Trends and Turning Points

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The media coverage of price trends in Toronto’s residential housing market has been confusing.  Most people look at recent reports and conclude that past trends have stopped or, at least, paused.  Some people point to examples where old patterns of behaviour (i.e. paying more than list price or selling in a couple of days) reappear and reach a different conclusion.  These conflicting stories illustrate how difficult it can be to analyse market conditions when there is no simple trend.

Turning points are challenging because a different logic of analysis is needed.  I teach classes on the simple analytics of trends.  Since there is general agreement on the direction, that analysis focuses on measurement and estimating precisely.

At a turning point, the general agreement falls apart.  Illiquidity in real estate markets means Continue reading

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A good discussion

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Many stories tell of the tension between developers and the current residents of the neighbourhood.  The story usually focuses on developers making money and on the residents who want to protect the quality of life.  In the end, the Ontario Municipal Board makes a decision.  The villain in the story depends on who is telling it.

This tension leads all sides to distrust others and is very expensive.  People who oppose all development are fighting against the inevitability of population growth.  Developers who start by treatnig all residents as CAVE Dwellers, may be creating the problem that they complain about: by turning potential YIMBYists into NIMBYists.  Sometimes, collaboration and actively searching for allies is a great way to add more value to a property.

Therefore, I was pleased to see a good news story in the Globe and Mail over the weekend.  It talks about a prominent developer (Diamond Corp.), a big property in downtown Toronto and some details on how more than two years of discussion led to useful changes.  That may sound costly but the alternative is also costly.  Especially for that reason, this example should be instructive.

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Transitions and Professionalism

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Lots of people worry about the upcoming transition when the next generation takes over.  Leaders with decades of experience in the real estate industry are stepping back or retiring: who will step up?  The past few years have pretty good and many business want to expand: where to find qualified people at the more junior ranks?  If real estate businesses cannot find qualified people then the people who live, work, shop, or play in those buildings will be unhappy.

I see this worry at an even younger level: university students who say they want to go into the industry.  You know, the ones who can’t pay attention for longer than 30 seconds during class because they are so busy on Facebook and Youtube.  The ones who can’t send an email without using obscure emojis and acronyms.  In a few years, their distracted job applications will clutter the desks of HR professionals.

These might be serious issues but I see little real difference from 10 or 20 years ago.  In my opinion, the solution is what it always has been: Continue reading

Numbers are important in Business

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The Ontario government is again thinking that somebody needs to do something about math education.  In the near future, many people will ask me whether they really need to know math to learn about the real estate business.  Enough people think that numbers are not important in business because success seems to depend on getting things done, on communication, on personal relationships and so on.

This post is about how numbers, plus more advanced forms of mathematics, are important because solving problems is fun and useful.  For nearly everybody, the real goal of learning math should be to become comfortable with it.  Continue reading

Toronto Real Estate Market: Up, Down, Sideways or ???

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When home prices go up, it seems that most people think that they can only continue to rise.  When they stop rising, the critics of the previous view are listened to: maybe, today is the day that the crash starts.   If only market analysis were that simple.

A long time ago, Paul Krugman said that there were three types of economics.  With “airport economics”, things will either go up or down.  The future will either be everlasting happiness or pain and devastation.  These simplistic claims are not taught in a classroom because insight comes from a deeper awareness of nuances.  Continue reading

Guelph is the best place to buy real estate

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According to Moneysense, and our Mayor, the best city in Canada to buy a home is Guelph.  While I agree that Guelph is a nice place to live, I think that it is silly to make that claim.

More importantly, should I believe anybody who says that they know? Moneysense’s ranking uses public information and massages it in some way.  Lots of people do this kind of exercise for many reasons (best country to live in (Canada is #2 in 2017, best country for business (Canada is #10 in 2016), …).  It would be better to know if information is relevant.  In other words, understanding the methodology is critical.  Professional statisticians and high quality data sources talk about methodology a lot.  If a methodology is not given, as was true of this exercise, attempting to reverse engineer it can raise important questions.

Based on the information provided by Moneysense, it appears that Continue reading

Research on Price and Time

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Academic research can seem rather odd to people not at a university.  Most of it seems obscure, until somebody needs to find the expert on a particularly troublesome topic.

This podcast explores some research done about 15 years ago by one of the members of GREG.  The discussion at the top of the page by the interviewer shows how this work shifts thinking on the connections amongst list prices, selling prices and how long it takes to sell, and is followed by the podcast.  (Click on the green arrow at the bottom to listen to the podcast itself.)

Understanding this very old problem has implications for understanding some current dilemmas.  Continue reading

Betting against a residential price bubble

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It seems like everybody has agreed that there is a price bubble in the Toronto residential real estate market.  And all bubbles end (eventually).  So, the next question should be: how to put your money where your mouth is?  How to profit from this knowledge?  The answers reveal a lot about real estate markets.  Continue reading

Change is common

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Spring is nearly here.  Students are finishing their exams and heading to summer jobs or co-op jobs.  Some are graduating into the Real World.  And high school students are about to choose where they will spend their next four or five years.  It is a time of change, excitement and a bit of fear.

Many people have trouble dealing with change because, in my opinion, they misunderstand it.  Change is common; disruption is annoying.  So, learn to accept change by preparing to be the disruptor instead of the disruptee.

At the recent Toronto Real Estate Forum, Frank McKenna noted that Airbnb is now the world’s biggest hotel company and Uber is now the world’s biggest car company.  People are worried about the decline of the once-dominant manufacturing sector because the number of employees down, but output is up.  As he concluded: the Stone Age did not end to end because of a lack of stones.  It ended because there was a better alternative. Continue reading