Real estate data and interpretation

The July Barfoot and Thompson numbers are out according to Stuff. The Rates Blog discusses the numbers – something I’m not going to do here.

However, I always enjoy reading what real estate owned businesses have to say about the numbers. In the Stuff article we see that house sales increased by 73, and we are told that this

shows that vendors who need to sell are gradually adjusting to the market and lowering their expectations

Very good – so according to this sales are starting to pick up again. However, prices eased pretty sharply. In order to account for this we are told:

Mr Thompson says while prices clearly eased during the month, the average was skewed slightly by a package of 87 apartments going unconditional during that time and reducing the overall average

Just a second. There was a one-off sale of apartments. Often when there is a sudden “one-off” event like this, people will look past it in order to get an idea of underlying activity in the market. As a result, the trend in sales would be 87 lower than the reported number – or below the June result. This does not suggest that house sales are recovering!

If it wasn’t for the fact that Barefoot and Thompson wanted to make the fall in prices not sound too bad we never would have heard of this one off increase in sales – and so we might have also taken the wrong conclusion from the data.

Ultimately they have to make a choice, was there an increase in sales and a sharp fall in prices, or a moderate easing in prices but no improvement in the sales picture – they can’t cut the data both ways 🙂

Update:  The commentator at the real estate blog discusses how the apartment block influenced the median sales price.

13 replies
  1. Fred
    Fred says:

    I thought it was the magic of the agent that was responsible for selling my house but I’m hearing other factors are involved?

  2. Alistair Helm
    Alistair Helm says:

    A well observed commentary – I am very interested to better understand why they decided to highlight these apartment sales. The best information direct from B&T at this stage seems to indicate it was not (as I thought it was) a distressed / mortgagee sale, merely a protracted sales which only went unconditional in July.

    However when is a block of 87 apartments not a strategic sale and in this market this kind of sale would most likely be an investor buying from a distressed developer?? – or have become too negative of the market situation?

  3. Matt Nolan
    Matt Nolan says:

    Hi Alistair,

    I’m glad they mentioned the apartment sale, as it helps us distinguish between the trend and one-off factors – the trend tells us that sales remain sluggish. This is probably a good thing in the current economic situation, as a pick up in sales would probably require a fair cut in prices given the gap between buyer and seller valuations in many areas of the domestic housing market.

    However, I get the feeling they only mentioned the sale in order to justify lower prices, rather than as the result of wanting to promote the dissemination of information 😀

    My feeling is that the apartment market in Auckland is nearing its trough (depending on the outlook for the remaining finance companies) and as a result, the apartment block sale was probably fairly heavily discounted. I’m picking the annual house price fall to be closer to 2% (July quarter on July quarter) when the figures come out next week.

  4. Alistair Helm
    Alistair Helm says:

    I agree, although I have a view that sales will actually be relatively strong, there are signs of a freeing up of the market and contracts being completed in July – the guide is that July is traditionally lower sales than June – good years or bad.

  5. Matt Nolan
    Matt Nolan says:

    “the guide is that July is traditionally lower sales than June – good years or bad”

    Yes, in seasonally adjusted terms it is usually a little bit lower I’d say just under 4k sales in July will be about on par with June, taking into account seasonal factors. If the number is much below 3.7k then i’d say activity is starting to stall a bit more, over 4.3k activity is picking up. However, even if activity is picking up, we’ll have to look at prices to see if it is a increase in buyer demand or a willingness on the part of sellers to meet the buyer on lower prices 😛

  6. Ross Brader
    Ross Brader says:

    Sales in July 2007 were 6,660 so if the 50% fall in volume continues to be the trend then July sales could actually be as low as 3,315. Will be interesting to see the data. If my memory serves me correctly a figure that low would make it the single worst month in the history of the REINZ statistics.

  7. Alistair Helm
    Alistair Helm says:

    July 2007 was the first month of the stalling of the market, given the 4,305 in June, I would be expecting around 4,500 for July. The reason is that I have been tracking 2008 vs 1998 and these two years are tracking very close – 1998 had a full year of 68,000, on a year to date comparison 2008 is tracking 7% off the 1998 level.

  8. Matt Nolan
    Matt Nolan says:

    “that low would make it the single worst month in the history of the REINZ statistics”

    It is important to seasonally adjust the numbers first – March 2008 was easily the worst SA month on record, even if we get that low July figure. However, March was missing two trading days (because of Easter). However, even if you average March and April, the seasonally adjusted figure for that period would be worse than a July with 3,315 sales (only just though :P)

    “July 2007 was the first month of the stalling of the market”

    The market started to slow in March 2007 – but it start to slow quickly in July, that is true. It would be hard to sustain 50% volume reductions on a year earlier, given how quickly sales fell over the second half of 2007 😛

    “I would be expecting around 4,500 for July”

    That would be the strongest seasonally adjusted month since February (I’m guessing) – however, consumer confidence, petrol and food prices, and even listings growth, have cooled since then. That seems like a big number to me – I guess we will see next week 🙂

  9. Matt Nolan
    Matt Nolan says:

    “I would be expecting around 4,500 for July”

    4,489, you were nearly spot on. Although its still over 30% down on a year earlier, it appears that house sales volumes are finding a base.

Trackbacks & Pingbacks

  1. […] However, if we take into consideration what we discussed last time, we will remember that the sale of an apartment block both biased down prices and increased sales in July.  If anything – the current figures tell us […]

  2. […] a surprisingly “strong” month for house sales – and the real estate blog did pick that (view this comment).  However, it is important to look at this month in […]

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