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Leith van Onselen of MacroBusiness fumbles cluelessly with house price to income ratios
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Topic Started: 15 Aug 2012, 03:56 PM (3,172 Views)
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Shadow
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15 Aug 2012, 03:56 PM
Post #1
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Evil Zealot Specufestor
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Leith van Onselen, the 'Unconventional Economist' of MacroBusiness and MacroInvestor demonstrates again today his utter lack of understanding of all things related to the Australian housing market. In an article titled 'RBA wags the dog on housing risks', the inept van Onselen attempts to prove an RBA chart wrong...
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 Unfortunately for the RBA, their calculated ratio of dwelling prices to disposable income for Australia (4.0 times nationally) does not stand-up to scrutiny... <blah blah blah> ...we can estimate that the average dwelling price nationally is around $421,114 currently, which suggests that average household disposable income (i.e. after taxes) is around $105,000 according to the RBA’s ratio calculation. This is a ridiculous notion given... <blah blah blah> ...the RBA’s suggestion that average household income is around $105,000 is very inflated, which throws its whole comparison of Australian dwelling prices-to-income into doubt
I 'snipped' Leith's quote so as to comply with his royal highness Prince Becker's ridiculous 'don't quote us' demands.
The problem with Leith's analysis is that he is clueless as to the income measure being used by the RBA. The RBA is in fact using the ABS National Accounts measure of average disposable household income (not just wages), which captures income from all areas (labour plus investments) and divides this by the number of households.
The ABS National Accounts figure for Real net national disposable income is $1,099,793 million.
Divide this by 9.2 million households and you get a disposable household income figure of $119K, which debunks Leith's claim that 'the RBA’s suggestion that average household income is around $105,000 is very inflated'.
Now, you may not agree with the RBA using this particular measure of household income, but I assume they use this because it is the easiest figure to obtain consistently for all countries, and as long as they use the same method for each country then Leith's claim that he has thrown the RBA's 'whole comparison of Australian dwelling prices-to-income into doubt' is also false.
But Leith goes on to embarrass himself even further.
He brings up the following older RBA chart, and claims that this old chart somehow contradicts the more recent chart above.
Wrong again Leith. The two charts measure different things. Aside from the fact one ends in 2007 and only compares Australia with five other countries, and the other ends in 2012 and compares Australia with eleven other countries, the main difference is that one is for house prices and the other is for dwelling prices - an important point that went right over Leith's head.
Despite the fact that Leith's whole article is based on false premises, the MacroBusiness readers are lapping it up, high-fiving each other and congratulating Leith on a brilliant analysis. Leith can just shovel any old bearish nonsense at his readers and they will lap it up without questioning it, because he is telling them exactly what they want to hear.
Leith van Onselen. Hopelessly wrong on house prices. Yet he wants people to pay $480 for his investment advice newsletter.
Edited by Shadow, 15 Aug 2012, 04:30 PM. |
Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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NotFooled
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15 Aug 2012, 04:04 PM
Post #2
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The Bear Whisperer
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Has anyone tried correcting his mistakes? Or is that a bannable offense on the MB forum?
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Shadow
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15 Aug 2012, 04:07 PM
Post #3
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Evil Zealot Specufestor
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- NotFooled
- 15 Aug 2012, 04:04 PM
Has anyone tried correcting his mistakes? Or is that a bannable offense on the MB forum?
Strindberg was banned for correcting his mistakes.
I was banned for correcting David Llewellyn-Smith's mistakes.
Audas and Stavros have both mentioned that they were banned for disputing the analysis of the MB bloggers.
Peter was banned for posting on APF.
So, it's best not to correct them if you want to keep your MB account!
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Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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Shadow
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15 Aug 2012, 04:28 PM
Post #4
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Evil Zealot Specufestor
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Leith should really know what income measure is used to derive the 4x ratio. In his blog today, Leith links to and selectively quotes data from this 2010 article by Chris Joye...
Australian Housing Market’s Valuation Improves
But he seems to have (deliberately?) ignored the part where Chris Joye writes...
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Australia’s dwelling price-to-income ratio in the September quarter is exactly in line with its average of 4.4 times since the end of the last cycle seven years ago. Unlike other estimates, Rismark’s national dwelling price-to-disposable household income ratio includes: The ABS’s quarterly National Accounts measure of average disposable household incomes (not just average weekly earnings), which captures income earned from all areas (eg, labour and investments) and reflects the fact that there is typically more than one income earner per household.
The truth is there are many ways to measure price/income ratios... mean vs median, all regions vs capital cities, houses vs dwellings, labour income only vs labour+investment income, national aggregate vs individual data etc etc.
Leith is claiming the RBA method is somehow 'wrong'. None of the methods are 'wrong'... they are just different to one another. The point of the RBA chart is to compare Australia to various other countries, as such, it doesn't really matter which method is used, as long as the method is used consistently for all countries.
