The language accompanying the release by REINZ of the April sales and pricing statistics was as telling as the data in the release.
The comment “(the) market suffered a further slump in sales in April” clearly acknowledges that what we are seeing in the data has been presented in the past few months but has not been so overtly conveyed. Equally the comment “the loss of confidence in the housing market is deeper than we had anticipated” speaks to the analysis presented in the earlier blog post “Media seriously impacts the psyche of NZ’ers when it comes to property” highlighting the emerging softening in demand as measured in web viewings of property.
There is no doubt that consumer sentiment has switched out of real estate as the dual whammy of rising mortgage costs (whilst rates may be on the way down the refinancing of fixed term mortgages will still be at higher rates than those established 2 to 3 years ago) and the general household costs impact discretionary spend.
Looking in more detail at the latest stats from REINZ data for median prices and sales we see the most extreme downward trend of the past 2 decades. These graphs present the year on year percentage change in median price and property sales tracked from 1993 to date.
Clearly seen here in the median price graph are the key cyclical peaks of pricing (1994 to 1997 / 2004 to 2006) and the lows of 1998 to 2002, plus our new downturn.
The steepness of the decline and the new lows are of an unprecedented level. A very important bell weather to understanding the stage we are at in this cycle will actually come in the May figures. It was May 2007 when we first started to see the signs of the heat coming out of the market in regard to sales volumes. Therefore a continued fall in volume as compare to May’07 would show sales down on a falling base of a year ago certainly highlighting that we are not close to the bottom of the cycle.
As for the trend of median price; naturally this is harder to anticipate as the scale of the falling-off in price growth has not been seen to this extent in the past 2 decades. Simply at this point all that can be stated are the figures.
It’s happening simultaneously all around the world as indicated by this UK item “Worst house price falls since 1978″
In the past 20 years, the biggest price fall in any 12 month period was less than 2%. If you were to place a $100,000 bet on whether the July 2008 stat will show a rise or fall, where would you place your money?
Just following on from the previous posting – apparently the media are causing the crash in the UK as well (see comment at the end of this piece: http://www.guardian.co.uk/money/2008/may/13/houseprices.mortgages
Yo Ross now your on to it! The worldwide bubble was synchronous and caused by cheap credit – so it follows the global property bust follows the end of cheap credit……… (well eerrr sorry actually it was a transglobal press attack on property wot dun it guv’nor, nowt to do with all the cheap cash the Fed and the other banks flooded the system with, no, no not at all)