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Baby, we got a bubble!?
- Thread starter simuls
- Start date
vz64
Active Member
daveto, statistics has only one average--mean. These two words are synonyms, at least in science and statistics and nobody refers to median by calling it "average". What you wanted to say that there are many central tendency measures, such as mode, median, skew, etc.
daveto
Active Member
VZ64, it sounds like we're saying the same thing, but differing on the semantics. Here is a google search on "statistics average definition" which provides various support for both definitions.
http://www.google.ca/search?q=stati...s=org.mozilla:en-US:official&client=firefox-a
But in either case, I think we can agree that it doesn't change the rebuttal point I was making in my original post?
vz64
Active Member
Another point: median can be deceptive too. Consider a neighbourhood consisting of mixture of old and new houses with no super-expensive mansions. Then median will reflect the prices of older houses while mean will be more tuned to the prices of new houses. Now consider that the area is half-build with the new houses and another half are older houses--then there might be wild fluctuations in median price from month to month. If someone needs a good picture of what is going on in local real estate market one needs to see a full distribution of sold houses in a specific area; maybe a some sort of frequency histogram, so you can see both proportions and values of the houses. Many scientific publications have similar deficiency when they report mean or median, which might not tell much about asymmetrical data (response time, wait periods, income, etc.).
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vz64
Active Member
I agree with your other rebuttal points, but I think it was unfair to say that he was not clear what average he was referring too. Also, I think that one of the main ideas of his article is very true, which is inability of economist to predict future market events.
interested
Senior Member
Maybe so, but the author's ability to predict future market events is certainly no better and may well be perceived as coming from a biased perspective (as a realtor with a vested interest to sell property). You will note the concluding sentence was that "As long as the demand for urban homes in good neighbourhoods and school districts continues to outpace the supply of homes coming onto the market for sale, prices may have no place to go but up."
A very convenient result if you are starting with a conclusion and working backwards to come up with reasons to support that conclusion.
vz64
Active Member
I agree with his observation (re predictions), not with his interpretation of events.
daveto
Active Member
VZ, as I read my post I can see that I was unclear. When I said that he was not clear in which average he was talking about, what my point was predicated on average=mean/median/mode/etc. As in the follows.:
1. He points out the economists use price averages (general)
2. Using price averages (mean) is flawed.
3. Therefore economists shouldn't use price averages (mean).
Therefore he was unclear by referring to "averages" (general), and then refuting the use of means, when economists typically use medians.
In fairness, if the author had believed that average=mean, then I would agree that they were not unclear in their mind, although they were incorrect in their statement that economists use means (when they typically use medians) and must therefore accept responsibility for a reader misunderstanding their use of the word average.
As one final point I acknowledge that it is always easier to criticize anonymously than to author publicly, and I appreciate the author's effort, and I don't mean (pun intended) to be mean (pun intended) via this medium (pun intended)
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vz64
Active Member
I see, no problem daveto, sorry if my post sounded a bit picky. What I also was thinking that sometimes your odds are better when you listen to a practitioner (RE agent) than to market analyst. A practitioner might be personally biased to present a certain view, but he/she often better predictors by using their "gut feelings" and intuition rather than academic knowledge. On the topic, there is very interesting book of N. Taleb "Black Swan", which discusses futile attempts of "expert" to predict market events. Personally, I have nothing against science; I am a scientist myself 
cdr108
Senior Member
weren't all these 'reasons' given for the US and every other global r/e market for their lofty prices ?!?!?
daveto
Active Member
One of my favourite books, along with his "Fooled by Randomness". I also recommend Freakanomics and SuperFreaknomics by Levitt.
redfirm
Active Member
Two points:
1) I agree that SL may drop, or even prove to be a bad investment. That's not my point. My point is that even if SL goes down, AURA and ROCP will also go down and always be cheaper because they are simply not in the same class. In other words if SL goes to say $950, then AURA will be around 750-800 clearly reflecting that it is lesser building. I'm not saying at all that more luxurious building is always better investment. AURA may provide better returns,but it will always be cheaper than SL.
