Confidence & the housing market

There is a lot of speculation about the housing market in the daily press at the moment, with a lot of talk re “price bubbles’ and the market taking off. For a more detailed review, attention needs to paid to leading key performance indicators (KPI`s) rather than current or last week`s auction clearance rates to allow a realistic assessment of trends. One of these is measures of consumer confidence, where we have a database over an extended time frame that enables comparisons with earlier periods where the outcomes are known. Michael Matusik in his Matusik Missive dated October 15th 2013 discusses the Westpac Melbourne Institute Consumer Confidence Index and reports as follows: Confidence The theory was that confidence would lift after the federal election, but the Westpac Melbourne Institute Consumer Confidence Index actually fell by about 2 per cent during October. The index now sits at 108.3 – which actually means little to most of us – but if I put it another way, 100 means that half the community are optimistic & half are pessimistic. So, a 108.3 reading means that slightly more see the glass half full rather than half empty. But not a lot more of us are seeing the sunny side of the street. Another surprise was the fall in the ‘whether now is a good time to buy a dwelling index’. This score fell 10 per cent from 140 index points to 135, with the biggest falls in NSW (down 23 per cent) & Queensland (down 11 per cent). There were similar falls in April this year, following media speculation about interest rates moving upwards. October’s decline comes on the back of talk about a housing bubble; declining affordability & pending market correction. But as we pointed out both here & here – in our opinion at least – no such bubble conditions (yet) exist. If we are not careful, we will talk ourselves out of a good thing. The Westpac Melbourne Institute Good Time to Buy a Dwelling Index is a near prefect bellwether as to the future direction of the housing market. If this current slide in confidence continues, expect the recent gains made in housing prices & sales to plateau & maybe even fall in about six months’ time. Acknowledgement – extract from the Matusik Missive, October 15th, 2013