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Calgary CMHC Forecast Bias – From Optimist to Pessimist? November 16, 2009

Posted by DustinRJay in Calgary real estate, CMHC.
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Studies have shown that there is a tendency among analysts to be consensus seeking.  More often that not, analysts are benchmarked against their peers so an analyst may be rewarded even if his prediction is off the mark as long as it is not too far off from consensus.  According to some studies, analysts are more likely to be optimistic when revising downwards, and pessimistic when revising upwards.

Although limited data is available, I believe CMHC is prone to some bias tendencies.  CMHC always forecast price increases for the following year since they have been putting out forecasts in Calgary since Q1 2008.  This illustrates they may have an upward bias to forecasting prices.  In addition, during the correction period in 2007 and 2008, there were four consecutive downward revisions.  The probability of four consecutive downward revisions is 1 in 16.  While the economy and oil prices did deteriorate considerably over this same period, I believe that the consecutiveness of the revisions may reveal a bias in CMHC forecasting towards being overly optimistic when revising downwards, with the potential of being pessimistic when revising upwards.

[click above image to enlarge]

For these reasons, I believe that the BEST information available from CMHC may not be only the price that they are forecasting for the next year, but also information in which revisions are being made counter to previous trends.  CMHC has broken with the previously held consensus revision trends as of Q3 2009 and that may be newsworthy in itself.

To find the current CMHC housing market forecast click here and go to the “Order Desk”, then “Housing Market Information”, and click on “Housing Market Outlook.”

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Comments»

1. Realesto Calgarysrealestate.ca - November 17, 2009

Pretty interesting. You’re abolutely right about the market always being predicted to rise. And it all depends on how the market is analyzed. Sometimes it is shown year over year, sometimes month vs month, sometimes this month vs last month, or this quarter vs. last, sometimes then mark is on dollar, sometimes sales, sometimes new homes are included, sometimes not, the stats can really show anything you want them to show.

2. radley77 - November 17, 2009

The way CMHC does there forecasts is that they take an average of the entire year, so by the time it gets to Q4, they are very close to being right as they have the bulk of the data in. CMHC is consistently making a forecast every quarter, for the current year as well as the following year for MLS resales (not new homes).

The last data point for “Real Data” is as of October 2009 and includes data from January – October 2009. Obviously with two months left, there is the potential to be revised, but likely it won’t be by much. As of mid November, prices are up slightly over October, and up over the year to date average, so that is likely to drag up the year to date average for 2009.

3. hermes kelly bag - July 5, 2010

The last data point for “Real Data” is as of October 2009 and includes data from January – October 2009. Obviously with two months left, there is the potential to be revised, but likely it won’t be by much. As of mid November, prices are up slightly over October, and up over the year to date average, so that is likely to drag up the year to date average for 2009.


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