Comments on Toby Johnston “Coast watch: the best and worst performers”, 14/01/2013, http://smh.domain.com.au/real-estate-news/coast-watch-the-best-and-worst-performers-20130111-2cjm2.html
While it is a general practice to use median price to compare price movement over time, that very indicator can be problematic, particularly when the market is thin and the number of properties sold in a particular time is small.
They may not always be comparable and can be very misleading. The very large percentage changes listed in the article are likely to indicate the problems with such comparison as opposed to real changes in prices in those areas. The current Australian hosing market does not support those big changes.
Having said that, it is difficult to tell a simple story on price movement, I have to admit.
But some property research and information gathering organisations should develop a more effective method to tell the true picture of housing market.
I would recommend trying to use some kinds of weights using the characteristics of properties sold, including types, size, bedrooms, location, etc.
Unless one uses a more meaningful and more reliable method, lot of the property reports and analyses are non-sensical.
Showing posts with label asset prices. Show all posts
Showing posts with label asset prices. Show all posts
2009-05-29
Macro managing asset markets without a framework - easily said than done
Comments on Alan Wood “Regulators should be neither bubble poppers nor blowers”, 29/05/2009, http://www.theaustralian.news.com.au/story/0,25197,25552776-5013578,00.html
Now it is high time to have a debate on a macro approach to asset prices, in the context of the great recession following the financial crisis that had its direct root of the bursting in the bubbles of asset markets, including housing and equity markets.
The current recession has been characterised by some as balance sheet recession. Balance sheet, no matter it is for banks, firms, or households, is affected by asset market conditions and asset prices. Although the current recession is a highly synchronised one, there have been these types of so called balance sheet recessions before, such as Japan in the 1990s.
In macroeconomics, there are goods, money, labour markets, but no other markets explicitly, such as housing and equity markets. The three markets in the macroeconomic framework jointly determine interest rate, output/employment, aggregate price (inflation). That macroeconomic framework has been good enough for using the two main macroeconomic management tools, namely fiscal and monetary policies to manage the real economy and inflation in the conventional sense, although there has always been so much desired for the effectiveness of those two policies.
While asset markets do not explicitly exist in the macroeconomic framework, their effects are included in more sophisticated models of some markets, though as exogenous variables, such as assets in household consumption demand. This treatment of other asset markets has left the main macro policy tools incapable of dealing with or managing those markets, from macro point of view.
Without a workable macro framework which includes important asset markets, it will be extremely difficult to see what macro policies should be used and how they will work in dealing with any perceived or real problems in those markets.
The current debate should and will prompt economists to come up with some workable macroeconomic frameworks that can guide policy makers in managing the economy more effectively than they have been.The great recession has presented economists with a very practical and urgent task in their research. They need to meet the challenges of our time.
Now it is high time to have a debate on a macro approach to asset prices, in the context of the great recession following the financial crisis that had its direct root of the bursting in the bubbles of asset markets, including housing and equity markets.
The current recession has been characterised by some as balance sheet recession. Balance sheet, no matter it is for banks, firms, or households, is affected by asset market conditions and asset prices. Although the current recession is a highly synchronised one, there have been these types of so called balance sheet recessions before, such as Japan in the 1990s.
In macroeconomics, there are goods, money, labour markets, but no other markets explicitly, such as housing and equity markets. The three markets in the macroeconomic framework jointly determine interest rate, output/employment, aggregate price (inflation). That macroeconomic framework has been good enough for using the two main macroeconomic management tools, namely fiscal and monetary policies to manage the real economy and inflation in the conventional sense, although there has always been so much desired for the effectiveness of those two policies.
While asset markets do not explicitly exist in the macroeconomic framework, their effects are included in more sophisticated models of some markets, though as exogenous variables, such as assets in household consumption demand. This treatment of other asset markets has left the main macro policy tools incapable of dealing with or managing those markets, from macro point of view.
Without a workable macro framework which includes important asset markets, it will be extremely difficult to see what macro policies should be used and how they will work in dealing with any perceived or real problems in those markets.
The current debate should and will prompt economists to come up with some workable macroeconomic frameworks that can guide policy makers in managing the economy more effectively than they have been.The great recession has presented economists with a very practical and urgent task in their research. They need to meet the challenges of our time.
2009-05-22
Economists need to act with urgency
Comments on Christopher Joye “Twisting in the mind”, 22/05/2009, http://www.businessspectator.com.au/bs.nsf/Article/Twisting-in-the-wind-pd20090522-SA4FQ?OpenDocument&src=sph
My view is that economists as a profession that have a responsibility must do their best to contribute to this debate. And they need to do that with an ultimate urgency.
No matter which schools of thought is or will be eventually proven to correct, there is a clear need for a serious and open debate on the issue. It is so important and affects almost everyone’s life. It is an inevitable debate. If it had not been clear in the past, it should surely abundantly clear by now given that the recent financial crisis almost brought down the world financial system and has resulted in the current great recession not seen since the great depression in the early 1930s.
A debate on this issue will need new and more rigorous theoretical supports. Unfortunately, we have got such luxury of well founded economic theories to support the debate. The economist profession needs to stand up to the challenges and shouldn’t still dwell in their comfort zone of research to study the real, urgent and important economic issues, crisis if you like.
Keynes created the main thrust of Keynesian theories in response to or in the aftermath of the great depression. It shouldn’t be too much to expect economists to come up with similar work in the wake of this great recession. After all, there are many times of economists now than the case during the heyday of Keynes time, so they should produce something useful to the society. Otherwise, they will have difficulties in justifying their pays taken from the society.
PS: I myself am also trained as an economist, but my economic skill is very rusty due to nature of work. So I can only call myself an amateur economist. Inspect of that, I should be among all the economists to share this responsibility.
My view is that economists as a profession that have a responsibility must do their best to contribute to this debate. And they need to do that with an ultimate urgency.
No matter which schools of thought is or will be eventually proven to correct, there is a clear need for a serious and open debate on the issue. It is so important and affects almost everyone’s life. It is an inevitable debate. If it had not been clear in the past, it should surely abundantly clear by now given that the recent financial crisis almost brought down the world financial system and has resulted in the current great recession not seen since the great depression in the early 1930s.
A debate on this issue will need new and more rigorous theoretical supports. Unfortunately, we have got such luxury of well founded economic theories to support the debate. The economist profession needs to stand up to the challenges and shouldn’t still dwell in their comfort zone of research to study the real, urgent and important economic issues, crisis if you like.
Keynes created the main thrust of Keynesian theories in response to or in the aftermath of the great depression. It shouldn’t be too much to expect economists to come up with similar work in the wake of this great recession. After all, there are many times of economists now than the case during the heyday of Keynes time, so they should produce something useful to the society. Otherwise, they will have difficulties in justifying their pays taken from the society.
PS: I myself am also trained as an economist, but my economic skill is very rusty due to nature of work. So I can only call myself an amateur economist. Inspect of that, I should be among all the economists to share this responsibility.
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