The Illusion Of Rising House Prices

[Realistbear]

http://business.timesonline.co.uk/tol/busi...icle6813415.ece

From Times Online

August 28, 2009

Fresh evidence of property market 'mini-boom'

Gráinne Gilmore

Further evidence of a stabilisation in the housing market came today as official data showed that property prices jumped at the fastest rate in years in July.

______________________________

Real Istbear wrote:

The real reason house prices seem to be rising in the UK is perhaps explained by a US tracking source: "The upturn in median the last three months is the result of a relative increase in sales of more expensive homes." (DataQuick August 21, 2009). We know transactions in the UK are down, unemployment is soaring and credit is tight. Only the better off can afford to buy hence the appearance of a rising market.

August 29, 2009 9:37 AM BST on UK-TimesOnline

Mark Knowles wrote:

lol

"Mini boom" ?

With sales levels down 75% from peak and nothing but the higher priced property selling to those with cash in hand? How odd that average prices rose. lol

They rose in Manhattan all through 2008 "defying the market" - then when the lower priced property began to sell - guess what happened? You cannot draw the conclusion that "average house values" have increased from such a small sample of sales.

August 28, 2009 4:22 PM BST on UK-TimesOnline

Recommend? (20)

[dancer7]

Any figures on number of first time buyers entering the market?

[scottbeard]

Real Istbear wrote:

The real reason house prices seem to be rising in the UK is perhaps explained by a US tracking source: "The upturn in median the last three months is the result of a relative increase in sales of more expensive homes." (DataQuick August 21, 2009). We know transactions in the UK are down, unemployment is soaring and credit is tight. Only the better off can afford to buy hence the appearance of a rising market.

August 29, 2009 9:37 AM BST on UK-TimesOnline

RB, as I've said before I don't think that this theory works. HPI indicators adjust for the mix of houses sold. Your conjecture would be true if their index was just the average house price sold in the month, regardless of size, but I believe it is not.

From Halifax website (http://www.lloydsbankinggroup.com/media1/research/halifax_hpi.asp):

The average price for any set of houses in any period will depend on the number

of observations on each characteristic in that period. Standardisation allows

for the varying mix of characteristics between different time periods and is

achieved by applying a representative set of weights corresponding to the

numbers of each characteristic observed in a base period. For the Halifax House

Price Index this has been chosen as 1983. The index numbers represent the

movement in average prices for houses possessing the same characteristics as

those bought in 1983 and are calculated by comparing the weighted (i.e

mix-adjusted) prices in each current period with the weighted average price in

the base period.

Nationwide's equivalent can be found here:

http://www.nationwide.co.uk/hpi/methodology.htm

[Where is my pen?]

http://business.timesonline.co.uk/tol/busi...icle6813415.ece

From Times Online

August 28, 2009

Fresh evidence of property market 'mini-boom'

Gráinne Gilmore

Further evidence of a stabilisation in the housing market came today as official data showed that property prices jumped at the fastest rate in years in July.

______________________________

Real Istbear wrote:

The real reason house prices seem to be rising in the UK is perhaps explained by a US tracking source: "The upturn in median the last three months is the result of a relative increase in sales of more expensive homes." (DataQuick August 21, 2009). We know transactions in the UK are down, unemployment is soaring and credit is tight. Only the better off can afford to buy hence the appearance of a rising market.

August 29, 2009 9:37 AM BST on UK-TimesOnline

Mark Knowles wrote:

lol

"Mini boom" ?

With sales levels down 75% from peak and nothing but the higher priced property selling to those with cash in hand? How odd that average prices rose. lol

They rose in Manhattan all through 2008 "defying the market" - then when the lower priced property began to sell - guess what happened? You cannot draw the conclusion that "average house values" have increased from such a small sample of sales.

August 28, 2009 4:22 PM BST on UK-TimesOnline

Recommend? (20)

More bearish sentiment from the press.

The press are always wrong.

[winkie]

House prices are becoming very attractive to rich foreign buyers.

[Housing Bear]

http://business.timesonline.co.uk/tol/busi...icle6813415.ece

From Times Online

August 28, 2009

Fresh evidence of property market 'mini-boom'

Gráinne Gilmore

Further evidence of a stabilisation in the housing market came today as official data showed that property prices jumped at the fastest rate in years in July.

______________________________

Real Istbear wrote:

The real reason house prices seem to be rising in the UK is perhaps explained by a US tracking source: "The upturn in median the last three months is the result of a relative increase in sales of more expensive homes." (DataQuick August 21, 2009). We know transactions in the UK are down, unemployment is soaring and credit is tight. Only the better off can afford to buy hence the appearance of a rising market.

