The simple answer is no.
First of all, monthly house price changes are volatile and unreliable. You’d be better off looking at quarterly figures.
Second, just look at the chart below. It follows real house prices (adjusted for retail price inflation, blue line), from 1975 to early 2009. The red line represents the long-term trend of 2.9% average annual growth. Average real house prices are currently right on that trend line...
You can also see that house prices have a tendency to over-shoot in a boom and under-shoot in a bust.
The faster they rise, the harder they fall
Back in the early 1990s, a period of strong economic growth with a correlated housing boom eventually gave way to the collapse in house prices (red box). No one wanted to borrow at sky-high interest rates and house prices fell 30% from the peak.
This time around, we may have near-zero interest rates, but lending is painfully tight. That means there is still not much chance of sustained demand for houses. Also, with unemployment on the up, repossessions are likely to keep rising - meaning there’ll be plenty of supply.
The latest monthly house price rise looks like a sucker’s rally. Brace yourself...
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