REP Research Seminar - Presenting in person - Paul Anglin, Professor Emeritus of Real Estate from the University of Guelph. Title: "Market Conditions in Real Estate Markets".

Abstract: We show how using commonly reported measures of market conditions can improve the accuracy of price predictions in real estate markets. The standard model of competitive markets asserts that “excess demand” causes price(s) to adjust to an equilibrium with little delay. In an illiquid market, such as the market for real estate, it may take more time for “market tightness” to return to its equilibrium level. Thus, observable deviations in market tightness can persist, and data on market conditions can be used to improve the accuracy of price forecasts.

This paper has two parts, both of which add to our understanding of the properties of how prices adjust. The first part introduces a simple dynamic model with competitive aspects and with matching frictions. The model includes some interesting special cases, and we use it to offer six hypotheses on why the adjustment process might differ between cities. The main part studies the properties of an inflation-adjusted price index and two popular measures of market tightness (the ratio of sales to new listings and “Months of Inventory”). We test the hypotheses using detrended monthly data on residential real estate markets in 31 Canadian cities. We find that changes in measured market tightness are economically significant because they persist for a significant period of time. We also find that market tightness affects prices both contemporaneously and, based on tests of Granger causality, with a lag. These effects differ by the type of city and, in some cities, feedback effects are statistically significant.

Bio: Paul Anglin joined the University of Guelph in 2005 and is now a Professor Emeritus. He has worked in Canada and the United States, as well as being a visiting scholar in Hong Kong, Poland, and Singapore. He received his B.Sc. (Hons.) from the University of Toronto and earned his M.A. and Ph.D. at the University of Western Ontario (now called Western University) in Economic Theory.

His best-known research focuses on issues related to the processes of buying and selling property, with a special emphasis on “time-on-market” and “over-pricing”. He has contributed ideas to a diverse set of topics including price dynamics, price indices, information asymmetry and physics. His work, using both empirical and analytical methods, has been published in leading refereed journals such as the Journal of Political Economy, Canadian Journal of Economics, Canadian Public Policy, Real Estate Economics, Journal of Real Estate Finance and Economics, and the Journal of Real Estate Research. More than 50 academic journals and research associations from around the world have asked for his opinion on manuscripts and research proposals. AREUEA awarded him one of their best referee awards in 2007 and in 2020. He is now actively researching and writing on topics related to the causes and effects of changing market conditions in real estate markets, to forecasting and applications of artificial intelligence.

He has taught courses at all levels of microeconomics, on Real Estate Market Analysis and, most recently, on Sales and Negotiation. After listening to students and other smart people for more than four decades, he asserts that the vast majority of ideas, applications, and techniques discussed in these courses can be summarized by five basic principles. Most mistakes of analysis and most apparent paradoxes in a market-based environment can be resolved by identifying how one or more of these principles were misunderstood.