2) "bloated prices are sure to drop ...artificially created.." Wait a sec, I'm confused now. That's what I've been saying all along, but you kept telling me that everything is fine and that prices will keep going up, or worst case scenario: we'll have a soft landing. Hmm ...
drewp
Active Member
But prices are going up! You can't compare Aura to SL in regards to price appreciation. The Hotel/Luxury Condo Market is unknown and a unique segment that, if suffers, does not translate to Condos as well. It is all about demand, and the demand will be there for projects like Aura, ROCP, Lumiere, etc...which in all likelihood continue the upward trend. At what rate that I cannot predict. This is usually a first buyer who has been renting for a while or downsizing couple who wants a weekend Condo (trust me there are a lot of those) At SL there is a very specific demographic that is looking for this lifestyle. If prices drop there I don't think it will mean that much to the rest of the market. We don't have real market stats on this segment (Ritz is not a good indicator) but we have seen the Condo boom first hand and still see the demand, at least that is what the market is telling us.
Johnzz
Active Member
You're welcome Daveto.
I only posted the article as a simple rebuttal to mainstream media reports always quoting “economist” predictions of an imminent house price fall/collapse (as they’ve done like a broken record every year for 8 years). I’m a trader for an investment bank and know economists quite well (I sit next to them). Their skill set is primarily spinning stories which help sell a product. How often are their predictions correct? I’d say maybe 20% (to help mask this 80% failure rate, they continually adjust their forecasts every few weeks as variables change). Ever wonder why no one holds them accountable after a prediction? Because it doesn’t matter. As a trader, I wish I had this luxury. If I’m wrong, I lose my job.
The above comments refer to bank economist specialties, which focus on common investment vehicles (equities/bonds). Their forecasting accuracy in real estate (a non-specialty) is even worse. It’s interesting to note that soon after Sherry Cooper (Chief Economist BMO) was personally condo hunting about 7 years ago, and realizing she couldn’t afford the properties she felt entitled too, BMO published a sensational report predicting an imminent condo price crash in Toronto. It made all the papers, and Ms. Cooper was rewarded $$ for her success that year. Potential condo buyers spooked by the report were not rewarded as property prices continued higher.
Daveto, I wouldn’t classify you as an economist, that would be an insult. In fact, I would say your analysis offers much more value, not simply because it’s well thought out and researched, but because it’s independent.
Unfortunately, most people rely on this “expert” advice from economists, the media or realtors, all of which are obviously biased.
Of course there are degrees of bias. I’d personally pay more attention to John Pasalis, over most media reports sourcing predictions from bank economists. Having said that, some realtors make these bank economists look like bloody genius’s.
I’ve been investing in real estate for well over a decade and credit my success primarily to independent thought. I have not blindly purchased property every year, but selectively (some years much more than others), and basically limited to central Toronto (I live in the UK and could have purchased here or the US, as others have mistakenly done). I’ve built my Toronto property portfolio well into the eight figures, but am growing more and more concerned (mainly due to tighter bank credit). However, I still see opportunities, albeit very few. I chuckle to see people queuing up to purchase 1-bed apartments in buildings like 1000 Bay at +$800/sqft.
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interested
Senior Member
Drew, buyers at the Exec Floor in Aura are not first time buyers though they may be wealthier boomers looking to downsize or have a pied a terre. So maybe small units on lower floors may not drop but if condo hotels drop significantly I am quite sure that higher end larger units in better condos will do the same. That said, I do agree that SL and similar can certainly drop more.
I would have to think there are a number of buyers like me who bought for a pied at terre or as a principal residence or secondary residence in Toronto. The question is how many are there and remember at $2+ million and even up to $9 mill this is a significant amount of money. There is only so much money to go around. As well, I would be curious about other buildings (non condo/hotels) are doing that are asking over $1000/sq.ft. with over a 1000 sq.ft. units. Are they as well experiencing difficulties because if so it may be just the high end of the market slowing or that got too far ahead of itself and further, if past experience is any predictor of future, the high end slows first, followed by it working its way down the food chain as it were.
On the other hand, if it turns out to be that Ritz and say Trump are just bad executions, and say SL or 4S execute well, future demand will go away from those buildings and naturally migrate to the better buildings. This is no different than any other project in the city. It is just in a booming market there has been indiscriminate buying of everything whereas in a slowing market and with choice buyers start to compare because they have the luxury of doing so.
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