The long boom is over as the long bust looms

The housing picture remains "awful", as Nils Pratley put it in The Guardian. House prices are already 11% below last year's peak and falling faster than in the last housing bust, and this week the British Bankers' Association said the number of mortgages approved for new house purchase in July were 65% down on last year, albeit marginally up from June's all-time low. The mortgage credit squeeze has also taken its toll on the buy-to-let sector, with new loans sliding by a third year-on-year in the second quarter.

More house price falls ahead...

Could there be a rebound in demand and prices now that mortgage approvals appear to have stabilised? It's hardly likely. Lending criteria remain tight and given the expectation of further house price falls as the bubble unwinds, even those who can afford a mortgage "may choose to steer clear" of the market, as Seema Shah of Capital Economics told the FT. Meanwhile the overall downturn in the economy and the darkening unemployment picture is hardly good news for approvals and prices.

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Arrears and repossession are on the rise, and according to the British Chambers of Commerce, unemployment now up for six months in a row could hit almost two million, notes Patrick Collinson in The Guardian, presaging "far more serious house price falls" as forced sellers dominate the market. "It's going to be bloody", said Jeff Randall in The Daily Telegraph, given how many homeowners took on "unsustainable mortgage commitments they cannot undo". The "full horror" of the debt "boom-to-bust" is still unfolding.

...as recession deepens

So it bodes ill that growth has already fallen to zero, according to revised second-quarter figures, ending an unprecedented run of continuous growth since 1992. Consumer spending fell by 0.1% during the quarter, the first drop for three years. Investment spending shrank by 5.3% and manufacturing also fell.

Data this summer, such as a 17% annual drop in car registrations and a downbeat survey of business investment intentions, point to a further decline in growth, notes Capital Economics, so a recession is definitely on the cards. And there won't be a fast recovery. The economy can't count on support from overseas now that America and Europe are weakening. What's more, "banks will struggle" to raise enough money to shore up their capital ratios following credit and housing losses, so they will be forced to rein in lending, further crimping growth. Britain has had a "good innings", said Ian Campbell on Breakingviews.com. Now it's likely to be "in the pavilion for quite a while".