Domain published an article today (Monday 8th November) that had a quote that caught my attention when referring to the Auction Clearance Rate (ACR) over the weekend just been:
“The clearance rate was 75 per cent, which is just under the average of 77.3 per cent collected for the city throughout October, the latest Domain Auction Report showed.”
This quote, and in-fact the design of Domain’s ACR is extremely misleading, as it tends to always bias more recent results to appear stronger than previous results.
What’s the problem?
The comparison being made is between the clearance rate for Saturday 6th November, since which only two days have passed at time of writing, and results across each Saturday in October, since which considerable time has passed.
Since Domain continues to update their ACR index as results arrive, this comparison is not like-for-like.
For example, for the Saturday just been, only 73% (726/994) of auctions had results reported and included in that Saturday’s ACR, whereas for the week prior 87% (775/887) of auctions had results included at the time of writing.
Worse still, pundits have noticed that results that come in soon after auction day are generally stronger than results that trickle in later. This creates a tendency for the ACR to always appear stronger for more recent weeks than prior weeks, which of course creates the impression that the market is “always hot”, when in reality it may just be because their method of reporting is misleading the public.
Quotes like the above take the deception a step further, by unambiguously comparing apples and oranges in order to paint a rosy picture of the state of the market.
