Why are the Bulls here buying this 0.1% recovery

Cleaver

Oh I give up.

I'm getting the impression that what you really think is that the methodology of how Nationwide collect and release information isn't up to sratch and this means that their statistics are incorrect. Which sounds a good basis for discussion. However, you don't seem to have any real evidence of how their methodology is flawed, so you've just called them liars as it sounds a bit more edgey and conspiracy theory-esq. Am I right?

abaxas

Cleaver wrote: »

Oh I give up.

I'm getting the impression that what you really think is that the methodology of how Nationwide collect and release information isn't up to sratch and this means that their statistics are incorrect. However, you don't seem to have any real evidence of how their methodology is flawed, so you've just called them liars as it sounds a bit more edgey and conspiracy theory-esq. Am I right?

No no no

All I want is for the methodoly and data to be open so it can be looked over by others. That way we can find out how it work and what it means.

Then and only then can you make statements like the BBC does. Eg 'house prices up 5%' etc. Because that statement is also a lie, as we have no idea how the figure is calculated. What they mean is, a number that is calcualted from mortgages given by the nationwide/halifax has gone up by 5%. These are not the same things.

I want things to open up and for people to understand what they mean, not take some number that means nothing as gospel.

Wouldnt that be a better situation? To have trust in the figures.

EDIT : I'm a straight kind of guy. I work with computers and numbers. Grey is not my fav colour :P

Really2

abaxas wrote: »

No no no

All I want is for the methodoly and data to be open so it can be looked over by others. That way we can find out how it work and what it means.

http://www.nationwide.co.uk/hpi/historical.htm

http://www.nationwide.co.uk/hpi/method_qs.htm

You only have 2 wishes left use them wisely.

Cleaver

abaxas wrote: »

All I want is for the methodoly and data to be open so it can be looked over by others.

Is the below not enough then?

http://www.nationwide.co.uk/hpi/methodology.htm

Full methodology

Summary

Introduction


There are several methods that could be used to calculate the trend in house prices, ranging from a simple average of purchase price to a statistical method of averaging. Then there is the matter of making sure that the different mixture of properties sold in each month does not give a false impression of the actual change in house prices. The next few sections explain the way we do this as well as providing some background to the Nationwide house price series and the current methodology that we employ to calculate average house prices.
Background to Nationwide House Price Information

Nationwide Building Society has a long history of recording and analysing house price data and has published average house price information since 1952. The following provides a short chronology of publish series and developments in Nationwide's methodology of calculating average house prices:
1952 - Annual publication of house price data.
1974 - Quarterly data is published for the first time.
1989 - Development of new house price methodology. A statistical 'regression' technique was introduced under guidance of 'Fleming and Nellis' (Loughborough University and Cranfield Institute of Technology).
1993 - The house price system was further improved following publication of the Census 1991 data. Frequency for UK series increased to monthly.
The monthly figure measures the mix adjusted average house price for all houses in the UK. Every quarter the Nationwide also publishes a more detailed breakdown of house prices. These include both UK and 13 regional estimates for:

• 4 types of house (Detached, semi-detached, terraced and flats);
• 2 types of buyer (First time buyer and Former owner occupiers);
• 3 property ages (New, modern and older - pre World War II).

This makes a total of 140 separate series, all of which are published in our Data Download
Data - source, cleaning and sample size

Source
All house price information is derived using Nationwide mortgage data. This data is extracted monthly for mortgages that are at the approvals stage and after the corresponding building survey has been completed. Approvals data is used as opposed to mortgage completions since it should give an earlier indication of current trends in prices in the housing market.
Cleaning
Nationwide house price series utilise only residential property information. In addition, properties that are not typical and may distort the series are also removed from the data set. Therefore, the following criteria is used to select which properties to include:

• House purchases - remortgages and further advances are excluded
• Properties sold at true market prices - right to buy sales at discounted price are excluded
• Floor size has to be within specified limits for a given type of property - e.g. a detached house has to have at least 400 sq. ft floor area

