Indicator shows worst maybe over for housing market

The indicator is a sensitive measure of the housing market and includes three main factors: changes in the number of houses sold; changes in price, and the time taken for houses to sell.

It runs from minus 10 to plus 10, with a minus being a downturn and a plus 10 indicating a strong upturn in the housing market In the past month the PCI rose from minus 5.93 to reach minus 3.36.

Mike Pero Mortgages chief executive Shaun Riley says “house sale volumes were up 40% in April, compared with a year earlier, which is particularly impressive considering the Easter holidays would have impacted on sales this year.”

Meanwhile the average time taken for a house to sell in April was 42 days, a shorter time than a year earlier, and the first time this measure has improved since mid-2007.

“Average house prices, the third component of the PCI, were down 1.4% in April compared with a year earlier, but are on a rising trend in the first four months of this year,” he says.

The average house sale price in April was $340,000, up from $325,000 in January. Riley says the PCI has been improving since August last year.

He says by using three variables, the PCI gives a “much better, and earlier, indication of shifts in the market” than other indicators.

Lower sales volumes are usually the first indicator that a market upturn is coming to an end, followed by properties taking longer to sell, while house prices are usually the last variable to change direction. House prices may still be rising, even though the index is negative and showing a downturn.