The Nation’s Psyche and the Hysteria of Falling House Prices
July 19, 2023 4:47 pm
In the realm of personal finance and investments, few things hold as much significance to individuals as the value of their homes.
House prices are deeply intertwined with the fabric of society, often becoming a central element of national identity. So, it’s no wonder that discussions about falling house prices can ignite a sense of anxiety and even provoke hysteria at times.
Let’s explore why this phenomenon occurs and why it reveals the intrinsic connection between house prices and the nation’s psyche.
Emotional Attachment to Homeownership:
For many people, owning a home is not just a financial decision; it’s an emotional milestone. Owning property symbolises stability, security, and a sense of belonging. Consequently, the fluctuation of house prices can evoke strong emotions, such as fear, worry, and distress.
The idea of losing one’s investment or the possibility of being priced out of the market can trigger a deep-seated unease that resonates with the collective consciousness.
Wealth and Social Status:
In many societies, the value of one’s home is intricately linked to social status and wealth. Rising house prices are often celebrated as a sign of prosperity and success while falling prices can generate a feeling of loss and diminished standing.
The notion of losing one’s financial foothold can create a ripple effect, affecting individuals’ perception of their overall well-being and societal standing.
Economic Implications:
The housing market has a significant impact on national economies. A decline in house prices can have widespread consequences, including reduced consumer spending, declining construction and real estate sectors, and potential financial instability.
The repercussions of a housing market downturn can amplify concerns and fuel the collective hysteria surrounding falling house prices.
Media Influence and Speculation:
The media plays a pivotal role in shaping public perception, and the coverage of housing market trends is no exception. Sensational headlines and speculative reports can exacerbate fears and amplify the sense of hysteria.
We saw this in 2020 and at the end of 2022, with some commentators suggesting market corrections of up to a 20% fall in values. These failed to materialise, although 2023 has started to see stagnation and the start of slight falls.
The extent of those falls is way below the hysteria, and even the two largest building societies can not agree on the extent, with Nationwide suggesting a year-on-year fall of -3.4% to May and the Halifax reporting a more modest fall of -0.1% year-on-year to April*.
Still, this is a far cry from the double-digit annual increases seen in 2021 and 2022. People tend to pay close attention to news regarding the housing market, often interpreting it as a barometer of economic health.
The constant bombardment of news, opinions, and forecasts can intensify the emotional response to any indication of falling house prices.
House prices have become deeply ingrained in the nation’s psyche, reflecting aspirations, financial well-being, and social status.
The fear and hysteria surrounding discussions of falling house prices stem from the emotional attachment individuals have to their homes and the broader implications for the economy.
While it is natural to feel concerned about significant shifts in the housing market, it is essential to maintain a balanced perspective and consider the broader factors at play.
Understanding the complex interplay between house prices and the nation’s psyche can help mitigate the potentially irrational reactions that can arise during these discussions.
We know that the latest bank base rate increase has hit the market much harder than those before it, but the market does remain active.
It is far more price sensitive than before and you should listen to your agent, and do not be fooled by those quoting unrealistically high asking prices, which can only end in disappointment.
*”House Price falls at the fastest pace in nearly 14 years, says Nationwide” 1 June 2023