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Posts Tagged ‘house prices’

House prices have fallen for the first time in six months, with the decline attributed to changes in stamp duty.

The average house price in March was £163,327, 0.9 per cent lower than in March 2011.

It was the largest fall in house prices since June last year.

Nationwide’s figures showed a fall in nearly every region of the UK, compared with the previous quarter.

However house prices increased by 0.6 per cent in the north of England.

They also increased in Scotland, and Greater London.

Stamp duty changes also affected mortgage approvals, which dropped to 48,986 in February, the lowest level for three years, according to figures released by the Bank of England.

The figure was 9,000 lower than in January, when first-time buyers were rushing to buy a property before the end of the stamp duty holiday.

Temporary changes introduced in 2010 meant that properties worth between £125,000 and £250,000 were exempt from the 1 per cent stamp duty, but this was re-introduced on 24 March.

The number of mortgage approvals in January reached a 25-month high but analysts warned that a dip was likely when the stamp duty was re-introduced.

In contrast, the Building Societies Association (BSA) also released new figures today, showing that mortgage approvals by building societies and other mutual lenders increased in February 2012.

Compared with February 2011 they were 31 per cent higher and they also increased, by 29 per cent, compared with January 2012.

According to the BSA’s figures there were £2.2 billion-worth of mortgage approvals in February.

Adrian Coles, director-general of the BSA, said: “Gross lending and new mortgage approvals by mutuals continued to rise year on year in February, despite growth across the market as a whole remaining relatively flat.

“The strong financial results released by a number of mutual lenders in recent months show that the sector is well positioned to offer market leading products to its customers and are open for business.”

The S&P Case-Shiller home price index is inaccurate.

…so is every other economic indicator.

But Case-Shiller faces uniquely complex issues.

Specifically, the prices levels indicated in a given month’s index are based on closing prices, which reflect contract prices that may be many months old.

In January, Business Insider investigated and spoke to S&P’s David Blitzer and index co-founder Robert Shiller.

Blitzer told us, “these are the only consistent, reliable and accurate source of price data.”

On Tuesday, Calculated Risk again raised the issue of lagged numbers in the Case-Shiller index ahead of the release of the January numbers.

To this, Blitzer responded on S&P’s website:

The infrastructure for buying a house — real estate brokers, mortgages, title insurance, lawyers, recording deeds etc. — is largely a paper-based system involving numerous parts and many different people and steps.  Sometimes buying a house seems to mean stepping back into the early 20th century if not the 19th century.   As a result, you can’t get data quickly and if you want an accurate picture of what is happening, it takes time.  So, unlike stock prices which are available in real time, house prices come with a lag.   Further, house prices tend to bounce around a lot, so the indices are reported as three month moving averages to give a better indication of trends.

Calculated Risk noted that competing home price indices often weight their numbers.  Here’s Blitzer’s response to that::

One comment suggested that a weighted average should be used with more weight on the most recent month.  This is also a trade-off: putting more weight on one of the three months means more volatility.   For the S&P/Case-Shiller indices, the trade-off between speed and accuracy means waiting a little while in exchange for better accuracy.

Like we said in January and earlier this week, we think Case-Shiller is nevertheless the gold standard in home price indicators.  But we continue to reiterate that it is important for the data followers to understand what the numbers are really saying.

SEE ALSO: 20 Cities Where Foreclosures Are A Huge Problem >

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See Also:

• Retiring Boomers Are Bad News For US Productivity
• LAKSHMAN ACHUTHAN: Developed Economies Are Going To Experience Frequent Recessions In The ‘Yo-Yo’ Years
• PAUL MCCULLEY: We Need To Rethink The Doctrine Of Central Bank Independence Because The World Has Changed

January Case-Shiller house price data comes out today.

Analysts expect a 3.8% annual drop, according to Briefing.com.

That’s a little less worse than the 4% drop for December, but it’s still weak. Note that all the housing data lately has been a bummer.

But there’s a key thing to realize about Case-Shiller numbers, and that’s that they’re very lagged.

Calculated Risk wrote about this yesterday…

But remember that the purchase agreement for a house that closed in November was probably signed in September or early October. So some portion of the Case-Shiller index will be for contract prices 6 or even 7 months ago! 

Other house price indexes do a little better. CoreLogic uses a weighted 3 month average with the most recent month weighted the most – and they will release their February index next week, almost a month ahead of Case-Shiller. The LPS house price index is for just one month (not an average) and uses only closings (not recordings like other indexes that can add an additional lag). 

But the key point is that the Case-Shiller index will not catch the inflection point for house prices until well after the event happens. Just something to remember …

Still, the Case-Shiller index is the gold standard of housing data, and the folks behind the index today (Robert Shiller and S&P’s David Blitzer) make a good case for its usefulness.

