The Halifax “biggest house price fall in decade” headline is misleading (surely not a bit of spinning to influence the MPC next week?).
The 0.6% fall in March is based on the seasonally adjusted (SA) figures; the unadjusted data for March is actually almost +0.7%, i.e. a RISE not a FALL.
A short note on the methodology: The seasonal adjustment is applied on the assumption that most of the HPI takes place in the run up to August, and the idea is to redistribute it over the year so that the rises appear to follow a straight line, and, crucially, Jan and Feb are very strongly ‘boosted’ – this is reasonable, except that they need to extrapolate the expected HPI for year (as they don’t know this in advance) with some sort of rolling average, and this introduces significant historical bias.
So let’s look at the Halifax data that the “biggest house price fall in decade” claim is based on (see below) – I’ve added a ‘seasonal adjustment’ boost column on the right so that you can see how the index has been adjusted each month.
As you can see, every year Jan and Feb are boosted by roughly 1.9% and 1.6% but March by only 0.3%, then some claw back mid-season, and a weak boost again leading into Xmas:
They are applying the same adjustment this year (when the underlying HPI is very flat) that they applied last year (when HPI was much larger).
Doing this will produce severe distortions, and it already has – the Jan/Feb SA figures have suggested an overly optimistic start to the year, and, as the boost is removed in Mar, an overly pessimistic fall. Even with constant prices the change in the SA boost itself would produce a fall of –1.3% in March, and the fact that this is only -0.6% is due to prices having actually risen by 0.7%.
Year Mon Price IDX IDX(SA) %Mon-SA SABoost
---- --- ----- --- ------- ------- -------
2003 Oct £131,947 263.2 264.2 2.1% 0.4%
2003 Nov £133,388 266.1 267.3 1.2% 0.4%
2003 Dec £135,444 270.2 272.3 1.9% 0.8%
2004 Jan £134,806 268.9 274.0 0.6% 1.9% <<<
2004 Feb £138,730 276.8 281.2 2.6% 1.7% <<<
2004 Mar £142,584 284.4 285.3 1.5% 0.3%
2004 Apr £145,918 291.1 290.4 1.8% -0.2%
2004 May £149,020 297.3 295.4 1.7% -0.7%
2004 Jun £151,524 302.3 297.8 0.8% -1.5%
2004 Jul £154,299 307.8 303.4 1.9% -1.5%
2004 Aug £153,743 306.7 303.7 0.1% -1.0%
2004 Sep £153,727 306.7 304.9 0.4% -0.6%
2004 Oct £152,159 303.5 304.7 0.0% 0.4%
2004 Nov £153,439 306.1 307.5 0.9% 0.5%
2004 Dec £152,623 304.5 307.0 -0.2% 0.8%
2005 Jan £151,757 302.7 308.4 0.4% 1.9% <<<
2005 Feb £152,879 305.0 309.9 0.5% 1.6% <<<
2005 Mar £153,876 307.0 307.9 -0.6% 0.3%
I really don't care what Nationwide (or Halifax) care to tell me is happening to house prices. Why? Because I simply don't believe them.
For me, falls are now inevitable (and already happening in the South). The massive decline in transation numbers tell me all I need to know about where house prices will be heading for the rest of the year.
History is on my side.
If prices bounce this Spring or anytime in the next few years, then I'm a banana.
There are huge regional variations which make these headlines meaningless. I'm sure in the south, prices will fall but that is not likely nationally. The Halifax predict a 3% rise in Scottish prices, while London housing prices are set to fall by 4%.
Originally posted by beecher: There are huge regional variations which make these headlines meaningless. I'm sure in the south, prices will fall but that is not likely nationally. The Halifax predict a 3% rise in Scottish prices, while London housing prices are set to fall by 4%.
I think you'll find the Halifax have predicted NATIONAL falls of 2% for this year.
So looking at the price column (which I assume isn't seasonally adjusted) we can see that prices went:
UP until July 2004; DOWN for August, Sept and Oct; UP a little in Nov; DOWN in Dec and Jan; UP in Feb and March.
Yet (apart from a tiny drop in Dec) the seasonally adjusted index has shown RISES the WHOLE TIME till this drop in March just reported. How strange it is only NOW that anyone complains about the seasonal adjustment. Why no complaints when all the previous falls went unreported? Hmmm....
Originally posted by fraggle: I think you'll find the Halifax have predicted NATIONAL falls of 2% for this year.
I think you'll find that they didn't - they predicted an average UK fall of 2%. This is meaningless as it doesn't take into consideration regional variations. The Halifax forecast a 3% increase in prices in Scotland.
quote:
Modest price rises in Scotland and Northern Ireland are predicted. The biggest price falls are predicted in the South East, London and the South West. Modest falls are expected in East Anglia, East Midlands and West Midlands, returning prices to levels seen in late 2003
Originally posted by Fran Tick: Yet (apart from a tiny drop in Dec) the seasonally adjusted index has shown RISES the WHOLE TIME till this drop in March just reported. How strange it is only NOW that anyone complains about the seasonal adjustment. Why no complaints when all the previous falls went unreported? Hmmm....
I’ve been even handed on this one – this post suggested that the early spring ‘recovery’ in Jan/05 was down to some dubious SA tweaking .
A house went up for sale about 6 months ago, it didnt sell with the original agent and a new board went up for a different agent. It was priced exactly the same at £185,000 (that means NO RISE in the last 6 months!).
There are exactly the same properties for sale at exactly the same price (its a 10 year old Redrow estate, so obviously lots of similair houses).
I wasnt that keen on it, but just wanted to "test the water" in todays market.... The agent rang me after the viewing and asked what I thought, I said I'll give £150k...he phones back 5 minutes later and says will you go to £165k and they'll accept!!!
