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Worrying House Price Index Data

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I'm not a property ramper, and I distrust estate agents terribly. However, I came across this index for the first time today and was shocked at its efficacy. It seems to work well as a forward indicator of the other house price indices, and moreover, seems to be predicting an upward trend into the future :(

Knight Frank and Markit Economics House Price Sentiment Index (HPSI).

http://www.markiteconomics.com/Survey/PressRelease.mvc/29fe62f3f0b14278adae03b41ceffaf2

Frank_Night_Index.jpg

Can anyone dispel this and re-assure me not to worry. It si a sentiment-based indictor that gauges the household views on house price direction. The only crumb of comfort I can gather is that it fits Nationwide less than ONS/LR.

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I'm not a property ramper, and I distrust estate agents terribly. However, I came across this index for the first time today and was shocked at its efficacy. It seems to work well as a forward indicator of the other house price indices, and moreover, seems to be predicting an upward trend into the future :(

Knight Frank and Markit Economics House Price Sentiment Index (HPSI).

http://www.markiteconomics.com/Survey/PressRelease.mvc/29fe62f3f0b14278adae03b41ceffaf2

Frank_Night_Index.jpg

Can anyone dispel this and re-assure me not to worry. It si a sentiment-based indictor that gauges the household views on house price direction. The only crumb of comfort I can gather is that it fits Nationwide less than ONS/LR.

If I'm reading the chart right the sentiment is ahead of prices during upturns and overly pessimistic on the down. However, it isn't that far off the ONS and would suggest that their number could come in at circa +5% annual by the spring end. And indeed sentiment has gained confidence as the spring has progressed.

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Well, looking at the chart, the low point for sentiment was Oct 2010 - since then sentiment has been gradually rising.

In Oct 2010, Halifax, Nationwide and the Land Reg all had the average price as £164K

Now Halifax has it at £163K, NW at £164K and LR at £161K - so prices have either not changed, or fallen depending on which index you take.

So, in short, their claim that sentiment leads prices is b0ll0x. Does that help?

This bit made me chuckle though:

"The Help to Buy scheme is designed to free up the mortgage market, and this is reflected in the surge in optimism over house prices seen among the generation of aspiring homeowners, aged between 25 and 34.

"Yay, the thing we aspire to buy is getting ever more expensive, yay!" Must we really allow everyone a vote?

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Well, looking at the chart, the low point for sentiment was Oct 2010 - since then sentiment has been gradually rising.

That was around the time when any thoughts about mortgage regulation were binned.

The Housing Minister, Grant Shapps, says he himself would have failed to get a mortgage had new proposals for the mortgage market drawn up by the City watchdog been in effect when he bought his home.

Speaking at the National House-Building Council's annual lunch, Mr Shapps said: "I think it was about the moment I realised that I wouldn't have a mortgage if the Mortgage Market Review (MMR) changes went through that I kind of thought that this might be going a step too far."

He continued: "There is no point in closing the door after the horse has bolted.

http://www.independent.co.uk/news/business/news/i-would-have-been-denied-mortgage-says-minister-2145051.html

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Well, looking at the chart, the low point for sentiment was Oct 2010 - since then sentiment has been gradually rising.

In Oct 2010, Halifax, Nationwide and the Land Reg all had the average price as £164K

Now Halifax has it at £163K, NW at £164K and LR at £161K - so prices have either not changed, or fallen depending on which index you take.

So, in short, their claim that sentiment leads prices is b0ll0x. Does that help?

This bit made me chuckle though:

"Yay, the thing we aspire to buy is getting ever more expensive, yay!" Must we really allow everyone a vote?

Psychology is an important part of the market, but so are banks willing to lending larger amounts of money. We have the former but not much of the later at the moment, during the boom we had both. (Nationwide doesn't seem to be willing to lend more to increase prices much - lending to more people would probably be better as they could then charge more fees. see also the thread on SSTC coming back to market.)

In word play on the footer slogan of another HPC commenter: "it is correlated until it isn't"

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If I'm reading the chart right the sentiment is ahead of prices during upturns and overly pessimistic on the down. However, it isn't that far off the ONS and would suggest that their number could come in at circa +5% annual by the spring end. And indeed sentiment has gained confidence as the spring has progressed.

