70% club does it again

macaque_2

The 70% club is predicting an avalanche of upbeat predictions about house price rises over the next few weeks.

https://forums.moneysavingexpert.com/discussion/2853236

Here we go:

House prices increased by 0.3% increase in October, the sixth monthly rise in a row, reports LSL Property Services /Acadametrics House Price Index. Year on year house price growth slowed to 6.1%, and is expected to slow further as the small increases in 2010 fail to match the larger gains of a year ago.

The average house price now stands at £224.709.

How prices rise for the sixth month in row? Oh come on! Even the most froth laden bulls will have to admit that this is complete tosh. How do they come up with this rubbish? The way they con the punters lies in the forumla they use for calculating house price rises which is:

A = T/N

Where
A = average house price
T = total value of house price sales
N = number of houses sold

This formula is almost guaranteed to give the illusion of house price rises at the start of a crash. The first casualties in a house price crash are the cheaper properties. When people stop buying cheaper properties T/N rises even though all house prices are falling. In other words they are not comparing like samples with like.

The material for this news item came from:

e.surv Chartered Surveyors is the largest distributor of valuation instructions in the UK

RenovationMan

I love all this 70% club stuff. Great fun.

PasturesNew

macaque wrote: »

Even the most froth laden bulls will have to admit that this is complete tosh.

The 70% Club likes to maintain its exclusivity by putting out false reports .... because they don't want riff raff joining.

Only explanation for it.

macaque_2

Here we go. They are rolling by the hour. All using old data or doctored stats.:

<H2 class=title>Rural house prices soar by £200 a week

</H2>http://www.moneyobserver.com/news/10-11-12/rural-house-prices-soar-200-week

Commenting on the lending figures, Nigel Terrington, chief executive of buy-to-let specialist Paragon, said the rise in advances is encouraging news that reflects increased confidence among both landlords and lenders.

http://www.myfinances.co.uk/mortgages/news/-dysfunctional-property-market-driving-buy-to-let-lending-says-cml-$1378313.htm

70% Club Mail order news - Our apologies for the delays in sending out the bull sized rubber pants. This has been due to very high demand. I am pleased to say that the latest shipment has now arrived from Taiwan and we are working hard to clear the backlog. Unfortunately, for those of you who orderer 'the tartan pants', I regret these are no longer available.

THE_GHOULS_PARADISE

The stastics they used is correct. Just go and do your own research on the street level. House prices have stabilized and are now rising exponentially as cash rich ftb snap up the bargains. Miss out and forever pay someone elses mortgage.

Generali

macaque wrote: »

https://forums.moneysavingexpert.com/discussion/2853236

Here we go:




How prices rise for the sixth month in row? Oh come on! Even the most froth laden bulls will have to admit that this is complete tosh. How do they come up with this rubbish? The way they con the punters lies in the forumla they use for calculating house price rises which is:

A = T/N

Where
A = average house price
T = total value of house price sales
N = number of houses sold

This formula is almost guaranteed to give the illusion of house price rises at the start of a crash. The first casualties in a house price crash are the cheaper properties. When people stop buying cheaper properties T/N rises even though all house prices are falling. In other words they are not comparing like samples with like.

The material for this news item came from:

Not true. The Acadametrics index works by comparing each house price sale with the last time that property was sold and then using that to create an index over time. They use something called 'mix adjustment' to cover new build and right to buy properties.

The people that create indices aren't idiots, they realise that if someone sells a manor house, it will skew a simple mean of the value of house prices.

Generali

THE_GHOULS_PARADISE wrote: »

The stastics they used is correct. Just go and do your own research on the street level. House prices have stabilized and are now rising exponentially as cash rich ftb snap up the bargains. Miss out and forever pay someone elses mortgage.

The data are the data. My belief is that they show UK house prices are about stable with a slight bias towards falling right now.

HAMISH_MCTAVISH

Generali wrote: »

The data are the data. My belief is that they show UK house prices are about stable with a slight bias towards falling right now.