Edited by Shadow, 15 Aug 2012, 04:34 PM. |
Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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The Punisher
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15 Aug 2012, 04:38 PM
Post #5
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- Shadow
- 15 Aug 2012, 04:28 PM
Leith should really know what income measure is used to derive the 4x ratio. In his blog today, Leith links to and selectively quotes data from this 2010 article by Chris Joye... Australian Housing Market’s Valuation ImprovesBut he seems to have (deliberately?) ignored the part where Chris Joye writes... The truth is there are many ways to measure price/income ratios... mean vs median, all regions vs capital cities, houses vs dwellings, labour income only vs labour+investment income, national aggregate vs individual data etc etc. Leith is claiming the RBA method is somehow 'wrong'. None of the methods are 'wrong'... they are just different to one another. The point of the RBA chart is to compare Australia to various other countries, as such, it doesn't really matter which method is used, as long as the method is used consistently for all countries.
Typical. Who else but Chris Joye would quote Chris Joye.
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Shadow
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15 Aug 2012, 04:40 PM
Post #6
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Evil Zealot Specufestor
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- The Punisher
- 15 Aug 2012, 04:38 PM
Typical. Who else but Chris Joye would quote Chris Joye.
I'm not Chris Joye.
Do you have anything to discuss about the article itself?
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Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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audas
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15 Aug 2012, 05:05 PM
Post #7
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Ah excuse me - this is a cluster fuck of bullshit once again I see.
First off - Leith expressly acknowledges that Stevens may well be using household income as opposed to average Australian income - and in so doing raises the ENTIRE POINT OF HIS FUCKING BLOG POST, namely that the ratio of housing affordability is never ever average household income to average house price, never has been, never will be - that is a meaningless stat of no significance. Which is the point of his post. The ration which is talked about all over the world is the average wage to average house price.
Secondly you will notice that not even YOUR OWN FIGURES add up to what Glenn Stevens was claiming as average household income.....so waht the living fuck are you banging on about ? Where did he get his figures, since yours do not even equate !!
What a seriously sad thread this is.
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NotFooled
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15 Aug 2012, 05:17 PM
Post #8
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The Bear Whisperer
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- audas
- 15 Aug 2012, 05:05 PM
Ah excuse me - this is a cluster fuck of bullshit once again I see.
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Shadow
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15 Aug 2012, 05:18 PM
Post #9
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Evil Zealot Specufestor
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- audas
- 15 Aug 2012, 05:05 PM
First off - Leith expressly acknowledges that Stevens may well be using household income as opposed to average Australian income
Eh? The chart specifically says household disposable income on it. Not sure what your point is here?
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and in so doing raises the ENTIRE POINT OF HIS FUCKING BLOG POST, namely that the ratio of housing affordability is never ever average household income to average house price, never has been, never will be - that is a meaningless stat of no significance. Which is the point of his post. The ration which is talked about all over the world is the average wage to average house price.
Not sure what that has to do with anything?
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Secondly you will notice that not even YOUR OWN FIGURES add up to what Glenn Stevens was claiming as average household income
Steven's doesn't claim any particular average household income - his chart shows a dwelling price to disposable household income ratio only.
Leith says the 4x ratio is wrong because he somehow derives a household income value of $105K which he claims must be 'very inflated'.
I showed that this value is not inflated if we use the same income measure as used by the RBA.
Edited by Shadow, 15 Aug 2012, 05:22 PM. |
Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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Strindberg
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15 Aug 2012, 05:47 PM
Post #10
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Leith van Onselen has again demonstrated that these issues are too difficult for him and beyond his limited comprehension capacity or that he is deliberately feeding his now 100% bear audience false facts to meet their hunger for bear porn. He is certainly not displaying the ability of a capable or honest economist.
As Shadow has pointed out, the issue of price/income ratios is complex and care is needed with comparisons to ensure that like is being compared with like. The RBA charts are correct. They depict what they say they depict. Other charts depict other things.
There is another major issue where Onselen has erred in that post. He claims that the RBA graph 7 depicting housing loan repayments on a hypothetical 80% LVR loan for a median house over time, is somehow "contradicted by its own data" on aggregate mortgage interest payments. This is an astonishingly mathematically naive error revealing mathematical and common sense illiteracy. Anyone who imagines, like Onselen, that knowledge of the aggregate mortgage interest payments at any time can tell us what RBA graph 7 should look like is displaying an ignorance of the pitfalls of extrapolation from a single hypothetical example to an aggregate of something else entirely with an unknown distribution. The linkage between RBA graph 7 and aggregate mortgage interest payments is complex to say the least. There is no reason to suppose that the two graphs "conflict" with each other. Analysis of the relationship between the two graphs requires a study of the actual distributions of repayments and interest payments over the period - which obviously change. For example, a greater proportion of people have a mortgage now. That is their choice and it cannot be inferred from that that affordability is now worse. There is no conflict in the graphs. They depict different things. RBA chart 7 fairly depicts what it says it depicts.
