Tuesday, May 12, 2009
DCB in technicolour?
FT: House prices at auction continue to fall
5 month MACD....
Posted by techieman @ 09:31 AM (474 views) Add Comment
8 Comments
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1. mountain goat said...
That chart shows a bounce, or am I missing something?
2. jonb said...
It shows prices as a percentage of estate agent sale prices. Estate agent prices are now falling faster than auction prices, which is why the graph is bouncing upwards.
3. drewster said...
Jeremy Leaf, a Rics spokesman, said....
I wonder if Jeremy Leaf is related to the BBC's Jeremy Vine? Maybe they should check their roots.....
4. techieman said...
not quite Jonb
"Fathom used this data collated from auctions across Britain and collaborated with Zoopla, which used Land Registry data, to match up properties that had previously been sold through estate agents. Where there was a match, they compared the price at auction with a price that could have been expected on the conventional market."
The chart shows the discount between Auction properties and those sold (or as close a correlation as possible). Its probable that the % discount / premium - or more likely movement in it is a good barometer of market turns. although:
a. I would like to see the raw data
b. how tight is the correlation between the types of property sold.
c. Why is there a 5 month moving average?
In any case is this "blip" a blip or will we see the dicount % continue to erode? Of course because a discount percentage @ action reduces doesnt mean to say thats the end of the falls but since an increase in property prices is likely to be met with a move to a premium - it strikes me as quite an interesting lead indicator. Particularly since more properties are probably being bought at auction.
5. 51ck-6-51x said...
Good find techieman.
This kind of analysis is great for market timing - theoretically this basis is an arbitrage opportunity and I seriously doubt there is much arbitrage activity on it since the market is so illiquid, even in the good times, but this fact makes it a good indicator of market sentiment., so long as both sides of the basis maintain equivalent liquidity (although this has broken somewhat, so the blip factor becomes bigger our current scenario).
The raw data would be good to get hold of, yeah.
The 5 month moving average will be used because without such smoothing a trend may not be visible (at least during more normal times) which in turn will be due to the inhomogeneity of the asset class (they have to try to compare like for like, so the data becomes thinned).
6. 51ck-6-51x said...
... although it's leading-ness may well be diminished or even eliminated & reversed by the combination of the use of lagging market data and moving average.
7. techieman said...
51ck - @ 6 - yes exactly! Thats why @ 5 the raw data would be of interest. I am fearfull though re the correlation co-eficient (if thats correct terminology ... its been a while) and actually the population of houses they use. And yes - the homogenity is interesting - perhaps they used a scoring system re area / type etc.
8. str 2007 said...
techieman
Thanks for advising me of this thread, I guess comparing like for like and the margin difference between auction and estate agents would give a good judgement on market sentiment.
However, I also see auctions as tending to be full of BTL investors that are after certain properties.
The types of houses that actually interest me/us (nice family houses in good areas) I fear never make it to auction.
So this analysis may well give an indication but not necessarily of the type of property you'd be interested in as a home.
There was a post a few days ago and on the thread someone was commenting how they'd been to an auction after having a survey etc. done on a house and was outbid almost straight away.
His observations were that investors were simply buying everything worth buying.
On the ground in South Hampshire nice family houses are gone within a couple of weeks, in fact I'd say (unqualified as I'm not an estate agent) that it is as busy now as at anytime leading upto the bust.