August 29, 2009 9:37 AM BST on UK-TimesOnline

Mark Knowles wrote:

lol

"Mini boom" ?

With sales levels down 75% from peak and nothing but the higher priced property selling to those with cash in hand? How odd that average prices rose. lol

They rose in Manhattan all through 2008 "defying the market" - then when the lower priced property began to sell - guess what happened? You cannot draw the conclusion that "average house values" have increased from such a small sample of sales.

August 28, 2009 4:22 PM BST on UK-TimesOnline

Recommend? (20)

BRILLIANT!

That explains it then. Is it possible to provide a link to the DataQuick article?

Assuming this is correct, this is the most important news on HPC at the moment.

Well done! Housing Bear

[blankster]

If we take a short-term viewpoint, because interest rates are so much lower, the overall cost (price, if you like) of a house is much lower. Asking prices are only part of the story. The house price crash has not occurred in the form of lower asking prices but in terms of lower mortgage costs.

[ccc]

If we take a short-term viewpoint, because interest rates are so much lower, the overall cost (price, if you like) of a house is much lower. Asking prices are only part of the story. The house price crash has not occurred in the form of lower asking prices but in terms of lower mortgage costs.

That is the problem. Short term view is fine, but not when you are signing up to a 25 year deal that is likely to change constantly.

Short termism is the bain of this nation. From debt to infrastructire to transport to everything. We are woefully bad planners.

[Realistbear]

BRILLIANT!

That explains it then. Is it possible to provide a link to the DataQuick article?

Assuming this is correct, this is the most important news on HPC at the moment.

Well done! Housing Bear

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

[Joey Buttafueco Jr]

BRILLIANT!

Assuming this is correct,

Which, surprisingly as it was RB that posted it, it isn't. Who'd have thought it?

[cybernoid]

RB, as I've said before I don't think that this theory works. HPI indicators adjust for the mix of houses sold. Your conjecture would be true if their index was just the average house price sold in the month, regardless of size, but I believe it is not.

From a cursory glance at that explanation it sounds like the weightings are applied to their input data to give their overal figure. It is not as simple as just averaging out the purchase price. But if there are many more higher price properties selling now than when this weighting was devised (they mention a sample date of 1983), the effect on the average would be as RB is pointing out. Combine this with the low volumes and the figures are less meaningful, in fact Id say the low volume figure is much more reliable and is telling us what we would expect - People aren't buying because they can't afford to!

Id like to see the originial month on month data per property type.

Unfortunately with this single figure spread all over the front pages and no explanation of how these figures are calculated, your average indebtor with a property on the market is going to be more stubborn in moving their price.

Where are the headlines saying volumes are 75% down?

[Realistbear]

http://www1.landregistry.gov.uk/assets/lib...ts/hpi_0908.pdf

Transactions are down by as much as 57% --thus suggesting the very real probability that fewer, more expensive, properties are distorting the data as DataQucik were honest enought to report.

As HPI is the main driver of the UK economy it seems that the government would want to try to kick start the economy by releasing news that HPI is back and back with a vengeance. The earlier news last week that business investment was down someting like 44% suggests the mood is far bleaker. Thousands of jobs are being lost every week and people are in no mood to follow Brown's suggestion to borrow more.

LR method:

"The standardised average house prices presented by Land

Registry are calculated by taking the geometric mean price in

April 2000 and moving this in accordance with index changes

both back to 1995 and forward to the present day. Classical

seasonal decomposition (Census Method 1) is used to isolate the

effects of seasonal trends in volume and index analysis."

DQ arrive at their "median" by using a broadly similar method. The only difference being that DQ admit that the rising prices are to be taken with caution and not accepted at face value which our press and government would like us to do.

Bottom line:

http://uk.biz.yahoo.com/090828/140/ipw0j.html

But economists have warned that the market still faces considerable obstacles due to continuing problems in the mortgage market and rising unemployment.

Commentators have also warned that a sudden increase in the supply of homes for sale could trigger renewed price falls.

Edited August 29, 2009 by Realistbear

[ccc]

Anecdotelly I would agree. I am seeing far more 'under offer' or 'sold' signs in Edinburgh. However these are almost all exclusively in the very poshest parts of town. The rest ? virtually nothing is moving, and hasn't for over a year.

