This recent one is written by Philip O'Connor, a senior lecturer a Auckland University. As a mere student at Victoria University, I certainly hesitate before criticising him. However, I don't think this piece is very good, and it's not just because he spelt 'intuitive' incorrectly on his graph.
The good gentleman provides us with a graph of house prices and variable mortgage rates between 2003 and 2005. He argues that the high level of correlation (r=0.79, we are told) implies that there is a link and that house prices will fall as interest rates continue to drop. Obviously this is of crucial interest to those who own houses, or plan to. But the time period he analyses is very short, so I thought it would be interesting to expand it out a little bit.In the brief time I have between studying (honestly) I couldn't find the data he is using, but I did find house prices and variable mortgage rates on the stats nz website and the rbnz website respectively, for the years of 1985 - 2003.
My hastily knocked together graph is far less pretty, but it seems to show that over a longer period of time, we observe the opposite effect of what the article suggests. This is obviously the 'intuitive' sense the author rejects - the idea that as mortgage rates rise, the cost of borrowing increases, so demand for houses goes down, and so does price. That sort of inversely proportional relationship seems to be roughly what we see here. There's certainly no way you'd get a positive r value from this bad boy.
Matt Nolan makes similar arguments.
(*Notes*) I indexed my graph, giving the first year (1985) a value of 1000. The data points were in different frequencies, which is why one came up as a line and one as dots. There may be a way to fix this, but all I have on my laptop is Excel, and it seems resistant to reason. Perhaps I will throw together a better one at uni next time I am in.
I certainly couldn't tell from the data if the house prices were inflation-adjusted, doing so might flatten them out somewhat. I don't suspect it would make them turn downward however, at least for the most part.
Update: I'm also having some formatting problems with ugly little squares showing up around the graph, but I'm not down enough with my HTML to solve this. Hopefully it is just restricted to firefox users, but if it isn't, please try to ignore them :)