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Realistbear

Recent Upticks In House Prices Explained In Our Mirror Market

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http://www.dqnews.com/Articles/2009/News/C...RRCA090821.aspx

California July Home Sales

August 21, 2009

An estimated 45,079 new and resale houses and condos were sold statewide last month. That was up 2.1 percent from 44,167 in June, and up 14.1 percent from 39,507 for July 2008. Sales have increased on a year-over-year basis the last thirteen months. California sales for the month of July have varied from a low of 30,596 in 1995 to a peak of 71,186 in 2004, the average is 47,634. MDA DataQuick's statistics go back to 1988. Last month's sales were the highest for any month since 51,054 homes were sold in August 2006.

The median price paid for a home last month was $250,000, up 1.6 percent from $246,000 in June, and down 21.4 percent from $318,000 for July a year ago. The upturn in median the last three months is the result of a relative increase in sales of more expensive homes.

Of the existing homes sold last month, 43.7 percent were properties that had been foreclosed on during the past year. That is the lowest in more than a year, in June 2008 it was 42.5 percent, it reached 58.8 percent in February.

Meanwhile, in the mass market, unemployment and forced sales are eroding the base number. The recent "increases" reported by Haliwide are nothing more than a reflection of lower numbers of sales of more expensive properties.

DQ are at least being honest as to why the median seems to be rising. The reality is that CA probably has another 20% to drop before a bottom is reached. We have another 30% to drop IMO.

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The UK Nationwide and Halifax are mix adjusted. Also flies in the face of increased transaction numbers.

Although if you look at the Nationwide quarterly series, I can imagine why its throwing the stats.

Edited by mbga9pgf

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The UK Nationwide and Halifax are mix adjusted. Also flies in the face of increased transaction numbers.

Although if you look at the Nationwide quarterly series, I can imagine why its throwing the stats.

so suppose very view houses of their "average" are sold, but most are in the higher bracket...how does mix adjustment work?

I bet it doesnt.

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Fixed adjusted? :lol:

You buy a house, put in a new kitchen, garage, conservatory and landscape the garden. This adds £50,000 to the value of your house when you put it onto the market. Your neighbour thinks his house has also increased by £50,000 while he was watching the TV!

Only the first house will sell. In all the indexes they are the same house. Go figure?

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The only figures that I read, understand and look for is Reposessions, currently 20% of the early 90's figures ( se coast )

Until that figure rises to levels last seen during the early '90's were not seeing a proper HPC

imho ofc

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so suppose very view houses of their "average" are sold, but most are in the higher bracket...how does mix adjustment work?

I bet it doesnt.

Look, I am far from bull, but we cant ignore the fact prices are going up. Its to be expected. To be honest, I am glad it is. It means all those feckless losers with big deposits like myself are blowing their wad before the party even gets started. Its going to make things much much worse once sentiment takes its next tumble. Fewer large deposits to go round and all that.

From the Nationwide:

Mix Adjustment Process

Why Mix Adjust?

The purpose of mix adjustment is to simply isolate pure prices changes. The simple example below illustrates how the changes in the mixture of properties sold each month could give a misleading picture of what is actually happening to house prices. The set of properties sold from month to month will vary by location and design etc. and some adjustment is necessary to make sure all of these do not give a false impression of the actual changes to house prices. A mix-adjusted or 'standardised' index is not affected by such changes because the relative weight given to each characteristic of a property in the 'mix' (or 'basket', to use an analogy with retail prices) is fixed from one period to the next.

Calculation

The price of a property will depend on the characteristics of the property. These characteristics could include physical properties of the house, like its design, but other aspects such as the type of neighbourhood the house is located in will also contribute to the price someone is willing to pay. Using mortgage data, the Nationwide house price system can relate all the observed combinations of these factors and relate them to the price of which the house was sold for. From this, the model can estimate how much on average a house would cost given a set values for these characteristics, in particular a set of characteristics that describes the 'typical' house. This typical house does not physically exist, it is an 'average' house across all the characteristics that the model uses. This method is repeated on data sets at different points in time and changes in the price of this typical house reflect only the price changes over the same time periods, and not the mixture of properties sold in the current or pervious periods.

Factors that affect the price of a house

The following are the items that are used to describe the characteristics of a property. There is no set order that these contribute most to the price of the house, although UK location, the type of neighbourhood and house size are consistently the three most important followed by the design of the house.

UK Location, i.e. part of country

Type of neighbourhood. The Nationwide index uses an established demographic system that classifies areas in the UK into 56 categories based on the type of people that live there, two examples include retirement and council areas.

