Worrying divergence in Nationwide and Halifax House Price Indices

Posted on 4 June 2010 by Ray Boulger

1 comment(s)


Nationwide announced its May house price index yesterday, followed by Halifax today, and there are major divergences, which is worrying, as broadly the two indices are designed to measure the same thing over the same area (the whole of the UK, unlike the Land Registry) and over more or less the same period (Nationwide’s figures go to the 25th of the month and Halifax’s to the end).

Below is a table of various Nationwide house price figures for the last year plus a comparison highlighting some differences with Halifax. As you can see the seasonal adjustment some months dwarfs the real price change, particularly with Halifax. Furthermore in most months, but particularly February (2.2%) the difference in the amount of seasonal adjustment applied by Halifax and Nationwide is huge in relation to the real figures. 

There is not only a large degree of seasonal adjustment in both Nationwide's (and other) house price indices but also in the Bank of England and British Bankers Association figures for mortgage lending and approvals. This builds considerable short term distortions into the reported figures because although Nationwide does include the real figures (Halifax doesn't) in its press release its comment always ignores the real figures and only features the seasonally adjusted ones, although it does make it clear it is referring to the seasonally adjusted figures.

Likewise, the Bank of England and British Bankers Association tables for mortgage approvals and lending show both the real figures and the seasonally adjusted ones on their web sites but the press releases only comment on the seasonally adjusted figures and hence nearly all the media comment is based on these.

Different providers can't even agree on what the seasonal adjustment should be (see attachment) and in the current market my view is that there are so many abnormal factors influencing the market that it is impossible to conclude with any confidence what impact the seasons have. In short the historic models the seasonal adjustment calculations are based on are bust. The CML and BSA sensibly do not seasonally adjust their figures and so the lending figures they produce are real ones.

Taking the Nationwide index as an example it is also worth noting that the seasonally adjusted figures are frequently revised (in any one month about half of the figures for the previous 12 months are revised), where as the real figures never change! Of course the revisions never get reported.

It is rather a mystery as to why the Nationwide and Halifax indices currently show a significant divergence, but on the seasonally adjusted figures it appears to be partly due to the different degree of seasonal adjustment.

Nationwide House Price Index – Impact of Seasonal Adjustments

Month

Real change m/m

Seasonally adjusted change m/m

Difference

May 2009

+ 1.4%

+ 1.2%

- 0.2%

Jun

+ 1.6%

+ 1.0%

- 0.6%

Jul

+ 1.6%

+ 1.4%

- 0.2%

Aug

+ 0.9%

+ 1.4%

+ 0.5%

Sept

+ 1.0%

+ 0.9%

- 0.1%

Oct

+ 0.1%

+ 0.6%

+ 0.5%

Nov

+ 0.4%

+ 0.6%

+ 0.2%

Dec

- 0.4%

+ 0.6%

+ 1.0%

Jan 2010

+ 0.9%

+ 1.3%

+ 0.4%

Feb

- 1.3%

- 1.0%

+ 0.3%

Mar

+ 2.0%

+ 1.0%

- 1.0%

April

+ 2.0%

+ 1.1%

- 0.9%

May

+ 0.8%

+ 0.5%

- 0.3%

Last 3 months

+ 4.9%

+ 2.5%

- 2.4%

Last 6 months

+ 3.9%

+ 3.7%

- 0.2%

Last 12 months

+ 9.8%

+ 9.8%

Nil

Jan – May 2010

+ 4.4%

+ 2.9%

- 1.5%

2007 peak to 2009 trough

- 20.6%

- 19.4%

+ 1.2%

From 2007 peak

- 9.1%

- 9.5%

- 0.4%

From 2009 trough

+ 14.5%

+ 12.3%

- 2.2%

Comparison of Nationwide and Halifax House Price Indices This Year

Month

Nationwide

Halifax

2010

Real change m/m

Seasonally adjusted change m/m

Difference

Real change m/m

Seasonally adjusted change m/m

Difference

Jan

+ 0.9%

+ 1.3%

+ 0.4%

- 1.0%

+ 0.4%

+ 1.4%

Feb

- 1.3%

- 1.0%

+ 0.3%

+ 0.3%

- 1.6%

- 1.9%

Mar

+ 2.0%

+ 1.0%

- 1.0%

+ 1.1%

+ 1.0%

- 0.1%

April

+ 2.0%

+ 1.1%

- 0.9%

+ 1.8%

- 0.1%

- 1.9%

May

+ 0.8%

+ 0.5%

- 0.3%

- 0.6%

+ 0.2%

+ 0.2%

Last 12 months

+ 9.8%

+ 9.8%

Nil

+ 5.2%

+ 5.3%

+ 0.1%

Jan – May 2010

+ 4.4%

+ 2.9%

- 1.5%

+ 1.2%

- 0.7%

- 1.9%

Categories: Property market, Bank of England

Comments

Call me cynical but how on earth does anyone add any credence to these figures? We all know that the number of transactions are at a low level compared with 2-3 years ago, and that those transactions that are being done are in certain geographical areas (i.e. London). If you travel up to the North, you will soon see that estate agents are struggling, there is a lack of supply as people refuse to accept that their homes are not worth anywhere near what they had expected, and that first time buyers are virtually non existant. When will people also realise that where you have no first time buyers, the market is imperfect. With lenders reverting back to proper income multiples and proper deposits, equilibrium will have to be reached and prices will have to fall. There is nothing more sure.

Liam04/06/2010 23:03

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