It will soon flounder. Its phoney money chasing phoney prices. The govt is sustaining house prices and it is barely working even with historic low rates. The bond market is tightening and will burst within 12 months. The Eurozone continues to be in crisis and the govts are in denial most of the time. Ireland is in deep s***, which people seem to have discounted but its rearing its ugly head. The PIIGs are all in it and pulling down the French, the Benelux countries which are all going into reverse and shoWing house price falls. We are next but the most stubborn, with an idiot for a Chancellor. What other country tries to pump up PROPERTY from a start point of a clearly overpriced house market? The south is a continuing bubble and London is to be renamed Barking-on-Thames.

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It will soon flounder. Its phoney money chasing phoney prices. The govt is sustaining house prices and it is barely working even with historic low rates. The bond market is tightening and will burst within 12 months. The Eurozone continues to be in crisis and the govts are in denial most of the time. Ireland is in deep s***, which people seem to have discounted but its rearing its ugly head. The PIIGs are all in it and pulling down the French, the Benelux countries which are all going into reverse and shoWing house price falls. We are next but the most stubborn, with an idiot for a Chancellor. What other country tries to pump up PROPERTY from a start point of a clearly overpriced house market? The south is a continuing bubble and London is to be renamed Barking-on-Thames.

Post of the week. ;)

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I think people are generally being squeezed a bit, and I cannot see that will make house prices bigger! This "financial crisis!" if that's what it is, has another five years to run, at least :blink:

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The chart isn't being lead by sentiment, it's being lead by the availability of credit. Fundamentally the availability of interest only mortgages as nobody can really afford the prices houses are currently selling for.

I have a friend who's just bought. Good city job, interest only mortgage not because he's bullish on prices it's because he couldn't afford a repayment mortgage!

(Wife hen-pecked him into it, he knows he's doomed)

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The turning points seem to happen when that sentiment index starts to deviate a significant amount from the other indices - such as the Nationwide percentage change chart.

At the moment there seems to be even more deviation compared to the two previous turning points - that is the 2010 peak and then the 2010/2011 low. In addition what they call the HPSI is now almost as high as it's peak value in 2010 just before the charts turned rapidly downwards.

Another notable thing is that the ONS and Land Registry charts have trended higher than the Nationwide chart since about early 2012 and that also happened during the bear period shown during 2010/2011. The Nationwide chart has had a bit of a bear run since early 2012 (although it's picked up a bit more recently) which for some reason isn't reflected in the ONS/Land Registry charts. Does that reflect the London effect?

The Nationwide chart hasn't increased since its 2010/2011 low despite the sentiment index having increased from about 37 to about 50. Does that reflect the London effect? Is the Nationwide percentage change index being left out of the "party" for some reason?

So it's quite possible that the HPSI is actually signalling a significant downturn in the next few months or at least in the not too distant future. At the very least it's not very convincing evidence of a significant upturn.

Note:

From their report they say they only started taking readings for the HPSI in February 2009 so it misses out the main decline during 2008.

Edited by billybong

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I'm not a property ramper, and I distrust estate agents terribly. However, I came across this index for the first time today and was shocked at its efficacy. It seems to work well as a forward indicator of the other house price indices, and moreover, seems to be predicting an upward trend into the future :(

Can anyone dispel this and re-assure me not to worry. It si a sentiment-based indictor that gauges the household views on house price direction. The only crumb of comfort I can gather is that it fits Nationwide less than ONS/LR.

You need to overlay the chart with QE operations (by the BoE, ECB and Fed) and it will all become very clear.

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The turning points seem to happen when that sentiment index starts to deviate a significant amount from the other indices - such as the Nationwide percentage change chart.

At the moment there seems to be even more deviation compared to the two previous turning points - that is the 2010 peak and then the 2010/2011 low. In addition what they call the HPSI is now almost as high as it's peak value in 2010 just before the charts turned rapidly downwards.

Another notable thing is that the ONS and Land Registry charts have trended higher than the Nationwide chart since about early 2012 and that also happened during the bear period shown during 2010/2011. The Nationwide chart has had a bit of a bear run since early 2012 (although it's picked up a bit more recently) which for some reason isn't reflected in the ONS/Land Registry charts. Does that reflect the London effect?

The Nationwide chart hasn't increased since its 2010/2011 low despite the sentiment index having increased from about 37 to about 50. Does that reflect the London effect? Is the Nationwide percentage change index being left out of the "party" for some reason?

So it's quite possible that the HPSI is actually signalling a significant downturn in the next few months or at least in the not too distant future. At the very least it's not very convincing evidence of a significant upturn.

Note:

From their report they say they only started taking readings for the HPSI in February 2009 so it misses out the main decline during 2008.

Very interesting stuff, thanks.

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  • 244 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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