My wife and I decided to put our home up for sale some months ago. If you've ever sold your family home, you know how time consuming it can be - decluttering, packing, staging, and getting to all those things you never seemed to be able to get to over the years, yet miraculously you get to it in a matter of only a few weeks. The designer, photographer, and copywriter did an amazing job. They made me want to buy back my own house. I guess you know they've done a good job if that happens.
My wife and I have a pretty clear financial plan, yet it's flexible enough to allow us to adapt to whatever life is throwing us at the time. Part of our game plan was to sell the family home as we venture into the future. We weren't under any pressure to sell, we were simply getting our ducks in order for the future. During this time, as we all now know (thank you, financial media), the market have slammed the brakes.
Our house isn't anything special. It's a turn key solution for a young family in a convenient location. We had relatively good numbers throughout the campaign. A couple of groups scratching the surface with pre auction offers. Unless there is good reason to, I much prefer to go to auction. As time went on, the agents identified a handful of serious buyers, however the agent's didn't feel as though we had the depth of buyers they would ideally like to have. But hey, what can we do in this market?
A couple of them we're fishing - playing games, low balling, trying to take advantage of the current market situation. The bottom line for me was that until you take the property to auction, you will never truly know. And that's what we did. 12 months ago, around our neighbourhood, you would have around 40-50 people attend an auction. On Saturday, the 6th day of August 2022, we had a handful of people outside our driveway. Following a vendor bid to kick off the morning, there were crickets. Donuts. It would not have surprised me if tumbleweed bounced past the auctioneer.
We had one serious buyer on the phone to their family in Sydney - mum was instructing their children to bid, the father, bless him, instructing them to wait so they could negotiate a bargain.
And that is the current state of play in the market. Bargain hunters. Vendors selling in the face of rising interest rates, or selling in fear of prices falling further. Buyers holding out doing the same, anticipating further declines. Admittingly, some of the properties that are being sold at the moment are selling for prices that one will be looked back upon with smiles on the buyers faces.
I decided the take a look at the current state of play of the market, and here's what I found:
Clearance rates are well off from 12 months ago - 60.9% vs 81.5%, and listing are down from 2,100 to 1,202, and we are seeing the largest 1 month drop in prices since 1982, as seen in the below chart.
Lending is one of the largest factors that influence house prices. What I have done here is plotted the change in lending for housing. Through our research, we also know that lending has a lead of about 6 months on house prices, so I have pushed the green line out by 6 months so that you can see the correlation between the two. We saw lending bottom in April of this year, rise from there, and has since fallen again. If we take a look at month to month change, the data is really noise. It's as if the banks and borrowers are unsure which way to take this.
I then plotted the change in building approvals. We can see from the chart below the correlation between building approvals and prices. As you can see, the blue line (approvals) has bottomed out and on the rise as of June 2022, which may mean we've seen the worst of it from an approvals stand point.
Finally, I plotted the stock market against property prices. The stock market is the most forward looking machine we have, and so I thought it was important to look at this too. You can see the correlation between the two different asset classes, not perfect, but I think it tells an important story. Two distinct assets which have similar "risky" characteristics. I've then pushed the stock market to lead the chart by 6 months, and similar to that of the lending chart earlier, the stock market appears to have bounced from it's bottom in mind June.
Market timing is hard. Everyone knows the narrative - inflation holding, RBA raising rates, property prices falling. There aren't any secrets in such a market. Most forecasters are predicting a 15% declines in national prices. I don't know. During the greatest financial crisis of our lifetime, prices fell around 12%. You don't need to look back too far to realise how unpredictable markets are. I'll take the unders on this one.
And with that, we pulled the property off the market. We'll wait until things look a little rosier. The beauty about planning is that it gives you a degree of control that you don't have whilst unplanned. Imagine being cornered in your financial position which forced you to sell that day. Imagine giving the buyers the control to dictate price. Unfortunately this is a real issue. Thankfully, we're not in that position. At least we don't have to pretend our house is in pristine conditions twice a week. Time to take off the suit and put on the trackies.
My colleague Matt Rigby and I talk more about this and more in last week's The Wide Lens podcast.
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