Our Sam Ro talked with both of them in January on this matter:

David Blitzer, Managing Director and Chairman of S&P’s Index Committee, told Business Insider that there is indeed a lag between the time a price is agreed on and when the sale closes.  However, he thinks a six month lag may be on the high side.  We asked Blitzer about Caron’s assessment. Here’s how he responded:

The analyst is correct about one point — prices for S&P/Case-Shiller (SPCS) are based on public filings. However, these are the only consistent, reliable and accurate source of price data. Further the time from contract to closing is more like 4 to 8 weeks, not 3 to 6 months. Also, many sales collapse before the sale closes and the only way to be sure the sales is arms length is through the public records of closings.

We also spoke to Professor Robert Shiller, co-creator of the Case-Shiller index, who shared Blitzer’s sentiment:

Our indices are based on closings. But I think that is the right thing to do. Many purchase and sales agreements are never consummated. Those that are away from the market are less likely to be completed. Using purchase and sales agreements to construct an index would be like taking limit orders on the stock exchange to compute a stock price index as if they were transaction prices.

Blitzer and Shiller both make good points about practicality.  Like Blitzer said, “these are the only consistent, reliable and accurate source of price data.”

So it’s a high-quality number. But it alone won’t help you call the turn.

Then umber will be out at 9:00 AM ET, and we’ll have live coverage here.

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See Also:

• Zillow: No One Actually Knows What’s Going On With Housing
• There Are Still 1.6 Million Homes Lurking In The Shadows
• DANIEL ALPERT: Housing Faces Enormous Headwinds, Price Could Fall Another 7%

The number of £2m-plus homes sold in England and Wales fell to 103 in December 2011, 18 per cent lower than the figure for December 2010.

Eighty of the £2m-plus properties sold during the month were located in London, where prices have been rising faster than in other parts of the UK.

The most popular price bracket in December was £100,000 to £150,000, with a total of 14,385 homes in this range sold.

These properties benefited from the 1% stamp duty holiday which ends tomorrow, when homes sold for more than £125,000 will be subject to the tax.

In Wednesday’s budget the chancellor announced that the level of stamp duty on residential properties over £2m would increase to 7 per cent with immediate effect.

It was previously 5 per cent for all properties over £1 million.

The new charge means that stamp duty on a £5 million property will now cost £350,000, an increase of £100,000.

The Chancellor has also introduced measures to ensure that stamp duty is paid on properties purchased through an offshore company

A loophole in the law previously allowed wealthy purchasers to avoid paying stamp duty by purchasing properties in this way.

However, in future such properties will be subject to stamp duty of 15 per cent.

The move is expected to raise £65 million a year for the Treasury.

The Land Registry said that February was the fourteenth conservative month of declining house prices, although the rate of fall slowed from the previous month.

On an annual basis, house prices fell by 0.6 per cent in February, compared with 1.1 per cent in January.

However prices increased in London and the south of England.

The average price of a house in England and Wales was £161,588 in February, compared with £161,368 in January.

Signs are emerging that the UK property market is slowly starting to improve.

According to the latest figures from The Royal Institution of Chartered Surveyors (RICS), the number of house sales increased in January, helped by first-time buyers rushing to secure a purchase before the end of the stamp duty exemption on homes under £250,000.

RICs reported that average sales per estate agent branch increased from 15.7 to 16 in February.

However, house prices continued to fall during the month, but at their slowest rate for 18 months.

Surveyors are not expecting prices to fall further, and anticipate that sales will continue to increase for the next three months.

Alan Collett, RICS housing spokesman, said: “With the recent upturn in activity brought on by the end of the stamp duty holiday, it seems that a renewed sense of optimism may be slowly returning to the property market.

“However, with affordable mortgage finance still out of reach for many potential first time buyers, it remains to be seen whether the more optimistic outlook for future sales can be sustained beyond the expiry of the stamp duty holiday.”

According to The Department for Communities and Local Government (DCLG) the average UK house price increased by 0.7% in January to £206,523.

In January 35,600 home loans were approved, a 22 per cent increase compared with January 2010, but 25 per cent lower than December according to the Council for Mortgage Lenders.

Yesterday the government launched two schemes designed to boost the housing market.

The NewBuy scheme offers 100,000 mortgages on newly built homes, requiring a deposit of just five per cent of the property value.

It is designed to help first-time buyers afford a mortgage on their first home while offering lenders some protection against borrowers defaulting on their mortgage.

The Right to Buy scheme has also been re-launched, giving up to two million social tenants the opportunity to buy their council home with a discount of up to £75,000 – treble its current level in most parts of the country.

Further changes to the scheme mean that additional properties sold must be replaced with new affordable homes for rent.