Calgary CMHC Forecast Bias – From Optimist to Pessimist? November 16, 2009Posted by DustinRJay in Calgary real estate, CMHC.
Tags: bias, CMHC, forecasts
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.
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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.”