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The Nationwide ‘Real’ House Price Index is up 0.6% in April

The Nationwide ‘Real’ House Price Index shows prices up by 0.6% in April, after a rise of 2.2% in March, and this index records a fall of only 0.8% in the first 4 months of 2009.

These factual figures paint a rather different picture to the doctored, or seasonally adjusted to use the technical term, figures Nationwide focussed on today.

Nationwide and Halifax both always focus on the seasonally adjusted figures in their monthly house price surveys.

Their comments are always based on these doctored prices, but although their press releases state the figures are seasonally adjusted the media generally ignore those two important words and misleadingly report the figures as gospel.

The table above presents the Nationwide figures since the beginning of last year in such a way as to make it easy to see the real figures and how big an impact the seasonal adjustments makes some months.

Based on last year’s seasonal adjustments the following 3 months will not see a significant difference between the percentage change in the real figures and the doctored ones, but in August the impact of seasonal adjustment will be to improve the real figure by about 1%, the opposite of what has happened in each of the last 2 months.

Halifax, for some reason best known to itself, refuses to disclose the real figures in its monthly press releases and only belatedly publishes them on a quarterly basis.

Nationwide, despite always ignoring the real figures in its comments, does include them every month in its table of historical data.

This is helpful to anyone like me who prefers to use real figures rather than “doctored” ones based on someone’s view of the seasonal impact on prices.

In current market conditions it is even more difficult than usual to decide how much price changes are influenced by seasonal factors and I would be very surprised if two economists came to the same conclusion on the correct adjustment required.

The housing market is, of course, seasonal, but many other factors also have an important influence on prices, particularly consumer confidence, interest rates and the availability of credit.

Until recently the latter factor had not been a significant problem since the mid 1980s and so maybe Halifax and Nationwide should have adjusted house prices over the last 18 months to take account of the restricted mortgage availability.

Perhaps they should also adjust for changes in consumer confidence and interest rates. If they manage to get all these adjustments right, house prices adjusted for all these factors would permanently only change very slowly in line with wage inflation, resulting in “No more Boom and Bust.”

In fact, come to think about it, Gordon Brown has missed a trick here in not passing legislation requiring all house price indices to be calculated in this way!

I intend to publish updated figures of the ‘Real’ Nationwide House Price Index every month on this blog.


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