Friday, July 31, 2009

The Bulls return (see Times comments section)

Unthinkable, but true, house prices rise yet again

Three months ago analysts would have called it unthinkable and homeowners would have been dismissed as wishful thinkers. Nevertheless, figures out today will show that not only have house prices risen for the third month in a row, but at the end of 2009 they could be higher than they were at the start of the year. Nationwide has reported a 1.3 per cent rise in average prices, from £156,442 to £158,871 in July, boosted by a scramble for family homes in desirable postcodes. NOTE - "Nationwide’s sample size is an estimated 3,600 properties — a figure based on the 45,584 mortgage approvals recorded by the Bank of England in June and the lender’s market share of 7.9 per cent"

Posted by jack c @ 10:00 AM (410 views)
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6 thoughts on “The Bulls return (see Times comments section)

  • Keith Thomas says:

    Classic Bull Trap rally – a bubble always gives the public one last chance to lose their money.

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  • Europeanbear says:

    I would love to have a look at the raw data of some of these indices (being a statistician). To quote “According to the Land Registry, there is evidence that greater demand but lower supply of large family homes, especially in London and the South East, is pushing up prices disproportionately.”
    This strongly suggests that a small number of sales of expensive houses are pulling the mean up. And all indices publish the (arithmetic) mean. What would be far more informative would be the median. I suspect this is heading downwards, and if it is the VIs would never tell you as averages are going up. The most expensive house in the UK has a price tag of 80 million, whilst the cheapest is probably around 0, with the “average” bumping along at 150,000. especially when turnover is low, the sale of just 1 house in the 1 million price bracket will push up the “average” index by 10 times the amount a sale of a 50,000 house would reduce it. Here is a worked example. 5 houses sell, priced 50,000; 100,000; 150,000; 200,000; & 250,000. Perhaps a typical sample from some provincial city ranging from a tiny studio to a family house. The mean price is 150,000 AND the median price is 150,000. Now lets have another cross section that also includes some large mansion in Surrey (but NO HPI): 50,000; 100,000; 150,000; 200,000 & 1,000,000. The median price does not shift, it is not affected by the expensive property i.e. it remains at 150,000. But the average shoots up to 300,000. AND 5 of the 6 houses sold have a selling price BELOW the average. On the other hand if there was genuine HPI, then all houses in the first sample would rise say by 10%, giving a sale price of 55,000, 110,000, 165,000, 220,000 & 275,000. In this example, both the median and average have increased to 165,000 (but the arithmetic mean is still lower than the sample with the mansion in Surrey). QED. Arithmetic averages are great for VIs to ramp, but no one wants to report the median which is a reflection on the great majority of housing transactions….The prices of houses are heavily skewed and the statistical analysis should reflect that….

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  • Vacuouspolitician says:

    Question – How can anyone be pleased that house prices are rising again?
    Some of the comments at the end of this article are truly crass – the one (I better not print his name) at July 31, 2009 4:35 AM BST is priceless – he just comes across as an awful, unsympathetic, morally bankrupt “know-it-all”…

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  • Notbuyingoneyet says:

    What sample size is needed for the statistics to be meaningful? The sample size is only 7.9%, is this enough to draw any conclusions?

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  • “Three months ago analysts would have called it unthinkable and homeowners would have been dismissed as wishful thinkers.”

    Exactly which is why they got:

    1. the crash wrong – few forecast
    2. this rally wrong – even fewer forecast
    and
    3. Why they wont get the next move down right either. – less and less are forecasting and alot will move to bullishness, just in time for the market to belly up.

    And as for the Bulls – as i said yesterday, thats a contrarian indicator in a bear market, The Bull trap cometh! I read some of the comments which stand up on the basis of a bull counter-trend mentality. Lots of – “i told you so” stuff coming out. But on the basis of a bear trend counter rally (which these guys have probably never seen before) its gonna be a bit of “Sh1t how did dat ‘appen?”

    The classic was one guy saying he recommended to buy Taylor Wimpey 38.5p whatever (he says – sand he’s right – the low was 4p – effectively that was a call option in the housing market so yep probably was then worth a punt) – the REAL question though is did he short at around £5?

    It takes two opinions to make a market – maybe we are right and maybe we are wrong – but it would be nice for these “chaps” to have some humility!

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  • Christopher Eares sums it up nicely in the comments section. I don’t think there’s much else to say.

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