It's spring.
Not only do you know that from the weather change and faster grass growth, but the real estate industry is trumpeting the change, saying "things have turned up" and "now is a good time to buy".
But is it?
There is extensive paid publicity from those who stand to benefit. Perhaps the most shameless is this tabloid effort. But paid voices from a wide range of conflicted players are reinforcing the message. Everyone says they are "genuinely dedicated to helping New Zealand homeowners".
The list of conflicted businesses seems endless, so there is little real pushback to the hot spruiking. They include:
- real estate agents (Harcourts, Barfoots, Bayleys, Ray White, and hundreds of smaller players).
- listing portals (TM Property, realestate.co.nz, and especially OneRoof).
- media who rely on their advertising (everyone who takes advertising. That includes us. The worst are those producing property porn and passing it off as 'reality').
- social media (probably where spruiking peaks, including TA, Opes, etc. and a wide range of podcasts and short video 'influencers').
- property coaches - say no more.
- analytics companies who sell data to the industry (CoreLogic, QV, Velocity, etc).
- lenders (all of them).
- insurers (all of them, led this season by AA Insurance).
That is an intense set of voices with vested interests in getting buyers back into the housing market. Are you buying it?
Of course, no-one knows the future, including those promoting the FOMO story, so it would seem sensible to set some benchmarks so we can judge the data that does emerge against objective standards.
And, the "housing market" isn't a homogenous thing. It is the sum of thousands of small local markets. So what follows is broad and suffers from that broadness. Also, the real nature of these myriad micro markets enables the industry to ignore the weak bits and reinforce their stories with some self-selected 'good bits'. Even though it's problematic to make generalisations, we are going to anyway. We need some benchmarks.
The current housing market is characterised by an unusually high number of houses for sale.
There were more than 33,000 houses listed for sale at the end of August 2024, according to the realestate.co.nz portal. And that is not only the most in seven years, it is +40% more than in August 2019, the last 'normal' pre-pandemic year. An extra +10,000 houses on the market will have a strong overhang effect.
But will it be enough to bring out the buyers? Of course, some will emerge, But it is hard to see an extra 10,000 new buyers jumping into a market that is exhibiting falling values.
It is not enough to have headlines that show median or average prices 'rising'. In a market where more top-end houses sell, but buyers hold back buying at the middle or first-quartile levels (which is where first home buyers enter the market and are the net drivers of activity), it is not hard to see that this will distort transaction medians or average. (In Auckland only about one in five sales are for homes that sell for $750,000 or less. The rest are in the churning portion where buyers and sellers are essentially exchanging residences).
2019 levels seems to be the benchmark. Unless 2024 sales rise to absorb more of the listing overhang, it will remain a buyers market. The volumes needed to do that are surprisingly large. Buyer choice is actually enormous. Buyers who hold back are not hurting themselves by waiting. Or by bidding low.
On the other hand, sellers are in an unusually fierce competitive position. Even if sales levels hold at about 6000 per month in September and rise seasonally towards the 8000 level, that will have little impact on the mismatch between listings available and buyers ready to buy. Only sales levels well above 10,000 per month - in other words, above prior record levels in the 2020/21 pandemic bubble - would move listing inventories down and start to make a meaningful dent.
That seems unlikely. The lid on house prices and 'values' seems more likely to stay in this spring selling season.
Readers are welcome to suggest how they would benchmark the September to November housing market sales. Above what, makes it a recovering market? Below what, makes it a market still struggling?
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