In recent months, the housing market correction has gathered momentum. The economy is also poised for three years of sub-trend growth and unemployment looks set to reach a 12-year high. We believe that house price falls will be extended into 2010 and, as a result, average house prices could fall 35% from their late-2007 peak. Although the timing of the adjustment is hugely uncertain, we now forecast a 15% drop in house prices this year, and falls of 12% in 2009 and 10% in 2010.
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