[mosstrooper]

todays blackpool gazette front page headline

"HOUSE PRICE BOOM"

"ESTATE AGENTS RUSHED OFF THEIR FEET AND TAKING ON EXTRA STAFF TO COPE"

quoting 5% increase this year

whats going on ?

suspect a bounce but will it last ?

[silver lining]

http://www1.landregistry.gov.uk/assets/lib...ts/hpi_0908.pdf

Looking at page 13 of the LR index, when comparing July 2009 with July 2008, volumes of properties over £250k have declined further than those under £250k.

So if anything there are a greater proportion of lower priced properties selling than this time last year.

Edited August 29, 2009 by silver lining

[cybernoid]

It also makes sense to me that it is the higher end that is moving now. There are people just sitting on cash at the moment waiting to see which way the wind blows - STRs, downsizers, business owners who got out, high income folks unimpressed with the alternative investments, those that have sold their expensive toys due to their running costs, etc.

If you've got a load of cash from which you used to get an income, you've seen that basically all but stop. You've waited to see what happens, you expected IRs to rise at some point. You're looking at the lack of recovery and are worried about the devaluation of your cash. QE is still ongoing, you know higher IRs will cripple many people so think that won't be coming for the forseeable future, so what to do with the money? What we have here is a demand for property. A 4% yield is better than nothing so there's an investment opportunity there with property offering an alternative to the devaluing of your cash. Or maybe they're getting somewhere bigger now that the kids look to be coming home to roost. And what about foreign investors who are gaining from the weaker pound?

There seem to me to be lots of logical reasons why someone with money would be buying around about now towards the higher end of the market.

[Pindar]

House price inflation, home ownership and constant ramping are all part of an exclusive club. It's as if 90% of the population doesn't exist and the remaining 10% has most of the country's wealth.

That 10% has its own rules, uses the media like some sort of contrived blog which is only allowed to spout "positive" (i.e. rising house prices) news, enjoy property ramping exercises and sell overpriced houses to each other with either no mortgage debt or very high equity.

If much of the recent activity in property transactions has existed in this level of the pyramid, then it's really no surprise that it shows small rises. You may also have noticed that most of the cheap mortgage deals apply to people with a lot of equity. Do not also forget that many of the transactions that have recently completed may have been agreed a year or more ago - it can take a long time to sell a large property. The full effects of falls will therefore have failed to filter through to the official figures.

Obviously if people with very small mortgages on very high value, high equity properties are selling to each other at a greater rate than the remainder of the market, you will see a rise. This has been boosted by low interest rates. The main point here is that the banks are lending, but only to *very* low risk customers.

Together, these factors conspire to skew the reality of a deeply troubled economy, rising unemployment, people in denial and a media that seems intent of perpetuating a dream that actually became a nightmare 2 years ago. The concerted effort of global central banks and government spin have temporarily made things seem better when in reality they are far, far from it.

[Cygnus Alpha]

todays blackpool gazette front page headline

"HOUSE PRICE BOOM"

"ESTATE AGENTS RUSHED OFF THEIR FEET AND TAKING ON EXTRA STAFF TO COPE"

quoting 5% increase this year

whats going on ?

suspect a bounce but will it last ?

The donkey population has exploded in Blackpool in recent years. They all need a home.

[Realistbear]

The London EAs are using that old and endearing term again: "Snapped up."

It all sounds like the stories when the CA market was in its 2nd year of the great crash--change in the median due to the market shift toward higher end properties. All of a sudden its the magic bottom and return to the glory days of HPI despite all*of the economic indicators pointing to the reality of the worst recession since the 1930s. If it was over as Brown would like to say it is, it would be the shortest lived recession in history. When you consider the trillions lost and the tens of thousands of jobs being lost it is delusional in the extreme to think that the single biggest factor that caused the mess has recovered wi=tout a correction.**

Some may remember the false bottoms in the Big Crash (1989-96) when the papers latched onto them as if the crash was over before it had begun. We mus be careful not to think the "great crash" is going to be like the "big crash" that only lasted 7 years. This one will be enduring and usher in a new era of austerity and the consequences of the biggest debt bubble the world has ever known.

_________________________

* the fractional uptick in UK GDP is due to the scrappage scheme and stimulus which is running down.

**20% down from peak

Edited August 29, 2009 by Realistbear

[Realistbear]

http://uk.biz.yahoo.com/090828/140/ipvoh.html

Saturday August 29, 10:35 AM

British Economy Shrinks Less Than Feared

By Sky News 2009

British Economy Shrinks Less Than Feared

The British economy shrank by 0.7% in the second quarter - less than previously feared.

