Early market indicators show the first signs of a housing market slowdown

PHOTO: Property Market – CORELOGIC AUSTRALIA

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. In other words, the change in the number of CMAs generated is a leading indicator for listings volumes.