I said get back to me when they want to sell it.... They're "considering" my offer???
I know this doesnt mean a whole heap, but it doesnt bode well for house prices does it?...and as for RISES in prices, not this year matey.
Originally posted by phugoid: I’ve been even handed on this one – this post suggested that the early spring ‘recovery’ in Jan/05 was down to some dubious SA tweaking .
More so than the press.
In that post you have put up the Halifax figures (which are also seasonally adjusted) I missed them as they are in a thread about FTB advice rather than one about the Halifax report. Your analysis of the figures in that post just consists of "So it all seems to hang on how much you trust the seasonal "adjustments"." which isn't as strong as you have posted this time. Looking at that thread I guess you are responding to buyingagent's link to the Times article which doesn't mention the seasonal adjustment unlike the spate of articles we have just had about the Nationwide figures that do:
"The average price of a house actually increased in March - from £152,879 to £153,876 - by over £11,000 on March 2004, but the building society makes seasonal adjustments to its figures."
So when the seasonal adjustment makes a fall look like a rise the press report a rise but when it makes a rise look like a fall the press I have seen spell out the details of seasonal adjustment!!!!
The problem as I see it, is that Nationwide appear to be applying the same seasonal corrections (size and direction) that they applied last year (look at the SA boost column), and this becomes more obvious as new data added each month [your point about timing], but since the cumulative HPI for this year (say Jan/05 to Dec/05) looks likely to be zero or (more likely) negative, the corrections should be very different, possibly almost zero, or even reversed.
If the adjustments are excessive, the newspaper headlines for this year can almost be read from the table (diff the SA boost) – Jan boom, March crash, June crash, October boom, etc. But Halifax has a different pattern of monthly adjustments, so we are certainly in for lots more confusion.
My Daughter and Husband had to stay in their house for a minimum of 6 Months for tax purposes after returning from the USA. They had it valued last September to gain some idea of what it would sell for. It has now been sold for £5k above that valuation in Sept. in just 3 weeks and 4 people wanted it. Forget National Statistics any property selling today at good prices will still depend on the age old formulae of location, condition, desirability to the purchasers needs.
Surely if there is a fall then it's good news for most.people will be able to sell easier and more young people will be able to enjoy the joys of home ownership.
Just why this country has probably the most extortionate property prices in the world is beyond belief.
Originally posted by wayne zab: Surely if there is a fall then it's good news for most.people will be able to sell easier and more young people will be able to enjoy the joys of home ownership.
Just why this country has probably the most extortionate property prices in the world is beyond belief.
Not quite true wayne. Many Countries have high property and land prices but I would concede that Countries like Botswana it is still very cheap! The main reason in this Country for high property prices is the high cost of land within this very small island of ours. (tell that to 2 Jags Prescott!) It is not going to get any better either in the future with an open door policy on EU immigrants and others seeking a better life (100,000 have arrived since last Summer--30 of them are working where my Brother works on a flower farm!) they are here to obtain more money before going back to their Homeland like say Bulgaria or any other Eastern European Country where land and property at present is very cheap but for how long?.Who can blame then really? I think I would do the same given their circumstances.
As Mark Twain said "Buy Land, because they 'aint making any more of it".
What are proprty prices like in Holland and Belgium,far smaller countries than the UK and Italy about the same size?
I was selling my house 4 years ago for £64000 but we pulled out through various reasons.The same house is now valued about £155,000.Now that is plain stupid to me.I wouldn't be able to sell it though as there are no first time buyers in a position to get on the ladder due to these daft prices.
I always thought the seasonal adjustment was meant to smooth out the year based on historical data not predicted data. The problem is Halifax and Nationwide don't publish the details of how the seasonal adjustment is calculated but Halifax do say:
"Seasonality: Houses prices are seasonal with prices varying during the course of the year irrespective of the underlying trend in price movements. For example, prices tend to be higher in the spring and summer months when more people are looking to buy. We therefore produce seasonally adjusted series to remove this effect and to allow us to concentrate on the underlying trend in house prices. These seasonal factors are updated monthly."
So I don't think zero, or reversed adjustments would be fair. If prices are historically higher in the summer but remain flat this year then it is right to show a seasonally adjusted drop this summer. There could be a case for smaller adjustments I guess but either way without publishing the method Nationwide and Halifax can massage the figures any way they wish. This is why I much prefer the Hometrack data. Wrigglesworth talks a load of tosh but if you ignore the text and just look at the figures they are more realistic than Nationwide and Halifax IMO.
PS As an aside have you ever plotted the land registry data? If so you will have seen how prices do vary during the year, basically it's a dip around Xmas.
PS As an aside have you ever plotted the land registry data? If so you will have seen how prices do vary during the year, basically it's a dip around Xmas and a peak around the spring/summer.
(quote) The main reason in this Country for high property prices is the high cost of land within this very small island of ours. (tell that to 2 Jags Prescott!) It is not going to get any better either in the future with an open door policy on EU immigrants and others seeking a better life (100,000 have arrived since last Summer--30 of them are working where my Brother works on a flower farm!) they are here to obtain more money before going back to their Homeland like say Bulgaria or any other Eastern European Country where land and property at present is very cheap but for how long?.Who can blame then really? I think I would do the same given their circumstances.
As Mark Twain said "Buy Land, because they 'aint making any more of it".
But surely people picking flowers can't be pushing the prices of houses up? They're earning a pittance.
I would say that it was low interest rates that fuelled the recent house prices rises. Lots of money/credit swashing about. And, for a while,it was very easy to borrow lots without any evidence of earnings. Some friends of mine told ever so many porkies in order to buy a house.
On a related theme,I'm always amazed by the people on those homes abroad programmes. How come they have so much money to spend on a second home? They'v