Floor size

Property design (detached house, semi-detached house, terraced house, bungalow, flat, etc.)

Tenure (freehold/leasehold/feudal) except for flats, which are nearly all leasehold

Number of bathrooms (1 or more than 1)

Type of central heating (full, part or none)

Type of garage (single garage, double garage or none)

Number of bedrooms (1,2,3,4 or more than 4)

Whether property is new or not

What I do find suspicious is the number of flat data series that are appearing as N/A in their quarterly data series... Without the flats data for large areas, the mix adjust cannot work and a significant skew can occur. I am surprised that no-one else has picked up on this already. Check the data series to see what I mean and compare it to the method nationwide use.

Edited by mbga9pgf

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Fixed adjusted? :lol:

You buy a house, put in a new kitchen, garage, conservatory and landscape the garden. This adds £50,000 to the value of your house when you put it onto the market. Your neighbour thinks his house has also increased by £50,000 while he was watching the TV!

Only the first house will sell. In all the indexes they are the same house. Go figure?

But in the boom times he got the extra and more when he put his place on the market. Cheap easy money and the spin that prices only ever go up. IO mortgages, Liar loans, BTL, demutualisation of the Building Societies, Securitisation and financial light touch regulation. Stick it all together and you ended up with the mother of all bubbles.

Many still see these inflated prices as the norm. The Base rate is at 0.5% ffs. THat has helped stem the tide. Partial reinflation is deemed politically and economically desirable. Massive falls would crucify the balance sheets of the banks and the wider economy in the short term. QE is keeping the bellows pumping.

So anomolies in the indeces may play a part, but face it prices are rising for now.

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But in the boom times he got the extra and more when he put his place on the market. Cheap easy money and the spin that prices only ever go up. IO mortgages, Liar loans, BTL, demutualisation of the Building Societies, Securitisation and financial light touch regulation. Stick it all together and you ended up with the mother of all bubbles.

Many still see these inflated prices as the norm. The Base rate is at 0.5% ffs. THat has helped stem the tide. Partial reinflation is deemed politically and economically desirable. Massive falls would crucify the balance sheets of the banks and the wider economy in the short term. QE is keeping the bellows pumping.

So anomolies in the indeces may play a part, but face it prices are rising for now.

Thing is, the banks cant finance at much cheaper than the current rates, and as my thread elsewhere points out, lots of fixes and trackers are starting to expire... to some pretty large SVR rates. Halifax and Nationwide rates are 3% and 3.5% higher than BOEBR respectively. ust in time for Unemployment to reach its first peak.

Edited by mbga9pgf

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Thing is, the banks cant finance at much cheaper than the current rates, and as my thread elsewhere points out, lots of fixes and trackers are starting to expire... to some pretty large SVR rates. Halifax and Nationwide rates are 3% and 3.5% higher than BOEBR respectively. ust in time for Unemployment to reach its first peak.

I think C&G were quoted on your other thread as the lowest SVR at 2.5%. Historically very low. Personally I am gutted not to still have my C&G lifetime tracker of 0.23% over base rate. Yes the SVRs are giving the banks better margins than they were but they are still historically low for now.

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Thanks for the info M9Agffbdsg!

"Type of neighbourhood. The Nationwide index uses an established demographic system that classifies areas in the UK into 56 categories based on the type of people that live there, two examples include retirement and council areas.

Floor size

Property design (detached house, semi-detached house, terraced house, bungalow, flat, etc.)

Tenure (freehold/leasehold/feudal) except for flats, which are nearly all leasehold

Number of bathrooms (1 or more than 1)

Type of central heating (full, part or none)

Type of garage (single garage, double garage or none)

Number of bedrooms (1,2,3,4 or more than 4)

Whether property is new or not"

I look in my Road.

we have council, we have mansions.. all in the same postcode.

Now I have a 4 bed very large house.

single garage.

3 bathrooms

not new at all.

further down the road, is much the same, only half the size

then I read about surveyors for Building socs doing drive-by valuations.

It makes one suspicious that the "Info" is not all there in many cases. The average mortgage has also risen quite a bit this year according to BoE stats...sort of indicates that better housing still has a market, and inferior yet similar in the stats will not sell, and nationwide only use their surveyed mortgages as the data.

The aspiring house down the road that is valued as the better one because statistically its similar, remains unsold, and the seller cant understand why as two years ago, condition was just about irrelevent.

and many of these lenders wont touch newbuilds or houses under two years old, and certainly very few BTL.

No, Im suspicious of the stats.

I of course agree their has been an upturn in Sales, a bull trap I am thinking.

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