“So far, we haven’t seen any evidence of panicked selling or forced sales”: CoreLogic.
By Wolf Richter for WOLF STREET.
In the most glorious housing bubbles, home prices are tumbling, as inflation is surging and central banks are trying to contain this raging inflation with rate hikes, and so mortgage rates are surging, and home prices are tanking – this is now the theme in lots of countries, particularly those with majestic housing bubbles, such as Australia.
In Australia, inflation spiked to 7.3% in the third quarter, up from 6.1% in the second quarter, and up from 3% a year earlier. The Reserve Bank of Australia has hiked its target for the cash rate six times so far this year, from 0.1% to 2.6%, but lagging woefully behind surging inflation. A seventh rate hike is expected on November 1, to 2.85%, while inflation is raging at 7.3%.
Home prices across Australia, after falling another 1.2% in October from September, have now dropped below year-ago-levels (-0.9%).
This year-over-year decline makes Australia’s housing bust far more advanced than the housing bust in the US, where home prices have been dropping for a few months nationally, but are still up from a year ago.
Home prices in Sydney fell 10.2% from the peak in January 2022, after dropping another 1.3% in October from September, with house prices falling faster than condo (“unit”) prices, according to CoreLogic.
Year-over-year, home prices in Sydney fell 8.6%, as the ridiculous spike during the pandemic is getting systematically unwound.
Home prices in Melbourne fell 6.4% from the peak in February 2022, after dropping 0.8% in October from September. Year-over-year, they’re down 5.6%.
The eight capital cities.
Home prices fell in all eight capital cities on a month-to-month (MoM) basis. Prices are now down year-over-year (YoY) in four of them. And in the other four, the monthly price declines are whittling down the year-over-year gains.
|Oct. 2022||MoM||YoY||From peak||Median, A$|
“I think it’s important to keep in mind that inflation is sticking around, and this has the potential to see further lifts in the [RBA’s] cash rate,” Eliza Owen, head of Australian research at CoreLogic, told ABC news. “So, there is some risk that this downturn could really accelerate.”
“So far we haven’t seen any evidence of panicked selling or forced sales,” said CoreLogic’s Research Director Tim Lawless.
And the decline is still “orderly,” he said: “To-date, the housing downturn has remained orderly, at least in the context of the significant upswing in values. This is supported by a below-average flow of new listings that is keeping overall inventory levels contained.”
And so far, so good: “There’s also tight labor market conditions, an accrual of borrower savings, and a larger than normal cohort of fixed interest rate borrowers, who have so far been insulated from the rapid rise in interest rates,” Lawless said.
Just working off the free-money price spikes during the pandemic. These were the ridiculous price spikes from March 2020 through the respective peaks in 2022 that are now getting worked off in an “orderly” manner:
- Adelaide +45%
- Brisbane +43%
- Hobart +38%
- Canberra +38%
- Darwin +31%
- Sydney +28%
- Perth +26%
- Melbourne +17%
Sales dropped 16.6% across the capital cities compared to the blistering sales a year ago, but were up 3.8% from the five-year average for this time of the year.
“Housing finance data shows subsequent buyers, such as upgraders, downsizers or movers, have been the most resilient sector of the market since interest rates started to rise. As interest rates rise further, it’s likely sales activity will also trend lower as borrowing capacity is reduced,” Lawless said.
Total inventory was down 5% from a year ago and 18% from the five-year average. New listings fell 25% from a year ago and were down 19% from the five-year average.
To which Lawless said: “The low number of freshly advertised properties is probably helping to contain price falls to some extent.”
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