Sample Size
The number of cases that are used to calculate the average price for a given month will depend on the volume of monthly mortgage activity and out of these the cases that meet the criteria in the cleaning process. The monthly sample size will therefore vary from month to month. Nationwide has sufficient sample size to produce a representative house price series. N.B. Net lending figures quoted at our half yearly and annual results are not a guide to our sample size. Sample size is based on the number of new loans we write i.e. the amount of gross lending for house purchase(remortgage cases are excluded).
The Nationwide Building Society is the 2nd largest mortgage lender in the UK by stock. This allows us to be confident that the series based on Nationwide mortgage data is representative of the whole house market.
The quarterly UK series for all houses uses 3 months of data and hence a much larger sample than at the month. The samples sizes for the other quarterly series will depend on what it is they are measuring, for example the series for first time buyers only considers properties being brought by first time buyers and hence this will have a smaller sample size than that used for the whole of the UK. It is for this reason that detailed breakdown of house prices are produced quarterly.
Mix Adjustment Process

Why Mix Adjust?
The purpose of mix adjustment is to simply isolate pure prices changes. The simple example below illustrates how the changes in the mixture of properties sold each month could give a misleading picture of what is actually happening to house prices. The set of properties sold from month to month will vary by location and design etc. and some adjustment is necessary to make sure all of these do not give a false impression of the actual changes to house prices. A mix-adjusted or 'standardised' index is not affected by such changes because the relative weight given to each characteristic of a property in the 'mix' (or 'basket', to use an analogy with retail prices) is fixed from one period to the next.

Simple example - Benefits of mix adjustment Suppose that the price of both detached houses and flats increased at the same rate for five periods, with flats being cheaper.
Further suppose that the proportion of flats and detached sold in each period varied considerably, as the table shows.
The simple average of both kinds of properties will be influenced by the proportion of each property sold. In periods 3 and 4 the simple average shows a decrease, whereas the actual prices of both increased!
The mix adjusted average uses a consistent measure of the proportion of each type of property and is able to better reflect the true change in prices.

Time Period P1 P2 P3 P4 P5 % Flats 50 30 70 30 70 % Detached 50 70 30 70 30

The mix-adjusted price represents the price for an average or 'typical' house. This should not be confused with the average price of all houses. The latter is usually higher because even though there are fewer more expensive houses sold, their price is such that they bias the simple average to be greater than the price of the typical house.
Calculating the price of a typical house

Calculation
The price of a property will depend on the characteristics of the property. These characteristics could include physical properties of the house, like its design, but other aspects such as the type of neighbourhood the house is located in will also contribute to the price someone is willing to pay. Using mortgage data, the Nationwide house price system can relate all the observed combinations of these factors and relate them to the price of which the house was sold for. From this, the model can estimate how much on average a house would cost given a set values for these characteristics, in particular a set of characteristics that describes the 'typical' house. This typical house does not physically exist, it is an 'average' house across all the characteristics that the model uses. This method is repeated on data sets at different points in time and changes in the price of this typical house reflect only the price changes over the same time periods, and not the mixture of properties sold in the current or pervious periods.
Factors that affect the price of a house
The following are the items that are used to describe the characteristics of a property. There is no set order that these contribute most to the price of the house, although UK location, the type of neighbourhood and house size are consistently the three most important followed by the design of the house.

• UK Location, i.e. part of country
• Type of neighbourhood. The Nationwide index uses an established demographic system that classifies areas in the UK into 56 categories based on the type of people that live there, two examples include retirement and council areas.
• Floor size
• Property design (detached house, semi-detached house, terraced house, bungalow, flat, etc.)
• Tenure (freehold/leasehold/feudal) except for flats, which are nearly all leasehold
• Number of bathrooms (1 or more than 1)
• Type of central heating (full, part or none)
• Type of garage (single garage, double garage or none)
• Number of bedrooms (1,2,3,4 or more than 4)
• Whether property is new or not

