House Price vs House Loan

[kum yin lau]

Hi, the non sensible part is where the statistics are strained to make a correlation where none existed.

House prices are house prices. Home loan totals show the number of people taking out new loans. Less new loans simply means less people bought in that quarter as opposed to the quarter before that.

My friend just borrowed $300 from me [yes, that pathetic figure is right, she's borrowing 200 here & 300 there] to make up 7K that she needs to pay upfront.

Her house will be ready in 6 months.

The total loan commitments has NO bearing whatsoever on her house price.

BTW, her fixed price build when she signed up in March 09 was 325000. The builders are now charging around 370-385 thousand for the same kind of house.

I posted those numbers in March/April last year.

Chances of those houses in Westwood/Woodville crashing to $280K, Hobo? As much as a snowball has in hell perhaps.

If they do, I'll be likely to buy.

KY

 

[MichaelW]

There is certainly a lot more factors than these two (loans/prices), but fewer loans = fewer sales and in an environment where sellers need to get rid of property then it can most definitely lead to lower prices.

I suppose its a good thing that we're not in that environment then. Quite the opposite actually with a booming economy with positive terms of trade and ever reducing levels of unemployment.

Jobs boom continues

And it looks like Sydney is finaly addressing its root cause of economic under-performance and simultaneously supporting its property market.

O'Farrell pledges $5 billion for infrastructure

Not to mention our globally high interest rate setting and scope to lower should the economic strength weaken from super-charged...

I love how people draw two completely unrelated lines on a chart with a single corresponding dip and instantly draw causality links. Amateaur...

Cheers,
Michael

 

[Aaron Sice]

I love how people draw two completely unrelated lines on a chart with a single corresponding dip and instantly draw causality links.
l

this is my problem with these vague graphs - what does the second line relate to value wise - there's always 1/4 values missing.

while certainly tend to agree with the short term bears at present, one CANNOT underestimate the pressure this will put on existing rentals.

i personally can't see any CG over the next few years.

 

[Ausprop]

i personally can't see any CG over the next few years.

really? even tho we are on the verge of resources megaboom? (RESPECT issues aside as hopefully it will never see the light of day). have you forgotten 2006 already BC?

 

[Witzl]

I love how people draw two completely unrelated lines on a chart with a single corresponding dip and instantly draw causality links. Amateaur...

Cheers,
Michael

Indeed..... now i actually have a use for this picture:

 

[Aaron Sice]

really? even tho we are on the verge of resources megaboom? (RESPECT issues aside as hopefully it will never see the light of day). have you forgotten 2006 already BC?

no because wages haven't moved in this state.

the boom can take off all it want, but values won't follow until lending laxes or wages improve.

wages WILL improve - base wage for Barrow Is. is $150k - chuck in a few unions to make it statewide - it's just WHEN.

 

[urbanprospector]

no because wages haven't moved in this state.

the boom can take off all it want, but values won't follow until lending laxes or wages improve.

wages WILL improve - base wage for Barrow Is. is $150k - chuck in a few unions to make it statewide - it's just WHEN.

150 k on barrow ... you been there .. thats why its 150k

wages will be falling as the real effects of what is happening in the world takes full effect here

look at the ship movements in the world // no recovery at all ..

the biggest consumers in the world are bust .(we are too people just not got it yet )

ok gov stats

10.8 mill housing units

population 22.6 mill

people per housing unit on average 2.5 ( think its a bit higher)

10.8x2.5=27

so going on current numbers we have enough housing units for 27 million already .

 

[andrew_de_a]

150 k on barrow ... you been there .. thats why its 150k

wages will be falling as the real effects of what is happening in the world takes full effect here

look at the ship movements in the world // no recovery at all ..

the biggest consumers in the world are bust .(we are too people just not got it yet )

ok gov stats

10.8 mill housing units

population 22.6 mill

people per housing unit on average 2.5 ( think its a bit higher)

10.8x2.5=27

so going on current numbers we have enough housing units for 27 million already .

are these properties where ppl actualy want to live?

 

[urbanprospector]

are these properties where ppl actualy want to live?

going on the vacancy rates yes .. we talking 1.5 million+ housing units here

you think some perhaps where people want to live

 

[andrew_de_a]

you think some perhaps where people want to live

come again?

 

[urbanprospector]

come again?

do you think some of the 1.5 million properties, might be situated where some people want to live

 

[Aaron Sice]

oh FFS not this "room vs dwelling" bullsh:t again.

 

[Witzl]

oh FFS not this "room vs dwelling" bullsh:t again.

*refer to facepalm above.

 

[urbanprospector]

oh FFS not this "room vs dwelling" bullsh:t again.

wtf about the rooms i dont want to know .i dont care i got 3 spare here

im talking total properties 10.8 mill

22 mill pop

2.5per house

 

[Reality Cheque]

Funnily enough, most people can predict the past and the present with a reasonable degree of accuracy. It's only the future that's debatable.



RC

 

[urbanprospector]

Funnily enough, most people can predict the past and the present with a reasonable degree of accuracy. It's only the future that's debatable.



