So far, the housing market has remained remarkably resilient, at least in price, if not in sales. Not very long ago, many commentators were suggesting falls of 20, 30 or even 40% in house prices from their peak late last year. Recent figures from the Real Estate Institute of New Zealand (REINZ) show that in fact, October 2008 values were down just 4.3% on those of a year ago. Quotable Value (QV), which calculates its figures on a quarter-over-quarter-a-year-ago basis, has calculated a 6.8% decline in prices, a broadly similar result.
Have we averted the huge loss in equities that the doomsayers were predicting? It is hard to tell, for at least two reasons. First, average or median sale prices do not take into account the “quality” of the house. By quality we mean size, neighbourhood and condition. It may well be that a disproportionately large number of those at the higher end of the property market are selling (or being forced to sell) at the moment. Even though they may be selling their six-bedroom mansions at large discounts, the median and/or average sale price would be higher than the typical house. If the median house sold happens to be an above-average quality of house, prices will appear to b holding their own.
Second, with all the negative news around about how poorly the housing market is doing, sellers are keeping their houses off the market unless they absolutely have to sell. Those who can afford not to sell, won’t. As a result, the smaller-than-expected drop in house prices is likely at least in part the result of the pool of sellers drying up. This theory is evidenced by the bundle of flyers from real estate agents that lands in this author’s mailbox each week. Agents are looking for more properties to market, both because that gives them more options to offer buyers, but also because the number of houses on the market has fallen.
Unfortunately, with the increasingly gloomy outlook for employment, the number of forced sales is unlikely to have bottomed out, and the fall in house prices may well continue although it is hard to see it falling as far as the big round numbers some have speculated about.
The number of houses sold seems at least to have flattened out at just over 13,000 a quarter, having fallen more than 50% from the dizzying heights of almost 28,500 in the three months ended April 2007.
Similarly, the number of days to sell has firmed somewhat, presumably as sellers develop more realistic expectations, and as the supply of properties for sale more closely matches demand.