Bubble trouble: Realty sentiment hits 44 year low

Nice little observation from Crag James today on the Westpac consumer sentiment numbers:

• Contained in the Westpac/Melbourne Institute survey of consumer confidence was a quarterly question on the wisest places for savings. Most people favoured putting new savings in the bank as the wisest place for savings (29.3 per cent of respondents). Next highest was “Pay Debt” (23.5 per cent) from Real Estate (10.5 per cent), Shares (8.9 per cent), “Don’t Know” (6.3 per cent); “Spend it” (5.7 per cent) and Superannuation (5.5 per cent). • In the September quarter the reading for “Real Estate” was the lowest in 44 years of records at 10.5 per cent.

Comments

  1. I downloaded the Corelogic daily index in Excel format and did some fiddling.

    The trend of daily deltas in the Sydney market was particularly telling. I created a column of these deltas, and then another column of a 21 day moving average of the deltas.

    This showed that the average daily increase in the index for the 3 months from Sep-16 was about 0.1, with not a single negative day. From March this year, the daily increase has dropped from 0.1, and is now bouncing around zero, with much time spent in negative territory. So the average increase at the moment is near 0, with daily lows in negative territory becoming much more frequent. The contrast between today and this time last year was striking once I graphed it, and I expect it to go negative shortly. I was tracking this trend last month, but it all got hosed by the new index calculations introduced on 1-Sep.

    The red-hot springtime selling season up to Christmas is going to be bloody interesting for Sydney home vendors this year.

      • Irrespective Gramus, this bubble is on its very last legs. Eventually, no one can afford anything anymore and the ponzi cracks.

        As we saw y’day with mortgage application fraud, this bubble is extremely fragile and all it’ll take is a sharp spike in unemployment or sharp reduction in home sales and that will be the end.

    • Tks LS appreciate the work you’ve done on this. Was confused when the index values suddenly dropped from 1st Sept. Where I’m located, RE agents beginning to lower their fees and older aged agents wont list unless vendors are reasonable. Tks again.

    • Ha, I did the same but didn’t use a moving 21-day average but rather calculated the % of days in every week in which the daily index delta was negative. In a nutshell:

      A year ago until about Nov-16, there were literally no days in each week in which the index fell.

      After May-17, there is not a single 7-day period in which the index didn’t fall for at least one day.

      Notably, the number of days per week with a falling index is steadily increasing now, with past 7 days showing 5 negatives.

      • Yep. I noticed that too. That increasing frequency of “negative growth” days is very telling, particularly compared to this time last year. I did a 6 week moving average and that has dropped close enough to zero that it makes no difference as a result of the string of negative results over the past week.

        If we have a couple more negative days this week, that moving average will drop below zero for the first time in 12 months, which would be an indicator of a critical juncture for the Sydney market.

    • “If we have a couple more negative days this week, that moving average will drop below zero for the first time in 12 months, which would be an indicator of a critical juncture for the Sydney market.”

      Not sure why I can’t reply to your subsequent post but, hey.

      I almost feel 100% confident that we’ll see exactly those drops in the comings days and weeks: just saw a 3BR flat listed in Mosman for $1.2m. An equivalent flat in the same block sold a few weeks ago for $1.8m.

      • TailorTrashMEMBER

        ….did it come with a BBQ …….or is it a BBQ ? ………..jeez that’s some hot drop ?….do you remember the address?

  2. The bogans could have been conditioned to think that a real estate bubble can not occur because the market will convert farm land on the edge of town into housing.

    Heck, that is what I used to think happens. But then I learnt about the urban growth boundary.

    Bogans were conditioned to think that most immigrants are refugees! And the bogans believed it for a decade!

      • Clearance rates of 70% are consistent with historic house price growth of around 10% p.a.
        That is NOT soft.

    • Clearance rates are easily managed by estate agents ‘advising’ sellers to be reasonable and to hope for a bidding war in the auction. In Sydney’s LNS, asking prices are definitely dropping by 50-100k if not more and some fools are seeing those drops as now-or-never type of ‘bargain’ opportunities. Heck, I can guarantee you a 100% clearance rate if I can scare sellers enough…

    • Listened to a Nightlife podcast from Tuesday night featuring Peter O’Malley a Sydney agent. Refreshing character who didn’t spruik – well worth a listen. Basically said the agents are lying to prop the clearance rates up. His data suggests Sydney down 5% since July and correcting. Melbourne still holding but close to peak, Also confirmed the liar debt problem is huge.

    • The downward trend from 1991 is the last recession we had.
      Then Howard relaxed the banking regulations around 1997 removing the 30% income rule (effectively removing the stress test for mortgages) and changed it from one income to “household income” combining both a couples income. Then there was the Dot Com bust in 1999 with Y2K fears.

      Add to that a first home owners grant and the halving of the capital gains tax and suddenly real estate is the best investment around and it went nuts.

      The next dip in the 2009 period is the GFC and the current dip is because buyers are utterly tapped out and Australia is too expensive to buy in.

      (Did I just summerise the last 20 years of Australian economy in less than 500 words?)

      • The Traveling Wilbur

        It was *very* good, but A- as you forgot the temporary effect of increased wages from the mining boom on the capacity to borrow of a cage load of workers who then went out and bought moar IPs. Perfect otherwise.

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