The latest Nationwide house price survey for August recorded the fourth rise on the trot and puts the average price of a house £12,500 higher than in February. Surely this means the slump is over and the price of houses is back on the way up?

Well no, or should I say not necessarily.

That is the view of most smart and informed people I talk to and also the view of Martin Gahbauer, Nationwide’s Chief Economist.

His view is: “If the various monetary and fiscal stimulus measures that have been introduced over the last year are successful in reviving growth on a sustained basis, then inflationary pressures will eventually re-emerge and necessitate an increase in interest rates to more normal levels.

“When this happens, it will probably have the effect of releasing additional supply back onto the market and dampening the recent rise in buyer interest. Under such conditions, the strong price increases of recent months would become difficult to sustain.

“At the moment, a rise in interest rates is probably still some way off. However, the eventual exit from exceptionally loose monetary policy could make the recovery in the housing market bumpier than some might expect after the last few months of price increases.”
It is encouraging to see so much caution being spoken in relation to the house price rises reported in recent months.

The great temptation is to call the corner. But to call the end of the slump too early could lead to more harm than good, whatever anyone says about confidence.

The reality is no one really knows whether we have seen the bottom of average house prices across the country. In some parts of Britain, perhaps we have, in others the chances are that prices will fall further.

The irony of the current situation is that the recession, which one might expect to cause homes to flood of homes for sale, has frozen the market.

The frightening scale of the recession has led to ultra-low interest rates. This in turn has meant a reprieve for those who may otherwise have had to sell up. So those who might have been struggling to afford their mortgage and looked to trade down or out of the market are sitting tight.

They can afford to stay where they are because they are pay far less in mortgage payment, but they have little incentive to move, especially when you factor in the associated charges. Also a fair portion may be in negative equity and so would struggle to get a mortgage if they tried to move.

To add to the freeze on the supply side is the wind-chill factor of movers holding onto their existing homes and looking to rent them out until prices once more rise. Again this is an unusual feature of this recession facilitated by the ultra-low interest rates and the fact that there is a more established private rental market.

All this as has frozen the supply side. So the choice for those looking to buy (the demand side) is limited. So prices rise, or are at least propped up above where they might otherwise have come to rest.

So what happens when the thaw on the supply side arrives? Well this all depends on how quickly supply increases, the state of the economy and how this influences the level of demand.

But here is a question to ask yourself. Do you think house-price-to-earnings ratios at historically high levels are sustainable in an economy where unemployment is at historically high levels and where, in patches of the economy, wage inflation is going sharply into reverse?
This is why, quite wisely, caution rules in the house price debate.

But lest you feel I am being too downbeat. Higher house prices today probably means a few more homes will be built. Now for the construction industry that is not a bad thing.