The "Real" Nationwide House Price Index rises 1.6% in June

Posted on 3 July 2009 by Ray Boulger

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Nationwide’s “Real” House price Index recorded an increase of 1.6% in June, compared to the “doctored”, or seasonally adjusted, figure of + 0.9%. This is the fifth consecutive month that the widely reported seasonally adjusted figures have shown worse figures than the real ones. The cumulative difference between these two figures in the first 6 months of this year is 1.9% (see table below). Based on last year’s figures there will be little difference between the real and seasonally adjusted figures next month and for most of the remaining five months of the year the seasonally adjusted figures will be similar to or higher than the real figures.

Nationwide are clearly confident about the initial robustness of the real figures in their index as these are rarely, if ever, retrospectively adjusted. However, the same can not be said for the seasonally adjusted figures. The adjustments for June are smaller than in May but again the biggest adjustment goes back a whole year. Last month the adjustment for May 2008 was 0.4% and this month it is 0.2% for June 2008.

Retrospective adjustments in statistics for the previous month or two are quite common but if it takes a whole year to calculate what adjustments are needed to seasonally adjust the figures the results are further devalued. In fact I can’t but wonder if the regular adjustment of the seasonally adjusted figure for 12 months previously means that this is in effect a balancing figure of some sort!

In a market where factors other than the seasons have become more important in affecting house prices, such as the availability of mortgage finance and the level of mortgage rates, it becomes increasingly difficult to work out what typical price movement could be expected purely because of the time of year and hence what the seasonal adjustment should be. Hence my view that it makes more sense to report just the real figures and allow everyone to make their own interpretation as to how much of an influence the season is.

The following table tells its own story and I now think that house prices will show a small rise in 2009, rather than the 5% fall I predicted at the end of last year. The main danger to a further setback is that interest rates rise too far to quickly but it increasingly looks as if the economy, and not only ours, is in such a mess that rates will stay low for several years.

Category: Interest rates, Mortgages, Property market

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