Data from the Office for National Statistics gave rare cheer for the economy, which was previously shown to have suffered a 0.8% decline.

Instead, revised figures show UK gross domestic product (GDP) contracted by 0.7% in the second three months of the year.

A pick-up in manufacturing helped drive the change, but it was still the worst year-on-year GDP fall since records began in 1955.

The figures were unveiled as analysts warned a quick recovery was unlikely because of Britain's underlying structural problems.

Vicky Redwood from Capital Economics said: "With tax rises looming, the labour market weakening and credit conditions still, any recovery in private sector demand will be weak.

"We continue to expect a pretty minimal rise in GDP next year."

The data also underscore the fact that the country is lagging behind Japan, Germany and France, who lately announced GDP growth for the second quarter.

French and German outputs grew by 0.3%, whereas Japan's economy expanded by 0.9%.

Britain will probably not fare as well as those countries in the future due to its shrunken manufacturing sector, according to economist Seijiro Takeshita from Mizuho International.

"The Japanese and Germans didn't go so far in dipping into the American type of government style which was one of the major growth factors of the past decade", he told Sky News Online.

Government and household debt levels are significantly higher than in France and Germany and the larger British banking sector was more severely hit by the financial crisis.

Hans Redeker from BNP Paribas in London thinks for a long-term recovery "the British economy has to reduce its household debt levels".

He added: "It has to increase its savings and it has in the future to rely on exports."

Just the sort of climate to see a return to the good old days of hyper inflation in house prices? I think not.

BTW, the Times have just removed all comments from their farticle.

Edited August 29, 2009 by Realistbear

[dunedin]

http://business.timesonline.co.uk/tol/busi...icle6813415.ece

From Times Online

August 28, 2009

Fresh evidence of property market 'mini-boom'

Gráinne Gilmore

Further evidence of a stabilisation in the housing market came today as official data showed that property prices jumped at the fastest rate in years in July.

______________________________

Real Istbear wrote:

The real reason house prices seem to be rising in the UK is perhaps explained by a US tracking source: "The upturn in median the last three months is the result of a relative increase in sales of more expensive homes." (DataQuick August 21, 2009). We know transactions in the UK are down, unemployment is soaring and credit is tight. Only the better off can afford to buy hence the appearance of a rising market.

August 29, 2009 9:37 AM BST on UK-TimesOnline

Mark Knowles wrote:

lol

"Mini boom" ?

With sales levels down 75% from peak and nothing but the higher priced property selling to those with cash in hand? How odd that average prices rose. lol

They rose in Manhattan all through 2008 "defying the market" - then when the lower priced property began to sell - guess what happened? You cannot draw the conclusion that "average house values" have increased from such a small sample of sales.

August 28, 2009 4:22 PM BST on UK-TimesOnline

Recommend? (20)

This is a dead cat bounce, a big bounce ill grant you that, but none the less still a dead cat bounce, remember its still down 11.7% compared to same period last year.

[spline]

We’ve looked at the distribution of house prices here on HPC before, and it’s interesting to do it again now that things have changed a bit. Here’s the new version looking at the changes over the year May 2008 to May 2009.

Generally, the 2009 distribution has shifted slightly down in price with more lower-priced houses selling and less higher-priced ones, although the very high end is relatively unchanged. The pivot point appears to be just above the £175k stamp duty threshold.

Normalised house price distribution, transaction weighted, England & Wales

from the Land Registry HPI report, August 2009, page 13.

[Pindar]

We’ve looked at the distribution of house prices here on HPC before, and it’s interesting to do it again now that things have changed a bit. Here’s the new version looking at the changes over the year May 2008 to May 2009.

Generally, the 2009 distribution has shifted slightly down in price with more lower-priced houses selling and less higher-priced ones, although the very high end is relatively unchanged. The pivot point appears to be just above the £175k stamp duty threshold.

Normalised house price distribution, transaction weighted, England & Wales

from the Land Registry HPI report, August 2009, page 13.

It's going to be interesting to see the graph for June, July and August. It takes on average 6 weeks to sell a house so doesn't this really refer to the prices in March?

Edited August 29, 2009 by Von Moses

[XswampyX]

What has happened to the comments on the page? I'm sure they we visible earlier?

Can somebody check please. It might be me. Ta!

[spline]

It's going to be interesting to see the graph for June, July and August. It takes on average 6 weeks to sell a house so doesn't this really refer to the prices in March?

Yes, should be quite interesting. Land Registry collate on the completion date so these are about 9 weeks down the purchase timeline from a verbal offer (historical timeline from BoE).