House prices are such a topical issue. It seems everyone has a view about price rises and falls.
Some commentators are floundering in their commentary as they get in a tizz when they try to say all house price gains are either good or bad. Many cannot distinguish between good rises in house prices and bad rises in house prices – ie, something normal versus a bubble.
Whatever those shortcomings of this dross, the daily house price data from Corelogic are showing that house prices are continuing to ease. While is may be a blip, seasonal or have some other unknown quirk in the data, it is nonetheless interesting that since the recent peak, house prices in the five main cities (the Corelogic expression), have fallen by 1.7 per cent. The index is now back to the level it first reached in March 2015, so it is probably no big deal.
In Sydney, since the recent peak, prices are down 1.8 per cent while in Melbourne, prices are down an eye-brow raising 3.8 per cent. In Perth, prices are off 2.3 per cent compared with the recent peak in that city. In Brisbane prices are only a tiny 0.8 per cent down from the peak while in Adelaide, house prices hit a new high today. Go Adelaide!
Maybe the house price boom is coming to an end and we are witnessing the early stages of it now. The next few months of data will be fascinating. If so, let’s hope the market correction is orderly, without any of the problems that falling house prices can mean for the banks or the real economy. If the fall we are seeing now becomes a crash, the consequences for the economy will make the drop in the iron ore price look like small change.