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Number cruncher

Will house prices fall again?

By Stephen Nickell   January 2010

Ratings agency Fitch made a big splash recently, forecasting the housing market will crash again. House prices have been rising steadily from their low point in February. The Fitch forecast is based on the notion that the ratio of house prices to incomes will ultimately revert to its long-run average. This involves a fall in house prices of around 20 per cent from their September level.

Two questions spring to mind. First, if house prices have got to fall, why are they moving in the wrong direction? It is not because of mortgage availability. Deposits required of first-time buyers remain…

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