It has been three weeks since the government shutdown non-essential services, placed a temporary ban on auctions and open inspections, and essentially halted the economy in response to COVID-19.
From a values perspective, the CoreLogic hedonic index has been showing a loss of momentum in housing value growth rates since mid-March.
Data through to mid-April has seen a continuation in this trend, with the combined capital city measure slipping into negative territory week-on-week for the first time since early August last year.
Additionally, CoreLogic tracks other high frequency metrics that provide insights about how housing market activity is responding to COVID-19.
Agent activity and listings have fallen
The first of these metrics is CMA generations.
A CMA is a ‘comparative market analysis’ report, that is generated by real estate agents using the RP Professional platform to get information on an individual property.
The report is used by a majority of real estate agents in Australia to research recent comparable sales and market trends, often in order to prepare a property for sale and set an expectation around pricing.
Therefore, the generation of a CMA report can be a leading indicator of new ‘for sale’ listings volumes.
This is reaffirmed by the graph below, which shows the rolling 7-day change in CMA generations and listings.
The correlation coefficient between the number of reports generated and the number of new listings is 0.8, but increases to 0.9 when the CMA volume series is set forward by two weeks.
For the week ending the 5th of April, the decline in the volume of CMA reports generated was
-19.9%, while the weekly change in new listings volumes recently bottomed out at -26.3%.
This downward trend re-occurred in the week ending the 12th of April, but this is expected around the Easter long weekend.
Before the holiday period, the number of CMAs, and indeed new listings volumes, seemed to be stabilising.
In the 28 days to Easter Sunday 2020, the number of new residential listings advertised for sale across Australia was 24,051.
This is by far the lowest level of listings for this time of the year in years, and is 27.3% below the equivalent period last year.
This is particularly significant given that this time last year was close to the trough of the previous downturn, and represents listings volumes in a weak market.
The weak new listings figures reflect a dive in consumer confidence at the onset of COVID-19.
Over March, the Westpac-MI Consumer Sentiment index plunged 17.7%, which is the single biggest monthly decline in the history of the index.
High levels of uncertainty and rising unemployment has led to postponed activity in the property market.
Valuations have slumped, but in some cases this is a good sign
Another early market indicator being tracked are the change in valuations ordered across CoreLogic platforms.
CoreLogic platforms account for the vast majority of valuations ordered on property, including for the purposes of refinancing, purchases, construction and mortgagee in possession events.
In the week ending 12th of April, the total number of valuations ordered was down -24.0% over the week, and 19.2% over the last year.
The weekly drop has been compounded by the Easter break, however valuation activity has been trending lower since mid- to-late March.
While the continued decline in valuations is reflective of a drop off in market activity, it is interesting to note that there has not yet been an uplift in ‘mortgagee in possession’ valuation events, in fact MIP related valuations remain an insignificant proportion of overall valuation activity.
This is important, because the mortgagee in possession category refers to valuations motivated by the bank taking control of an asset where the borrower has failed to make repayments.
In fact, data to the 14th of April suggests that valuations generated for this reason have seen the largest decline of any other valuation types, down 62.2% on the previous year.
The number of MIP valuation events will be an important indicator to track; a trend towards increasing MIP valuation events would imply more distressed properties are flowing onto the market.
In the same period, 75.3% of valuations ordered were for the purpose of loan refinancing, which suggests high volumes of borrowers looking to take advantage of record low interest rates.
However, it is still worth noting these types of valuations were also significantly down on the equivalent week in 2019 (-12.0%) after tracking well above 2019 levels until late March.
The extent of decline in activity across CoreLogic platforms shows clear signs of a sharp slowdown in market activity.
With plunging property volumes across listings, and less activity from real estate agents and valuers, there is likely to be a severe drop in the number of properties being transacted over the coming weeks and months; at least until social distancing policies are lifted and sentiment levels return to more normal levels as the economy emerges from the COVID-19 slump.
But less listing activity also speaks to the moderation of supply against less demand for property.
This is one reason that property values are unlikely to fall as quickly, or the same extent, as transaction volumes.
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from Property UpdateProperty Update https://propertyupdate.com.au/early-market-indicators-show-the-first-signs-of-a-housing-market-slowdown/
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