Friday, November 09, 2007
Another house price index
Posted by David Smith at 09:30 AM
Category: Thoughts and responses

The FT-Acadametrics house price index has the same 12-month increase as the Halifax, 8.9%, but showed a 0.7% monthly rise in October. Confusing.

Meanwhile, Britain's trade deficit widened from 6.9 billion in August to a record 7.8 billion in September. The pound is at $2.11 ...

Comments

Hi Davd

No, its not confusing

FT index is based on sales (Land reg), and so it about two months behind Halifax.

Also, As you are no doubt aware, the MoM numbers have a margin of error of about 0.8% (for nationwide and Halifax).

The best way to see what is really going on with the housing market, is to run a 3 month average of the Haliwide numbers


Jan 2007 180,998 1,497 0.8% 9.8%
Feb 2007 182,404 1,406 0.8% 10.0%
Mar 2007 184,259 1,855 1.0% 10.2%
April 2007 186,149 1,890 1.0% 10.2%
May 2007 187,446 1,297 0.7% 10.1%
June 2007 188,666 1,221 0.7% 10.5%
July 2007 189,582 916 0.5% 10.9%
Aug 2007 190,598 1,016 0.5% 11.0%
Sep 2007 191,205 607 0.3% 10.3%
Oct 2007 191,699 494 0.3% 9.3%

As you can see, the market is slowing very nicely

Posted by: kingofnowhere at November 9, 2007 12:47 PM

Thanks. I did know about the timing differences but that looks just about right to me. Other data, including approvals, suggest Halifax's fall is premature.

Posted by: David Smith at November 9, 2007 01:26 PM

Hi David

Halifax is probably over egging the falls (Proabably more to do with the small data sample, and margins of error) , and Nationwide is probably over egging the rises. (Again small data samples, margins of errors)

I personally find it incredible the MoM numbers aren't more volilte. Halifax has about 15%-20% market share, so they are doing about 20K of approvals a Month. From that they come up with a UK house price movement.

Anyway Halifax does seem to lead the Nationwide numbers, even more than the timing (Nationwide Mid month to mid month, Halifax end of month end of month), would suggest.

The trick, I find is not to look at the MoM numbers in isolation, they are volatile.

I wouldn't be surprised if Halifax put in a large rise next month, and Nationwide put in a large fall.

Basically prices are not falling in the UK (On average), at the moment, no matter what any indicies show.

Posted by: Kingofnowhere at November 9, 2007 02:54 PM

I don't know if this is a good way of looking at it or not, but if you look at BoE figures for bank lending for housing loans, or what ever it is known as, you see that year on year growth has barely moved since the start of the year. So if people are still increasing their borrowing at a fairly constant rate, it would need the number of transactions to increase in order to have falling house prices. Or am I just spouting rubbish?

Posted by: Will at November 9, 2007 05:24 PM

It's an interesting way of looking at it, but we usually think of it in exactly the opposite way, if I've understood your point. The smaller the number of approvals, the weaker house prices will be, because approvals are a measure of housing demand.

Posted by: David Smith at November 9, 2007 07:28 PM

Hi

As well as approvals, which David is correct in saying is a proxy for demand, you can get both sides supply and demand from RICS Sale to stock ratio.

Here is a little BOE graph, so S/S ratio and HPI (average Haliwide)

http://www.geocities.com/kingofnowhereiii/boe_market_tightness.gif

Rics at the moment is low on the supply side, so I suspect it is being distorted by Hips.

Posted by: kingonfnowhereiii at November 10, 2007 08:42 AM

people like jonathan davis of doomsayers house price crash website sold their property to rent in 2002 thinking prices were crashing - they wanted to speculate to buy back in cheaper later and sadly mistimed the market.

they havnt shut up about an impending crash ever since and are getting increasingly desperate. dont know why anyone listens to them.

Posted by: BARRIE at November 14, 2007 06:29 PM

I don't know whether that's true or not - perhaps Jonathan can respond.

Posted by: David Smith at November 16, 2007 10:27 AM