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Posts Tagged ‘PBS’

Complexity Theory Makes Housing ‘Quake

March 15, 2006 | 12:05 am |

In the article Housing Bubble Science UCLA geophysicist Didier Sornette has taken the theories developed in earthquake prediction and applied them to the housing market.

Sornette studies what’s known as “complexity theory” to try to predict how a system will behave in the future. He uses physics and statistical analysis to look at the organization of the dynamic parts of a complex system, and how these parts interact to cause something major to happen.

“It emphasizes the whole more than the parts, it emphasizes the interactions and what we call the feedback,” he says.

The interplay of the elements is affected by both positive and negative feedback. Negative feedback is often obvious. For example, when real estate prices are inflated many people decide to sell with the hope of making a nice profit. Eventually more houses are available for sale than there are buyers, so the prices start to drop back to normal. “Positive feedback is exactly the opposite. A high price pushes the price still higher,” explains Sornette. “This is the expectation of people that lead [people] to buy houses at prices that they would never have bought otherwise and taking supposedly big risks first buyers, for example” you’re a young couple relatively at the early stage of your life and you think, ‘Well if I don’t buy now'”

The results
In 2005 he predicted that in the first half of 2006 prices would level out or return to normal rather than crash.

Housing bubble defined
…when house prices climb continually and unexplainably fast — faster than exponential growth — resulting in market prices that are vastly inflated from the fundamental value of the house.

Greater fool theory
The faith that you’ll be able to sell it in the future to a greater fool than yourself for an even higher price. In other words, buyers in an overheated market may understand that they are over paying but have confidence that others will buy the property from them.

However, his theories, as in most scientific theories, especially those relating to economics have a number of detractors [DigiJournal.com].

Nevertheless, it would seem that housing market predictions are ripe for fresh academic research. I am surprised there has been so little of it.


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Shameless Self-promotion: Recent Media Clips On The Real Estate Market

January 18, 2006 | 8:37 am | | TV, Videos |

Here’s couple of media spots I did recently. The first is part of a series of podcasts that The Real Deal does with various leaders within New York real estate industry. They are the first to use this medium in New York and its a great way to distribute information. The other is an interview I had with PBS on understanding value in housing. This one is more national in relevance.

[I know, I know, I am just an appraiser and this is shameless self-promotion.]

Here’s the 2nd and latest podcast with The Real Deal. Its a different format, more of a casual recap of the quarter instead of an interview. I hope to provide these every quarter if there is enough interest in them.

The fourth quarter Manhattan housing market report from appraisal firm Miller Samuel showed a drop-off in sales activity of 21.2 percent and a slight rise in the average number of days properties are staying on the market. At the same time, both the average and the median sales prices for a Manhattan apartment increased – and the borough’s average sales price per square foot set a record.

So, what exactly is going on in the housing market? Miller Samuel CEO and president Jonathan Miller, in a special podcast for The Real Deal, breaks down his firm’s heavily watched report.

The conversation with Miller is part of The Real Deal’s regular podcast series. To listen to the entire interview, click one of the links below.

MP3 Version
Podcast (RSS) Version

Here’s the segment I did for American Media/ PBS on what to consider when buying a house. You need windows media player to watch it.


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