Comments on: Supply/Demand: Does it predict price? Maybe not. http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/ The Dirt on San Francisco Real Estate - (Broker, Cal. Dept. Real Estate License No. 773349) Wed, 02 Jun 2010 21:13:56 +0000 http://wordpress.org/?v=2.9.2 hourly 1 By: Misha http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/comment-page-1/#comment-407 Misha Fri, 06 Feb 2009 22:33:58 +0000 http://www.pegasusventures.net/wordpressblog/?p=118#comment-407 Agreed. And to a large extent I believe that was the conclusion I was trying to make. Factors more important than a "disequilibrium" in supply/demand are at work. Or perhaps, to be more precise, in the context of a market like San Francisco where supply remains relatively constrained in relation to demand, the rate of absorption simply isn't a very good metric to reflect real demand. Agreed. And to a large extent I believe that was the conclusion I was trying to make. Factors more important than a “disequilibrium” in supply/demand are at work. Or perhaps, to be more precise, in the context of a market like San Francisco where supply remains relatively constrained in relation to demand, the rate of absorption simply isn’t a very good metric to reflect real demand.

]]> By: X http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/comment-page-1/#comment-406 X Fri, 06 Feb 2009 17:59:07 +0000 http://www.pegasusventures.net/wordpressblog/?p=118#comment-406 Hey Misha, If there is one thing certain about economic theory: they are always wrong, sometimes. Secondly, correlation does not mean causality lastly, humans only randomly act rationally. Thirdly there are many factors to analyze such as access to credit - employment market - and income (which everyone liked to forget about during the bubble because apparently it no longer had to correlate to price of real estate) blah blah blah. So, although supply and demand is nice, it can be skewed by increasing the price of conforming loans for example, bankruptcies. Hey Misha,

If there is one thing certain about economic theory: they are always wrong, sometimes. Secondly, correlation does not mean causality lastly, humans only randomly act rationally. Thirdly there are many factors to analyze such as access to credit – employment market – and income (which everyone liked to forget about during the bubble because apparently it no longer had to correlate to price of real estate) blah blah blah. So, although supply and demand is nice, it can be skewed by increasing the price of conforming loans for example, bankruptcies.

]]> By: admin http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/comment-page-1/#comment-398 admin Fri, 30 Jan 2009 07:14:22 +0000 http://www.pegasusventures.net/wordpressblog/?p=118#comment-398 Jean-Claude, you're absolutely right. I thought I'd anticipated that by dividing a three month moving average of listings by a three month moving average of sales, staggered one month forward (ie. Jan-March listings divided by Feb to April sales). In fact, I'd inadvertently done the reverse -- moral: don't try to do statistical analysis in the wee hours of the morning. But before you get too excited, take a look at the revised chart. The lines line up very prettily -- until you remember that there's supposed to be a reverse correlation. Conclusion: the results, if anything, prove the lack of any correlation even more clearly. Jean-Claude, you’re absolutely right. I thought I’d anticipated that by dividing a three month moving average of listings by a three month moving average of sales, staggered one month forward (ie. Jan-March listings divided by Feb to April sales). In fact, I’d inadvertently done the reverse — moral: don’t try to do statistical analysis in the wee hours of the morning. But before you get too excited, take a look at the revised chart. The lines line up very prettily — until you remember that there’s supposed to be a reverse correlation. Conclusion: the results, if anything, prove the lack of any correlation even more clearly.

]]> By: admin http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/comment-page-1/#comment-397 admin Fri, 30 Jan 2009 06:48:41 +0000 http://www.pegasusventures.net/wordpressblog/?p=118#comment-397 Matt: I would not say that absorption is a commonly-used metric in the retail residential real estate market. The concept is certainly used by larger-scale residential developers when looking at how long their inventory, or someone else's, will take to be absorbed. Matt: I would not say that absorption is a commonly-used metric in the
retail residential real estate market. The concept is certainly used by larger-scale residential developers when looking at how long their inventory, or someone else’s, will take to be absorbed.

]]> By: Matt http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/comment-page-1/#comment-396 Matt Thu, 29 Jan 2009 19:01:39 +0000 http://www.pegasusventures.net/wordpressblog/?p=118#comment-396 Thanks Misha, I found this posting interesting. With so many statistics thrown around out there, it's difficult to know which are relevant to where real estate prices are headed. Is Absorption a commonly-used figure? Thanks Misha, I found this posting interesting. With so many statistics thrown around out there, it’s difficult to know which are relevant to where real estate prices are headed. Is Absorption a commonly-used figure?

]]> By: Jean-Claude Branch http://www.pegasusventures.net/wordpressblog/2009/01/25/supplydemand-does-it-predict-price-maybe-not/comment-page-1/#comment-394 Jean-Claude Branch Tue, 27 Jan 2009 21:39:13 +0000 http://www.pegasusventures.net/wordpressblog/?p=118#comment-394 What about a delay to the chart, assuming some sort of lag between supply increasing and then prices decreasing, ie if you put a 60-90 day lag on your chart would the numbers correlate? it's just a theory. bus based on experience that as more properties come onto the market, the prices will drop but over time, noting unlike say the stock market there is a significant time lag in finding property settling on property etc. What about a delay to the chart, assuming some sort of lag between supply increasing and then prices decreasing, ie if you put a 60-90 day lag on your chart would the numbers correlate? it’s just a theory. bus based on experience that as more properties come onto the market, the prices will drop but over time, noting unlike say the stock market there is a significant time lag in finding property settling on property etc.

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