A longer, slower adjustment seems in store

We have not changed our view that the housing market is overvalued. But recent developments in the housing and macroeconomic data point to a slower, more drawnout correction than we were previously forecasting. Thus, we have revised our forecasts. We have pencilled in a 5% fall in house prices this year and a 7% fall in 2012. However, that means that housing would still be overvalued at the end of 2012, leaving scope for further falls in later years.