 0.5 per cent yesterday) are likely to stem the flow of distressed sales.
In any case modestly falling house prices are only a problem if we predicate our view of the economy on the interests of the older generation who have large amounts of equity tied up in their homes. For some of them, a fall in the cost of bricks and mortar could bring negative equity. But for younger people it will make buying a house a little more affordable, and for employees it will make it easier to move round the country in search of a better job.
The real problems in the economy are not a drop in the price of homes, but rather muted growth, an increasing fiscal squeeze, low consumer confidence, and the threat of higher unemployment. And the major problem for first-time buyers is less house prices than the banks' requirement that they raise much larger deposits.
Overall, therefore, a small corrective in the balance of housing supply and demand – which has so long been in favour of sellers – is to be welcomed. It is time we British ceased to regard homes as cash cows and looked at the needs of both society and the economy with a wider perspective.