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
One of the messy facts of life about facts (bad pun intended) is that they are hard to work with. There are many reasons why facts do not reveal everything you want to know about consumer tastes, price trends and anything else that success in business depends on. These problems will not shrink in the future as Big Data takes hold and as smart buildings throw out so much information in real time.
Fortunately, a simple idea shows how to deal with much of the messiness. All facts matter but not all facts are equally important: different sources of facts imply different weights for a fact. I will focus on facts as numbers since, except for the added slipperiness of facts as words, as conversations, as rumours and as written reports, the same concepts applies.
Several different perspectives reveal why attaching weights to facts reduces the confusion. In a series of posts, I will talk about weighting and context, weighting and precision of data, weighting and trade off and weighting and communication. Here is the first: Continue reading
It is fashionable to say that economic ideas are wrong, at best, and, at worst, dangerously misleading. This fashion is not new. Since the most familiar pieces of the traditional economics model have survived for many decades, it is worth seeing how they appear in the world of real estate. Continue reading
Yes. Somebody should do something about high house prices. You are somebody. And whatever you do would count as “something”. So do it!
Based on recent reports, I worry that this is the thinking style of the new federal government. The Finance Minister has talked about doing a “deep dive” into the data. They must be feeling a lot of pressure from people in Toronto and Vancouver to do something about high prices but media headlines often overlook the real problems.
A bit of perspective would help. The last Prime Minister had an M.A. in Economics and, still, his policies such as “boutique tax credits” ignored most of the simple advice given in Econ 101. Econ 101 tells us that prices are never a problem. (To be very clear: prices being “high” is not the definition of a “price bubble”!) In a market context, they are always a symptom of something else (i.e. matching the demand curve to the supply curve). Continue reading