Real estate guru: property prices have already crashed 10-20%

In his weekend update, “Australasia’s #1 real estate coach and trainer”, Tom Panos, suggested house prices have already crashed 10% to 20% and is urging vendors to sell before the spring listings flood.

Panos also accused the average economist of living in “La-La Land”, given they are relying on market pricing information that is already three months old:

“Prices have held up reasonably well in winter because there’s been no stock. But that’s about to change my friends. There’s a lot of stock that’s about to hit the market. We are going to be flooded with listings as real estate agents return back from Mikonos and their overseas locations, and so do their vendors. And what we are going to see is a lot of stock hit the market”.

“This Tuesday we’ve got a rate rise. And it’s not going to be a weak one… It will be 0.5 minimum. And then my friends, we are going to enter September. And most likely more rate rises and more property hitting the market. This is going to be the test”.

“But there was an article yesterday from someone who basically said, ‘hey what are prices going to drop by?’. Man, I’m telling you straight they’ve already dropped. But don’t you understand the average economist lives in ‘La La Land’. Because they’re working off data. And data in real estate has roughly a three month lag. So you’ve basically got these economists and data specialists that are looking at data, but the market moves faster than the economists. That’s the problem”.

“So what they are doing is giving you historical information. And by the time they give you their view, guess what? The market’s moved again”.

“And I’m saying to you, right now in most parts of Australia minus Adelaide and minus Perth, those drops are 10%, 15%, 20%”…

“If you’re a seller right now, all I can say to you is why wait three months and put yourself in the spring catalogue with millions of other properties? Don’t do that. Put it on in August, short campaign… two week campaign. Third week, have an open then do the auction”…

Economist Stephen Koukoulas will be hoping Panos is wrong, given he has only tipped a peak-to-trough fall in Australian dwelling values of 7%.

In all seriousness though, while there is some truth in Panos’ claim that real estate price data is lagged, CoreLogic’s daily index did only begin to plunge after the Reserve Bank first hiked interest rates in early May:

Australian dwelling values change from peak

Dwelling values fell after the RBA first hiked rates.

This alone suggests that CoreLogic’s daily index is not as lagged as suggested by Panos.

Unconventional Economist
Latest posts by Unconventional Economist (see all)

Comments

  1. 2023HomelessMEMBER

    LVO. Please tell me how a transaction of a property is negotiated, contracts exchanged immediately and reported daily? And where this magic data set is that is somewhat unbiased that allows the daily index to turn exactly in the week/day of rate rises? Even auction contracts exchange on 30days. And auctions happen rarely on Mondays and tuesdays….

    This magic daily sales price data set exists in a land of rainbows and unicorns. Unless they have put listening bugs in every realestate agents office and some great AI, it doesn’t exist. Possible, but seems unlikely.

    So now I will outline what data does exist that corelogic could be using that would enable its index to shift within a week of a rate rise, so you can consider it’s likely shortcomings. And why you may want to trust the agents (don’t worry, the concept of trusting realestate agents made me want to vomit initially too).

    Property transactions don’t occur on a single day. They take weeks. 30days for most auctions, more for other sale formats. The only data sets that could be used to ‘calibrate’ the daily index daily that could immediately respond to an RBA announcement in near real time are not actually sales datasets….but listings prices (particularly price drops) and internet terms searches perhaps. On a weekly timeline it gets a little better…..with reported auction prices becoming available on Sundays. Which may explain some large daily index changes on Sunday/Monday of recent. These are the most short term data sets available, and both don’t compare like to like. Both are prone to market shifts and failed transactions. Both are driven by realestate agent strategy, such as not publishing poor auction prices. One has more coverage of expensive sales (auctions), the other cheap areas (listing prices).

    So without having looked under the hood of the daily index, the fact it turned within 1week of rate rises, gave me enough to finally unpick what data it actually uses, and the inherent short comings/likely bias.

    So I’m listening to Panos and McGrath and other agents atm. They are closest to daily sales contract prices. Before it is put into any central database. But I also think agents are professional BS artists. so luckily I know some other agents personally in 2 cities, who are saying the same thing as Panos and McGrath. For comparable sales in Sydney and Canberra, the agents are saying prices are down 10-20% already, and falling fast. This will show up in sales exchange data in 2-3months. And then the indexes will all play catch up, with some statistical smoothing so they don’t look too wild!

        • Fishing72MEMBER

          The 2nd hand surfboard market is softening after being a lead indicator during the bullish covid/ early inflationary period. This tells me that the discretionary purchase market is backing off. People starting to pull their financial heads in. Sh1t is turning and not for the better.

