Economists prediction vs Reality on housing prices
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Recently I read a few online articles & one of them was an interview with Robert Shiller, Economics Professor at Yale University. The interesting point was that he admitted the economists only advising their firm get prediction right about 3 - 4 times out of 10. Think how difficult it is to predict the weather. Overall, though, weathermen do okay, because they know their limits; they look four or five days ahead, but not much more. Economists, in contrast, have to make 5 years or more long-range predictions. Couple of weeks ago, Egypt was fine, now, the country is in a mess. How could Economists predict this was going to happen? Paradoxically, while everybody knows that forecasts are mostly wrong, everybody still demands them.
Back in 2008 during the Global Economic Crisis. Many Economists predicts real estate market was going to drop 30% to 40% but it never happened. While the market rebounded a little bit, some Economists did another prediction for further housing price drop. I attended one of the Vancouver Economists seminar at that time. During his seminar, he firmly believe Vancouver housing prices were going to drop for another 15%. I challenged him afterwards how he could be so sure that our market would drop another 15%, he said it was the worst scenario prediction. However, I questioned him why he didn't tell the public that it was his worst case scenario prediction instead, he presented it the way that the market WOULD drop for 15%.
Our recent tighten on mortgage regulation was not enforeced purely for mortgage debt. It was very clear that the consumer debt was on a rise & created a concern. However, Economists would not understand how Mainland Chinese immigrant way of spending habit. I recently sold a listing listed just under 2 million & sold ALL CASH at $2,316,000. Interest rise doesn't affect the Mainland Chinese buyer. Housing prices in popular cities around the world can somehow wear the storms better than the other less popular cities. Cities like Vancouver, Toronto & Calgary in Canada, Taipei in Taiwan, Shanghai & Beijing in China, New York, Mahattan, Washington in US. We just have to accept the fact that we need to pay the price to live in the World's popular cities.
