Posts by David Hood
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Katharine, I am sufficiently not an economist/banking person that I will say “It sounds from that like there is a similar sized pool of money out there that has something to do with cross border currency movements”
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Speaker: House prices and the "Magic Money", in reply to linger,
linger, I think I would agree to that. Which is why I've been describing it in terms of influence- the volume of the explicable money but into the hpusing market vs the unexplained. We have no idea about how those volumes break down in terms of number, price and location of individual houses.
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Speaker: House prices and the "Magic Money", in reply to linger,
linger, the Central Limit Theory may not apply to psychology,, but the arguement is that it if you get an outlier event in one year, it will get brought back into line by eventts from subsequent years. If it doesn't it isn't an outlier. Hence the CLT.
If the hypothetical high priced outlier sale does shift all the neighbourhood, it is not an outlier and the sales of the other houses is at that value, and people have to find the money to play those prices. If it is an outlier, things revert.
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Swan, even if thos are reasons for the prices going up, we come back to the problem of where is the money coming from for paying for the bidding up? Because the increase in prices is not being paid for by increasing borrowing (people are not borrowing more to pay for the increase), household income increases are flat, and there is no obvious shifting money out of the sharemarket or things like that.
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Speaker: House prices and the "Magic Money", in reply to Michael Homer,
Michael, since I misunderstood where you were going previously, perhaps you could work through an example.
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Speaker: House prices and the "Magic Money", in reply to chris,
Chris, I've only really glanced at the immigration pattern long enough to dismiss it without worrying about why people were immigrating- I basically did the things you normally do with time series- see if it lines up in a time (in this case) quarter on quarter way and seeing if it fits better with a time offset (like the Irish and US graphs upthread become a perfect fit with a time offset, not so much NZ). Didn't really see much so moved on.
People can argue for a unusual change in the kind of immigrants (in terms of their ability to access capital) but at that point you are arguing against the lack of trend among immigrants generally so the small set needs to be exerting a more and more powerful effect (since it is clearly not all immigrants) and if people want to start arguing that I think they need to bring some postive evidence that overwhelms the general immigration pattern.
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Speaker: House prices and the "Magic Money", in reply to Michael Homer,
The argument is supported by the REINZ price index though ,which is only based on sales and shows the same pattern. So if it is a collective delusion it is a delusion that someone is putting up the money to fund.
I have two big problems with "small number of sales having a disproportionate effect" arguements.
- there is no evidence for a dramatic drop off in sales,. Indeed, if anything whenyou look at the figures, there have been more houses sold in the recent period of rises than earlier periods of less rises. and larger volumes would mean that the proportion of house sales contributing to house value is higher. Yet mortgage debt is going down as a proportion of the price (because the price is rising so much but not debt). That logical incosistancy is enough to make me rule out the small sample effects theory.
- any one of small sample altering things is followed by other sales periods, and a small freak event would be cancelled out by subsequent sales events in a central limit theorm kind of way.But, while I feel that renders the arguement moot, I am happy to suggest what you do to test it. Get hold of a sales volume time series, and see how well sales volume predicts price (you could pretty much take the data file I put on github and replace the debt data with volume data and see what the graphs are like. For the "it is low volume that is not representive" arguement to work there would need to be a relationship between lack of sales volume and dramatic rises in price. I you want to test your theory, please post the graphs as while I don't think it makes logical sense I am always willing to be convinced by data.
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Speaker: House prices and the "Magic Money", in reply to Lilith __,
Thanks. I had to make a few judgement calls about not winding too many information sources together to make the basic point in a way people can follow along.
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Speaker: House prices and the "Magic Money", in reply to BenWilson,
But I’m not asserting that it must be so, and from what I understand of David’s point, he’s asserting that it isn’t so, here in NZ, right now
I would say I'm asserting that, by the numbers
- it used to be so
- it isn't any more
- as it isn't, the money pushing up prices (which in turn push up values) has to be coming from somewhere.
- it is nowhere easy to see alternative sources from within the NZ economyyou can think of it as a case of "follow the money" where we can rule out the traditional suspects.
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Speaker: House prices and the "Magic Money", in reply to Swan,
Why? What is the reason for debt to go up because peoples houses have been revalued.
Because the revaluation amount is based on sales information- so the sales price going up leads to the revaluation figure. The debt is going up for the people buying the houses at the higher prices which is the trigger for the revaluation of other houses. Would I help if I link to a Real Estate Institute of New Zealand graph of house prices.
That is the same graph as the valuation information- valuation and price can be used interchangeably, and REINZ do not release their actual data that their graph is made from, but in terms of plugging numbers into a calculation, the valuation numbers which make the valuation graph will give the same figure 2 because the graph is the same shape.
Because the amounts on the REINZ graph are in "Housing Price Index" dollars, it is tricky to talk about the exact amount, but because the graphs are the same shape, it will come out to 3/8ths of the amount spent on increasing the value of actual sales is not explicable by household mortgages or obvious other parts of the economy.