          Also noticing people rearranging holiday plans due to price. I’ve heard many crew discussing their dreams of trips away-even domestic travel within Australia- who then get back to me that they’ve canned the idea or downsized concept because the prices were too much for them to seriously entertain. Big change from the YOLO mindset which permeated society since covid restrictions were eased.

      • 2023HomelessMEMBER

        Agents and buyers often choose to not disclose prices. And it’s become very common lately. Especially for low prices.

        But you have a valid point. Reported sale prices would be a key dataset for the daily index. Thanks!

        • innocent bystander

          they don’t disclose on websites etc but they do to the data collectors. I have been told by r/e agents they get phone calls asking for prices.

      • Which others? Do they pull out and cite ‘technical issues’ when they turn negative too?

        To me it looks more like a FOMO mechanism in boom times and an RBA fog horning tool when the market senses a threat e.g. rate rises, but what would I know.

      • There is no mechanism of law that binds a RE agent to disclose the actual sale price to core logic.
        The only thing that appears on the record as closest to the truth is the value of a property at stamping.

    • Another index to track is the permanent caravan site. I’ve noticed on FB a lot more permanent caravan sites popping up in my feed. The actual cost of these is pretty reasonable but it’s the weekly fees (~$150) which is the gotcha. I think these are being sold to offset there increase in interest payments.

  2. Holiday In ScomodiaMEMBER

    Talking his own book for sure- need to get those listings. I would guess a lot of sellers will sit tight unless desperate and see how things pan out.. ‘not going to give it away!… Anecdata -place down the road from me, owners upgraded a few streets away late last year, spent 6 months painting, landscaping and hired full staging furniture set up for photos and opens, the opens started about 2 months back, 10 cars, then next week 5 cars, until last open few weeks ago no cars except agent, then open by appointment, then truck took staging furniture away and listing is off agent site and REA, only way you know it ever existed is in cache…

  3. That seems to be the consensus from agents we have spoken to on the central coast. Recon the slow down in transactions and the turn started in December from rapid increases and strong buyer demand.

      • Not really……I know we live in the age of incompetence but I can’t see that it is happenstance that two avoidable catastrophes like driving Europe into depression and now risking the same with the Asian region are being done without eyes wide open. Can’t begin to understand what they plan to do except go into isolation.

        • I’ve read a few times a kind of conspiracy theory that “they” thought they might try hyperinflation to reduce debt obligations, then panicked and raised interest rates – do you put any weight on that?

          • No…..US debt levels aren’t really that bad. I do think that Powell will only pause rates and not cut them when it hits the fan. I believe he intends to bring US Treasuries back to the fore-front for geo-political reasons. Expect central clearing of Treasuries to happen this time which will be a good way to stop these endless collateral crises. Otherwise they are another market the Fed will have to own completely. That doesn’t mean he isn’t manipulating markets out of Japan at the moment.

  4. pfh007.comMEMBER

    20% down and unemployment keeps falling and the world has not ended.

    News doesn’t get much better than that.

    Actually it does. The RBA is likely to further tighten monetary policy today.

    And as we know, some basic regulation of bank lending can ensure that more credit is available for productive investment but cutting off the fuel supply for speculation is a good thing.

    • Yep, I have no idea what this sites problems is with raising interests rates to combat inflation and the knock on effect of lowering houses prices. Seems all good to me.

  5. And in New Zealand , Barfoot and Thompson the largest real estate agency in Auckland reported its timely July sales.
    1 July sales at 22( July) year low.
    2.The median price at 1102000, was comparable to the median price of 1100000 throughout the 2021 calendar year. The July average at 1122000 was 3 percent lower than the average thru the 2021 calendar year.
    No adjustment for seasonality/ sales type or comparing to periods of lockdown.

    • THIS
      At some point a growing number of owners realise that their RE investments are losing value and look increasingly likely to lose more. Better get out before it gets worse. And chances are it will turn into a snowballing herd that are all trying to appeal to a fast dimminishing pool of potential buyers.

  6. Goldstandard1MEMBER

    and yet the fact remains, of the 15 or so auctions I ‘ve seen in South/East Melbourne the last 5 weeks, prices are either sold 10-20% down from April 22, or passed in and negotiated to a ‘price undisclosed’ and I find out through the agent it was ’10-20%’ down. This guy is on the money and vendors will meet the market as FOSI (Fear of staying in) set in.

  7. SimowilsonMEMBER

    Hi Leith, Don’t falls in May reflect your view that the market peaked mid Feb’22 : a 3 month lag in itself? RBA timing is perhaps coincidental?

  8. Nah still not capitulation levels yet. Hear a mates neighbour still talking about “you gotta take a long term view with real estate”. Not getting the 30 – 50% falls unless this breaks

Leave a reply

You must be logged in to post a comment. Log in now