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Persimmon share price outlook as UK house prices tumble

By:
on Nov 7, 2022
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  • Persimmon share price has crawled back in the past few weeks.
  • UK home prices continued unraveling in October.
  • Persimmon will publish its results on Tuesday.

Persimmon (LON: PSN) share price has crawled back in the past few days as UK home prices crash. The shares rose to a high of 1,327p, which was about 20% above the lowest level this year. It has crashed by more than 47% this year, making it one of the worst performers in the FTSE 100 index.

UK house prices crash

UK house prices continued their downward trend in the past few months as UK interest rates surged. The average house prices declined by 0.4% between September and October. That was the most they have declined since February 2021.

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As a result, home prices declined from 9.8% in September to 8.3% in the previous year. In a note, Kim Kinnaird of Halifax said that there was no doubt that the housing market received a significant shock as a result of the mini-budget. Meanwhile, analysts at Savills said that house prices will drop by 10% in 2022.

Persimmon share price tends to react to trends in UK house prices. As one of the biggest UK housebuilders, the company makes more money when home prices surge.

The next key catalyst for the Persimmon stock price will be the company’s earnings scheduled for Tuesday. The most recent trading statement showed that the company completed 6,652 homes in the first half of the year. 

In that period, the company’s revenue dropped to £1.69 billion from £1.84 billion in the same period in 2021. Its forward sales rose to £1.87 billion.

In its statement, the company said that demand for housing remained strong in the first half of the year. It cited its forward sales and low cancellations. However, things have changed since then as the BoE has delivered several rate hikes, as we wrote here. Home prices have also dropped sharply in the past few months.

Persimmon share price forecast

The four-hour chart shows that the PSM stock price has been in a slow comeback recently. In this period, it has managed to move from a low of 1,1112p to a high of 1,343p. It has managed to form an ascending triangle pattern shown in black. The stock has also moved above the 50-day moving average while the Relative Strength Index (RSI) has moved above the neutral level.

Therefore, there is a likelihood that the Persimmon share price will have a bullish breakout after its earnings. This is based on the ascending triangle pattern and the fact that the stock seems to be undervalued. If this happens, it will likely resume the bearish trend.