I would agree.

macaque_2

Generali wrote: »

Not true. The Acadametrics index works by comparing each house price sale with the last time that property was sold and then using that to create an index over time. They use something called 'mix adjustment' to cover new build and right to buy properties.

The people that create indices aren't idiots, they realise that if someone sells a manor house, it will skew a simple mean of the value of house prices.

Fair point Generali, I will concede that the forumla I gave is not valid (at least not for this statistic).

However, the claim "the sixth monthly rise in a row" is still a load of old tosh. For the past 10 years easy credit has spawned an epidemic of house improvements and extentions. This seriously distorts the stats if valuation is based on address. This is especially when the housing market dries up since the proportion of transactions will be biased towards sales of new or newly refurbished houses (builders are obliged to sell).

Unlike other countries, the house selling industry in the UK have steadfastly resisted using floor area as a standard metric for describing property (for obvious reasons). Until they do, the opportunities for fiddling the stats will remain legion.

Generali

macaque wrote: »

Fair point Generali, I will concede that the forumla I gave is not valid (at least not for this statistic).

However, the claim "the sixth monthly rise in a row" is still a load of old tosh. For the past 10 years easy credit has spawned an epidemic of house improvements and extentions. This seriously distorts the stats if valuation is based on address. This is especially when the housing market dries up since the proportion of transactions will be biased towards sales of new or newly refurbished houses (builders are obliged to sell).

Unlike other countries, the house selling industry in the UK have steadfastly resisted using floor area as a standard metric for describing property (for obvious reasons). Until they do, the opportunities for fiddling the stats will remain legion.

AFAIK, none of the house price indices are a simple mean, they either us mix adjustment (Haliwide, Rightmove) or compare like with like (Land Registry, Acadametrics).

What you are talking about comes under the rather ungainly name of 'hedonics'. Statisticians use hedonic adjustment when creating inflation indices to reflect the fact that a computer or car bought today is likely to be considerably better than what was available 10 years ago.

I think there is a case for using hedonic adjustment in house price indices, not just to reflect extensions but also for the fact that what you get when you buy a house is perhaps better than in the past. 40 years ago you wouldn't have a dishwasher in a fitted kitchen for example and central heating was normal but not a given in the way that it is today.

I don't think the stats are fiddled personally for two reasons. Firstly they correlate pretty well most of the time. Secondly, many of the producers of house price indices have too much commercial credibility at stake if it was ever to come out.

The reason the Acadametrics index shows rises IMO is because they are what is known as a lagging indicator, that is they show changes in the market after the market has already changed. Nominal house prices have gone from rising slightly to falling slightly it would appear from the indices. Indeed the RICS survey seems to show a grim future for house prices this winter if you happen to think that falling house prices is A Bad Thing.

In terms of timing, you have first of all RICS and Rightmove as leading indicators, Haliwide in the middle and finally Land Reg and Acadametrics as lagging indicators.

macaque_2

Generali wrote: »

I don't think the stats are fiddled personally for two reasons. Firstly they correlate pretty well most of the time. Secondly, many of the producers of house price indices have too much commercial credibility at stake if it was ever to come out.

I am shocked Generali. You are talking about organisations that have been caught red handed in countless miss selling scandals and have actively promoted liar loans. They have knowingly passed off poor quality debt in the form of A grade CDO's. They have used tax payers money to pay bonuses to the very people that brought the economy to the brink of ruin. They are organisations with more than their fair share of greedy, selfish and thoroughly dishonest people. Such people are hardly going to be sqeemish about massaging statistics, especially when the very survival of their business relies on keeping house prices up whilst they deleverage.

As for the stats corrolating, well that just does not hold water. In some months, we see one group reporting rising prices whilst another reports falling prices. If their answer to this is that their results are based on long term moving averages that is just a weazel form of corruption and spin. It is like selling rotten fish and claiming that the fish are fresh on the basis of long term moving averages. Such practices are extremely missleading and can cause serious damage to would be home buyers.