Interesting comments, and fascinating to see one agent 'break ranks'. Ultimately agents depend on volume - no sales mean no commission. Agents can cope with a market that is falling, as long as sales are occuring - sure they get a lesser share as its a lower price for the house sold, but at least its a share of something. The current sales drought is what is killing agents not prices per se. The REINZ seems to be determined to deny any possibility that prices are falling, which seems to have encouraged a significant number of vendors to dig in their heels for higher prices. However buyers simply wont or cant pay; result a stand-off, which every week sees more agents go to the wall. Its a moot point whether the REINZ is acting in its members best interest here by continuing to use a deeply flawed measure (and trumpeting when it shows little decline). I have heard Alistair over at realestate.co.nz also say that there are mumblings of discontent about the measure, perhaps he could comment.

Well said Andy !!

It's been clear for a long time that REINZ always try to positively spin real estate statistics. It's in their interest to do so. What's most disappointing is the simple regurgitation of REINZ spin by the print media.

Great article, Peter. You are certainly showing real concern for the vendors who may be fooled into thinking they'll get a lot more.
AREINZ: That's a good idea. Perhaps we need to see where the subdivisions are going at the moment.
The quicker the market resolves the 'gap', the faster sales numbers will increase again.

As a society we have failed to recognise that housing is a basic human need and over securitised our housing assets. The old saying "don't put all your eggs in one basket" still applies. New Zealand needs a wide range of asset securities and must achieve lower debt levels. So no one really knows what the true value of our houses at any time when variables such as cost of construction, debt & interest, wages & incomes, population & migration, productivity and growth change from time to time. These fundamental variables have lagged and correlated effects on house prices. We can all talk about the likely drop or increase in the shorter time frame making lots of assumptions about the housing market. The root cause for the market uncertainty is the irrational behaviour of using houses as the first preferred investment, tax saving, and as the primary security for lending by banks.

Cath
You hit it on the head. Picture this.
Agent 1 attends listing appointment and states home would sell for $375-385k
Agent 2 attends listing appointment and states home would sell for $395-405k
Agent 3 attends listing appointment and states home would sell for $410-420k.

Here's the question, what agent would you as a vendor (seller) go with?
Why?
Well if the vendor here is like 95% of the population, they tend to opt for the
agent who informs them he can get the highest price.
Still I ask why?
If one particular agent could warranty to get the price that he said at the listing
selection interviews with the vendor, then why does that town not have just the one agent ~ him/her who said they could get that figure.
After all if they were right 100% of the time then surely that town would only need just that one agent, and he/she can employ staff to deliver flyers, conduct open homes, phone buyers up, tele-market, etc.

The best research you can do right now - today or in the next month if you are looking to sell would be go to your local property press / franchise catalogue tomorrow when it comes out and see how many "PRICE REDUCED" signs are over adds.

Take note of them and see if there is a trend. Does that Agent C who "promised" the highest figure (eg $410-420k like above) regularly appear next to all those "Price Reduced" adds? Does one company have many more than another company? (taking market share into account)
A little bit more research up front can save a lot of heartache down the path.

Peter, a wonderful spot on article and one I agree with entirely.
Like you I have been trying to convey to any one that would listen the inaccuracies of using the median house price model, but was ignored because it didn't suit "their ends" to know the real truth of the market.

Like Richard and Andy I get thoroughly sick of hearing the spin REINZ put on the state of the market as Peter have just illustrated and it is about time they started to listen to what their members are telling them and told the true story gleaned from those at the coal face. It's embarrasing to hear some of the crap they spin about the market in my view.
Take a look at the statement from REINZ on the November house prices. I personally think it is quite mis leading in regards to factual evidence as Peter has illustrated.
Thanks for having the guts to speak out

Alistair - I would never wish to misquote you but in your blog entry in early November where we discussed measures of the market (I think the 13th) you said:

''Not sure though how aware REINZ is to the bubbling sentiment of disquiet I am hearing as to creditability and relevancy of the median price stats''.

Comment number 5 here: http://www.realestate.co.nz/blog/residential-property-update-november.html

Could you expand a little on the diquiet you refered to in your blog? that doesnt seem to be a comment on the low sales number having an effect, more on the use of the median itself?

While a case shiller-like index may be difficult to compile, it's not hard to compare same home sales. This is a great website that lists selling prices and 'wishing' prices among other things. Check this example: http://www.irvinehousingblog.com/blog/comments/jumbo-drops/

If you don't like the Median then you can graph the REINZ Mean. They give both total Nat Sales in $ and the number of sales.

So your median hypothetical house price has risen $20K and the average hypothetical house price has risen by $9K.

Increases and decreases are only relevant to what someone actually paid for it.

If you brought 20 years ago for $60K and sell tomorrow for $500K the average annual compound growth rate is 11%.

If you brought 4 years ago for $280K and sell tomorrow for $365 the average annual compound growth rate is 7%.

Wordz 'n Muzik is correct in my humble opinion, prices have dropped about that much.

Another issue is one of perception and expectation, quite apart from the reality. If your property was worth 380 in its mid 2007 peak and you put your house on the market 2 months ago for say 410-420 (most of the general population build up their expectations a wee bit) then by Wordz 'n Muzik's estimate of the market you may have lost up to 30% of its value mid 2007 being a sale price of 266. This, in the vendors eyes is a difference from 420 to 266 (a loss of 154) probably completely unacceptable to them and hence the lack of listings. These are taking the maximums in each direction but you get the drift.

Those folk "bought" a house. They "brought" nothing. While I'm giving an English lesson "says" is pronounced "sez" not pronounced "sayes". And the market's always great at the right price.

Three friends of mine in the Far North have had their homes on the market for the past year without any result. All bought their homes between 2004 - 2006. All three initially went through Real Estate vendors who valued their homes at about 5% less than purchase price and kept coming back to get a reduced asking price. Only a handful of prospective buyers were interested. All three have now sought independent valuation suggesting the selling price should be at least 16 - 25% lower. Today, they have reset asking prices and have listed their homes on TradeMe, to save on agent's commission, and there has only been 1 site visit in three months.

For Sale sign are growing roots on the lawns of homes here and yet Agencies still talk and act like there will be a turnaround in the spring. To my mind we are still a year or more away from seeing the bottom. Factor in stricter lending rules and I will not be surprised to see homes at 2001 prices.

Craig, Making 100% in 10 years is just fine and normal given our interest rates and the rate of inflation. The trouble starts when prices go up 100% in 4 years.