McGrathmaggeddon returns:
Real estate guru John McGrath says he had “never been more excited” about the future of the housing market and his eponymous firm as he predicted house prices to start rising from next year after already bottoming out in most markets.
…“While there isn’t just one housing market, generally it seems that prices stabilised around Christmas, and we have been pleasantly surprised at the level of buyer activity in the market,” the McGrath CEO told The Australian Financial Review.
“We have seen an uplift in numbers at both open homes and auctions.
…While buyers have “rushed back to the market” and become more comfortable with new interest rate settings, Mr McGrath said seller activity had not increased to the same degree implying still constrained listings for some time.
I have made some of the above points about property recovery myself but let me add one gigantic caveat.
If McGrathmageddon is right and we are at the bottom for house prices then…we are not at the bottom for house prices. Inflation is running at 7.8% and it has become obvious that various interests are now gaming it. Inflation will not come as fast as it should without material further weakening in the economy.
We still have the fixed-rate reset largely ahead of us. And that will deliver further economic downside. But if house prices stop falling at this juncture, it will support consumption through the adjustment, and the economic weakening will be blunted.
The analogy is the US where a wild Fed-endorsed stock market rally has triggered a renewed consumption pulse which, in turn, is now reversing interest rates higher.
In short, although I see house prices rising in 2024, that is only if prices keep falling materially further.
If not, then the RBA like the Fed will be forced to hike the cash rate even higher and the ultimate economic landing will be even harder.
The same argument can be applied to APRA’s insane mooted loosening of lending standards.
