I don’t have any particular beef with the RPData daily house price index per se but I am going to note that removing seasonal adjustments does mean the data is likely to be misinterpreted on a more regular basis. More to the point, the daily index is not about recent days – it is analogous to “daily orange juice” in the sense that are both are squeezed daily but probably six weeks ago.
So, it leaves me a little bemused when folks like the Kouk use the thing as if it’s some genuine minute by minute guide to house prices:
After a tepid 0.3 per cent rise in April, house prices have fallen a somewhat large 0.7 per cent in the first 16 days of May, according to the daily RPData house price series.
While the numbers are clearly choppy, volatile and are not seasonally adjusted (the autumn blues?), we just might be seeing the jolt to consumer sentiment and impaired affordability starting to bite what had been a strong rise in prices.
For now, a moderate house price fall of, say, 5 per cent or so would be small beer. Even with the recent house price pick up, which was looking uncomfortably large, the total change in house prices since 2010 has been a little over 6 per cent. This is not a large change.
That said, the perils of falling house prices for the banking sector and the economy more generally are clear. One only has to look at the experience of Ireland, the US, the UK and Spain, to name a few, to see how a drop in house prices can smash the economy into recession.
Now the SMH is in on the act:
More signs are pointing to a slowdown in the red-hot housing market. House prices (in seasonally adjusted terms) fell across all capital cities, ANZ notes:
- While trend home prices continued to increase across all capital cities except Melbourne, in seasonally adjusted terms home prices were lower across all reported capital cities in the past week.
- The sharpest weekly decline was reported in Melbourne (-1.4% w/w) where home prices have now fallen for the past three weeks, suggesting Melbourne home prices have potentially reached buyer price thresholds and are vulnerable to swings in home buyer and consumer sentiment.
- Auction sales have moderated in recent weeks, reflecting a loss of momentum from the strong sales levels earlier in the year. Nonetheless, cleared auctions remain historically elevated and are expected to continue to be supported by significant underlying housing demand and strong foreign and domestic investor appetite for housing.
I deliberately left house prices out of my post this morning because the current falls are very likely seasonal:
That’s not to say that the future for prices isn’t more gloomy but the current falls in activity cannot be used to rationalise such.