Onselen's errors today are quite comparable to his earlier charts (which still litter the internet) where he wittingly or otherwise compared nominal housing assets with real GDP at 2008 prices over a 20 year period falsely introducing a 100% error in claiming that the 1990 ratio of housing assets/GDP was 1:1 (the result of using housing at 1990 prices and GDP at 2008 prices) rather than actually being nearer to ~ 2:1 when the correct figures are used. It could be incompetence but it seems that ALL of Onselen's errors are in favour of presenting stuff in the most bearish manner.
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Housing costs to Income broadly unchanged since 1994 - re-ratified here
The People of Australia have the highest median wealth in the World
2002-2012 10 year house price growth the SLOWEST since 1952-1962
1990-2010 20 year house price growth the SLOWEST since 1950-1970
CHRIS BECKER NOW NEUTERED
"There are two kinds of people in this world: ones that fiddle around wondering whether a thing's right or wrong and guys like us." (Hugo to Gagin in Ride the Pink Horse)
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audas
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15 Aug 2012, 05:51 PM
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- Shadow
- 15 Aug 2012, 05:18 PM
Eh? The chart specifically says household disposable income on it. Not sure what your point is here?
Not sure what that has to do with anything?
Steven's doesn't claim any particular average household income - his chart shows a dwelling price to disposable household income ratio only.
Leith says the 4x ratio is wrong because he somehow derives a household income value of $105K which he claims must be 'very inflated'.
I showed that this value is not inflated if we use the same income measure as used by the RBA.
No you muppet, the ratio which economist take to evaluate housing affordability is average income to the average house price, NOT the average household income - which is a completely fucking different thing and stands almost twice the value of average income.
His ENTIRE POINT is that Stevens is using the WRONG FIGURE DELIBERATELY but you missed the entire point of his entire thread - fuck you are dumb.
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audas
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15 Aug 2012, 05:52 PM
Post #12
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- NotFooled
- 15 Aug 2012, 05:17 PM
A 12 year old redditor sitting in a pile of his own cum is amused at your Tyson meme.... you do know reddit is for kids right ?
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Shadow
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15 Aug 2012, 06:12 PM
Post #13
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Evil Zealot Specufestor
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- audas
- 15 Aug 2012, 05:51 PM
the ratio which economist take to evaluate housing affordability is average income to the average house price, NOT the average household income - which is a completely fucking different thing and stands almost twice the value of average income.
Which economists? Nowhere in Leith's article does he say average single income should be used in preference to household income.
As I mentioned previously, there are many ways to measure price/income ratios... mean vs median, all regions vs capital cities, houses vs dwellings, labour income only vs labour+investment income, national aggregate vs individual data etc etc. Leith claims the RBA method is somehow 'wrong'. None of the methods are 'wrong'... they are just different to one another. The point of the RBA chart is to compare Australia to various other countries, as such, it doesn't really matter which method is used, as long as the method is used consistently for all countries.
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His ENTIRE POINT is that Stevens is using the WRONG FIGURE DELIBERATELY but you missed the entire point of his entire thread
No, that wasn't the point of his entire thread at all, and Steven's isn't using a 'wrong' figure - he is using a perfectly appropriate method, and as long as it is used consistently then it is a useful measure for showing changes in affordability, or comparing affordability across various countries.
Even Leith doesn't say we should be use single income. He is fine with household income being used, but he just isn't aware that the RBA is using the ABS National Accounts measure of household income specifically.
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you muppet
fuck you are dumb
Your angry abuse and hurling of insults shows me you've already lost the debate.
Edited by Shadow, 15 Aug 2012, 06:31 PM. |
Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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Shadow
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15 Aug 2012, 06:20 PM
Post #14
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Evil Zealot Specufestor
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A ratio of 4x times the ABS National Accounts disposable household income figure of $119K would give a national average dwelling price of $467K.
Which seems reasonable enough to me. (Remember this particular chart is based on averages, not medians).
Edited by Shadow, 15 Aug 2012, 09:59 PM. |
Shadow's Blog - The Australian Housing Market
1 - Debunking Demographia. Demographia Survey Debunked. Australian housing is not particularly unaffordable by global standards.
2 - USA, Ireland, UK, Spain and Japan Property Bubbles versus Australia. All confirmed property bubbles had one thing in common... a particular house price/income ratio pattern.
3 - Banks can't margin call on residential property unless borrower defaults, because residential property loans are regulated by the NCCP Act 2009.
4 - Housing is the second highest taxed sector of the Australian Economy. Renters don't pay their fair share of tax, and are subsidised by high taxes incurred by homeowners.
5 - Epic Fail! Steve Keen's Bad Calls and Predictions.
Parse: A rep's spare spear pares pears, reaps as per AREPS.
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NotFooled
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15 Aug 2012, 06:27 PM
Post #15
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The Bear Whisperer
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- audas
- 15 Aug 2012, 05:52 PM
A 12 year old redditor sitting in a pile of his own cum is amused at your Tyson meme.... you do know reddit is for kids right ?
You talk tough but were completely demolished in this thread. You were wrong and your best comeback is some insults which pretty much demolishes your credibility as well.
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5:38 PM May 20
