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
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.
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
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
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
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
Ethical awareness affects people involved in the real estate industry. There is a lot of money at stake and, because investors are separated from their real estate by distance or expertise or uncertainty, lots of exciting operational challenges. Research has shown that these same features also create opportunities to mislead or to be misled. So, operations and ethics in the real estate business cannot be separated.
Being ethically aware is a good thing. Many industry associations have codes of conduct or courses which include an ethical dimension. Unfortunately, it is hard to teach a 20 year old how to be ethically aware, especially if the “good answer” seems obvious in a two-hour test. 60 year olds have more life experience and know that distinguishing “good” and “evil” is not so simple.
So, the discussions about potentially unethical behaviour by the next president of the United States represent a teachable moment about an important topic. Continue reading
The start of a new year is a time of new beginnings. 2017 will be an interesting year, even if we do not yet know why. With that in mind, I encourage you to make a resolution to be more curious.
Two items in particular attracted my curiosity during this Break and I encourage you to check them out. Continue reading
Well, that was an interesting election. It also adds special significance to a comment made by a student in my Real Estate Market Analysis course: the job of an analyst seems really difficult. Or, more poetically, “Prediction is very difficult, especially if it’s about the future.” (Nils Bohr, supposedly).
When expectations differ from reality, somebody is surprised. In this election, the media have settled on the word “stunning”.
Being a long term investment, the real estate business is full of such stress. The outcome, and sometimes the best business strategy, depend on unknown market conditions. That is why market analysis is both difficult and unavoidable.
Election night in the US offers two memorable examples which should remind you of best practices. Continue reading