RC

have you sold i have ...that is the only real price and paper profit is bs

go look at my previous posts it gives details of my timing and i will give full details then come back at talk

 

[hobo-jo]

Hi, the non sensible part is where the statistics are strained to make a correlation where none existed.
House prices are house prices. Home loan totals show the number of people taking out new loans. Less new loans simply means less people bought in that quarter as opposed to the quarter before that.

Unfortunately my Excel spreadsheet skills are a little amateur, I couldn't work out how to get both lines on the same graph, but here is the last 8 years of Owner Occupation loans (number of) vs the quarterly housing index (both ABS stats, I had to average the monthly OO stats to get quarterly figures):

As you can see for the last 8 years (and the start of the current housing index) there is a correlation between strong times of growth and larger numbers of OO loans, and likewise stagnation in index or drops when loans drop in number. Are you suggesting we have 8 years worth of coincidence here?

An old saying comes to mind though: You can lead a horse to water, but you can't make it drink.

My friend just borrowed $300 from me [yes, that pathetic figure is right, she's borrowing 200 here & 300 there] to make up 7K that she needs to pay upfront.
Her house will be ready in 6 months.
The total loan commitments has NO bearing whatsoever on her house price.
BTW, her fixed price build when she signed up in March 09 was 325000. The builders are now charging around 370-385 thousand for the same kind of house.
I posted those numbers in March/April last year.
Chances of those houses in Westwood/Woodville crashing to $280K, Hobo? As much as a snowball has in hell perhaps.

I can't say I know the area well enough to comment on what prices might do, but I will say if it's one of those poxy looking townhouses selling in the area for around those prices then I wouldn't even pay what she did. Also if she can't even save a few grand for a deposit (without scavenging from friends) then she's probably going to be one of the first to crash and burn. I'm really not even sure though what this part of your post had to do with the topic at hand.

I suppose its a good thing that we're not in that environment then. Quite the opposite actually with a booming economy with positive terms of trade and ever reducing levels of unemployment.

Even in an environment where there are not forced sales OO loans are clearly correlated with prices.

 

[kum yin lau]

Hi Hobo, I'm arguing on the opposite side of the fence from you. I've been expecting our house prices to drop some for a few years now.

But the charts don't mesh.

The number of oo loans fluctuate between 50000 to 70000. You also see some sharp quarterly changes.

The graph for house price index on the other hand is a continually increasing one.

Look at the March 08 to March 10 lines. Where the oo loans dropped sharply, there wasn't a corresponding same shape drop.

Maybe my chart reading needs to be revamped.

KY

 

[hobo-jo]

Hi Hobo, I'm arguing on the opposite side of the fence from you. I've been expecting our house prices to drop some for a few years now.

Look at the March 08 to March 10 lines. Where the oo loans dropped sharply, there wasn't a corresponding same shape drop.

Not sure what you mean by the other side of the fence. If you've been expecting prices to drop for some years then you have also been wrong for a few years, like many of the bears on "other" sites, some of whom have now broken down and purchased property (at what I expect will be the peak for sometime to come).

I became quite bearish on property late last year as data from first home buyers started to roll in from the first 3 quarters of 2009, showing that they were leveraging to the max in an environment that had record low interest rates...

In regards to the chart, perhaps because I have seen the figures behind it I can see something that you can't (?). Here are the figures from late 2007 to mid 2009:

Quarter - HPI - OO Loans
Dec-2007 - 130.1 - 66554
Mar-2008 - 131.0 - 58506
Jun-2008 - 129.9 - 54828
Sep-2008 - 126.5 - 49867
Dec-2008 - 124.8 - 53398
Mar-2009 - 123.8 - 57272
Jun-2009 - 129.1 - 65616

Of course the House Price Index is not going to follow the loans straight away, it has a lagging effect (the loans are a leading indicator) e.g.
Dec 2007 - OO Loans Peak, then start to drop
Mar 2008 - HPI Peaks, then starts to drop
Sep 2008 - OO Loans Bottom, then start to rise (IMO due to FHOG boost)
Mar 2009 - HPI Bottoms, then starts to rise (IMO longer lag here due to quiet time of year)

As you mention we have a strong fall in OO loans occurring currently, IMO while we've had a rise in the index 1st quarter, as I mentioned the loans are a leading indicator so we will see stagnation or a fall in the Q2 ABS HPI and almost definitely a fall in the 3rd and 4th quarters.

 

[hobo-jo]

Stumbled across this today which pretty much confirms exactly what I have been saying (loans correlated with prices). So if you don't trust a random user with a keen interest in the subject, maybe you will believe the RBA

Periods of strong growth in housing prices are usually associated with a pick-up in turnover in the housing market and an increase in housing loan approvals.
*********
While movements in housing prices, auction clearance rates and housing loan approvals are typically highly correlated, over the six months to March 2010
the value of housing loan approvals fell by 16 per cent, while auction clearance rates and growth in housing prices remained buoyant.

http://www.rba.gov.au/publications/bulletin/2010/jun/pdf/bu-0610-1.pdf

Worth reading the whole piece, some interesting statistics.