Seasonal Adjustment

House prices are slightly seasonal - that is, prices are higher at certain times of year irrespective of the overall trend. This tends to be in spring and summer, when more buyers are in the market and hence sellers do not need to discount prices so heavily, in order to achieve a sale. The effect on prices over the year is of the order of +/- 1.5%; however this is much smaller than the change in volume of property transactions. The seasonal effect is estimated each month using established statistical methods.
For the monthly house price index where changes can be as little as 0.1%, seasonal factors are important. The Nationwide therefore produce a seasonally adjusted series for UK house prices which seeks to remove this effect so that the overall trend in prices is more readily apparent.
Seasonal adjustment shows that June is generally the strongest month for house prices (raw prices are 1.3% above their SA level) and January is the weakest (raw



Questions and Answers

• Nationwide house prices are mix adjusted - i.e. we track a representative house price over time rather than the simple average price. We do not use the simple average price (Land Registry uses this method) because it is too easily influenced by a change in the mix (i.e. proportion of different property types, locations etc) of houses
• Although it remains similar to the Halifax method we substantially updated our system in 1993 following the publication of the 1991 census data. These improvements mean that our system is more robust to lower sample sizes because it better identifies and tracks our representative house price

What data is the index based on?

• House price information is derived from Nationwide lending data for properties at the post survey approval stage

How long have you been publishing house price data?

• We have the longest unbroken run of house price data - it stretches back to 1952 on a quarterly basis and 1991 on a monthly basis.

Are your house prices biased because you do more lending in the South East?

• No. The whole point of mix adjusting prices is to remove any bias that the Nationwide mortgage data may exhibit whether that be the type of property we lent on or its location or indeed any one of the other characteristics we use to identify our representative house

What sample size do we have?

• Nationwide has sufficient sample size to produce a representative house price series. N.B. Net lending figures quoted at our half yearly and annual results are not a guide to our sample size. Sample size is based on the number of new loans we write i.e. the amount of gross lending for house purchase.

Why are our house prices different to the Halifax's?

• Over long periods the Halifax and Nationwide series of house prices tend to follow similar patterns
• This stems from both Nationwide and Halifax using similar statistical techniques to produce their prices
• Our average price differs because the representative property we track is different in make up to that of Halifax

What is seasonal adjustment?

• We seasonally adjust our prices because the time of year has some influence. Winter months tend to see weaker price rises and spring/summer see higher increases all other things being equal

abaxas

Really2 wrote: »

http://www.nationwide.co.uk/hpi/historical.htm

http://www.nationwide.co.uk/hpi/method_qs.htm

You only have 2 wishes left use them wisely.

No data or methodology of any value there.

Just useless figures with no informtion of how they are worked out and a document that shows the the ways they use the data, not how the data is calculated.



Useless to anyone and everyone who has a brain. Do you really want me to rip it apart and make it look stupid, becasue that is very easy to do.

chucky

abaxas wrote: »

All I want is for the methodoly and data to be open so it can be looked over by others. That way we can find out how it work and what it means.

do you not drink coca cola either because you don't know the exact formula?

nembot

It would be incredibly cheap to consolidate all sales data into a single independantly managed database, from which accurate and unbiased data could be provided.

The assumption that VI's would not put bias on their own numbers, is the real question here?

Although, I understand your perspective Cleaver the people who don't trust the numbers (including myself) haven't any real way to disprove them and if the numbers were accurate, the companies wouldn't be against keeping independant data on all house sales, for the general public to see.

It's 6 of one and half a dozen of the other.

The land registry is not all sales data, it's like for like only and therefore inaccurate.

Really2

abaxas wrote: »

No data or methodology of any value there.

Just useless figures with no informtion of how they are worked out and a document that shows the the ways they use the data, not how the data is calculated.



Useless to anyone and everyone who has a brain. Do you really want me to rip it apart and make it look stupid, becasue that is very easy to do.

So you want to see every sold price? By all means tel us where they are going wrong.

abaxas

chucky wrote: »

do you not drink coca cola either because you don't know the exact formula?

No... I prefer water myself.

Much better for you.

Really2

nembot wrote: »

The land registry is not all sales data, it's like for like only and therefore inaccurate.

But all data is listed why not make your own data? They only don't include Cash and auctions as they are extremes but the data is available to everyone for all sold prices.

Easy to make a local index if you believe people manipulate the figures.