The real estate market plunge

Alex Tarrant over at Interest.co.nz had a couple of, well, interesting posts on the housing market in NZ.

There is a piece on the February housing statistics, which rose dramatically versus January, although the median price stayed down, and the number of days to sell was a record 62. Alex also looked at the REINZ commentaries over the last year, and to their credit REINZ has pretty much got it right each time.

So let’s look at the total year on year dollar transactions for the real estate market over the last year and a bit:(Red is older, green most recent)

REINZ

It’s been a pretty steady decline from October 2007, though February was an excellent month this year.

Let’s look at what is near and dear to the industry – estimated commissions. I’ve just used 3.5% as a wild guess – what’s important are the orders of magnitude. The fives months between September 08 and January 09 saw $182 million more less in commissions for the industry than the corresponding period a year earlier. $182 million pays for a lot of agents, and a lot of agents’ flash cars and investment properties.
REINZ, 3.5% commission estimated by me
Let’s also smooth out the effect of a lousy January and a great February – and apply the average of the two to them both. You can see that we are not really seeing a resurgence.
REINZ, my smoothing

Finally, as The Bank Manager notes in the comments on interest.co.nz, the February sales in 2009 were a huge drop from previous years. This chart is telling:

REINZ

Things are really not good for the real estate industry, nor for homeowners with large mortgages and uncertain jobs. Nice February statistics are a start, but is it a bounce or a dead cat bounce?

<update. Alistair from realestate.co.nz has introduced an excellent chart:
realestate.co.nz

This is really scary – it shows we still have quite a way to fall. Brace yourselves – and remember that these things tend to overshoot.>

About Lance Wiggs

@lancewiggs
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5 Responses to The real estate market plunge

  1. Koz says:

    It never ceases to amaze me how the media asks ‘impartial’ people for comments on the real estate industry:

    * Barfoot and Thompson
    * Leaders
    * Olly Newland

    Just what do they expect them to say…

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  2. It’s not scientific evidence but I did a count a few weeks ago and discovered the real estate industry had reported a ‘turning point’ or variations on those words, six times in the past 14 months.

    Of course, eventually they’ll get it right.

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  3. Lance

    A very pertinent observation on the realities of the real estate market. I would like to add another chart to your collection – this one I use as a salutary opening to many of my presentations within the real estate industry.

    This one charts the moving annual total of sales volumes and transaction value for the industry since 1992. It is so telling in the volume sales being back where they were in 1992 with around 60,000 (2008 was actually only 56,000) – but the axis for value in green is the fact that wakes up everybody – the value which of course means by your logic earning potential grew from just over $15bn in 1992 right up to $42bn in late 2007 – only to fall to a dizzy level of $23bn today

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  4. Mushion22 says:

    Do you mean $182m *less* commissions over Sep 08 – Jan 09 compared to Sep 07 – Jan 08?

    I’m assuming the red lines/bars are sep 07 – aug 08 and the green lines/bars are for Sep 2008 – Feb 09, in which case there is significantly less commission, not more.

    You should probably add explanations of the colour coding.

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  5. lance says:

    Mushion22 – that’s right – less. I’ll edit it to fix – thanks.
    Green lines are this year to date as you surmise.

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