As a predictive tool it's not the greatest Kingy, you can make different factors look like they correlate on a graph if you play around with them enough. It's only really useful if it can make some worthwhile predictions, this doesn't.
From the article:
"Note importantly the 2 quarter lag Deutsche apply to clearance rates to illustrate this positive correlation, which indicates that current auction rates are a pretty good predictor of house price growth in 6 months time…"
Clearance rates in Melbourne in May last year were in the high 50's/low 60's (which would suggest and increase 5-10% from the graph) yet prices have continued to drop - as seen here - http://www.rpdata.com/research/back_series.html
