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Short Term Changes Don’t Matter

I read an article by Terry Ryder from hotspotting the other day, that really rang true for me. And the point was / is this. 

One of the common ways in which the media can mislead consumers regarding the state of the real estate market is by placing undue importance on month-to-month statistics. For instance, when the price growth data from a single source indicates a decrease in growth from the previous month, media outlets often sound the alarm, predicting a looming downturn. Terms like “nosedive,” “plummet,” and “fall off a cliff” suddenly dominate headlines across various media platforms. However, the narrative can swiftly change when the next month’s numbers reveal an uptick in the monthly rate of price growth, prompting the media to use words like “soar,” “skyrocket,” and “supercharge” to describe the market’s resurgence.

In reality, month-to-month data, whether it refers to median prices, rents, building approvals, vacancy rates, or other datasets, lacks meaningful significance. A single month’s statistics do not establish a reliable trend. It is only when a consistent decline in the rate of price growth persists over several months, corroborated by other research sources, that we should begin to attribute significance to the data. However, the month-to-month figures often fluctuate, with no smooth trajectory in sight.

In early August, the media jumped on the bandwagon when CoreLogic’s monthly price report indicated a 0.7% rise in dwelling values nationally for July, following a 1.1% increase in June. It’s important to note that different sources, such as some self promoting property guru, Domain, SQM Research, and the Australian Bureau of Statistics, may provide varying figures. CoreLogic, being a major player in the media, tends to exaggerate small fluctuations in month-to-month growth rates to generate attention, even when such changes are essentially insignificant. And I am not saying their data isn’t accurate, but you need to keep in mind why it’s being printed and published. 

The media claimed that these figures signaled a market slowdown, but in reality, these generalized national statistics hold little relevance to residents and property owners in specific regions like Brisbane, Sydney, Perth, Regional Queensland, or Regional South Australia. Many of these areas experienced much higher growth than the 0.7% national figure reported by a single source, CoreLogic, which is just one among several sources.

The situation worsens when we consider auction clearance rates, which are reported weekly. When this week’s clearance rate falls slightly below the previous week’s, the media often blows it out of proportion. In early August, for instance, media outlets made a fuss when a clearance rate guru declared that the preliminary clearance rate had dipped just below 70%. Such a minor fluctuation led to sensationalized reporting.

Building approval figures are another volatile dataset. When the Bureau of Statistics reported an 8% drop in dwelling approvals for June, the media portrayed it as a disaster. However, the previous month, May, had seen a 20% increase in approvals. Predicting the next official figures for building approvals in July is uncertain, but one thing is clear: the media will likely sensationalize the results, further adding to the sea of misinformation that engulfs real estate consumers across Australia.


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