What’s the difference between a “streak” and a “pattern?”
Is there one?
Does it depend on the context in which we view a consecutive string of similar outcomes?
I’m not a huge basketball fan, but I am a huge sports fan. I’m also a huge fan, as most of you know, of stats.
Combined with an overwhelming case of obsessive-compulsive disorder, I will actually study and memorize statistics for sports in which I have very little interest.
Case in point: tennis.
I don’t watch tennis. I find it to be extremely boring, in the same way that a non-golf fan would find golf boring, or baseball, or basketball, or essentially any other sport which involves repetition.
Tennis is back-and-forth, back-and-forth, point, point, point, game, set, match, boring.
But tennis fans might suggest that a basketball game, which ends up at a 102-101 score, is even worse. Back-and-forth, for two hours, all to come down to a whole lot of time-outs in the last 60 seconds, which take 30 minutes in real-time, so that one team can beat the other by a couple of points.
See what I mean?
I don’t care for tennis, but I do care for the stats!
The Grand Slams! Oh boy, when a grand slam is finished, I immediately run to the laptop to input the winner and runner-up, then update my “All Time” list, as well as a host of others.
That page, along with hundreds of others like it, for other sports that I don’t watch, end up in a book that I print and bind quarterly (waste of paper, so be it), and read in bed at night when I can’t fall asleep………which is every night.
Which men have won all four Grand Slam tennis tournaments?
How about the women?
I know the answers, even though I don’t watch the sport.
The same goes for basketball, which, I’m sorry, I just can’t find interesting. Even the March Madness NCAA tournament has ceased to capture my attention in the last decade.
But when the NBA season is over? You know I update my “All Time Leaders” stats for points, rebounds, assists, steals, games played, et al.
And of course, the “NBA Championship Winners.”
For those of you that know basketball, you know that there was an absolutely unprecedented period in the 1950’s and 1960’s when one team dominated.
There have been dominant teams in every team-sport, as well as individuals in sports like golf, tennis, and cycling! Lance!
But there was absolutely nothing like the Boston Celtics of the late-50’s and 1960’s.
They still hold the record, in the four major sports (hockey, football, baseball, basketball) for the most consecutive championships……..with eight.
Eight? In a row?
In fact, only the New York Yankees and Montreal Canadiens can claim streaks of five straight championships. And the most consecutive championships in the NFL, is two.
Here’s how the Boston Celtics eight straight championships looked, with the NBA Championship winners in yellow highlight:
Yup, there it is – eight straight from 1959 to 1966.
What an accomplishment, right?
Except that, wait, there’s more.
On this list, there actually thirteen seasons, and the Celtics won eleven championships.
And they also went to the finals ten straight years!
In fact, if you study this list a little longer, you’ll see that you can make five huge claims, depending on what your objective is:
1) Boston won 8-straight from 1959 to 1966.
2) Boston won 9 championships in 10 years, from 1957 to 1966.
3) Boston won 11 in 13 years, from 1957 to 1969.
4) Boston went to the Championship 10 seasons in a row, from 1957 to 1966.
5) Boston went to the Championship 12 times in 13 seasons.
The fact that the Boston Celtics won eight straight championships is incredible.
But is it more impressive that they won 9 times in 10 years?
Or 11 in 13 years?
Is 9/10 more impressive than 11/13?
Is the higher percentage more impressive than the higher total?
I can’t tell you how many times I’ve looked at these dates, teams, and championships, and wondered what’s the most impressive way to explain this period of dominance.
In the end, I think it’s that Boston won 11 times in a 13-year period, and combined with the loss in 1958, they were present at the Championship 12 times in 13 years.
A similar discussion can be had regarding the UCLA Bruins men’s basketball team, which won seven straight championships from 1967 to 1973, but also won in 1964, 1965, and 1975, for a total of 10 times in 12 years.
So what in the world does this have to do with real estate?
I love stats, but I also love streaks.
I will cheer for the favourite in a championship simply because I like dynasties.
And when it comes to the Toronto real estate market, a massive dynasty is coming to an end.
I don’t have stats to support this, but I would gather that the longest “streak” of consecutive years of increase in the average home price in a given city has to be the one we currently find ourselves in.
Twenty-one straight years, from 1996 to 2017.
Eat your hearts out, Boston Celtics!
Here’s a look at the average sale price of a Toronto home from 1995 to 2017:
The last time that the average home price in Toronto decreased from one year to the next was from 1995 to 1996.
I was in grade eleven.
Atlanta hosted the summer Olympics.
Friends and Seinfeld were at their height of popularity.
The Toronto Raptors were in their second season of existence.
Connor McDavid, Auston Matthews, and Mitch Marner weren’t born yet.
And “the internet” was still something that only half of your friends had, and most of them couldn’t figure out how to open Netscape Navigator.
Since the Toronto average home price came in at $198,150 in 1996, that average has increased every single year since. And while 2018 isn’t over yet, let me be the first to tell you, in case you didn’t already know, that this “streak” is going to end.
The average home price in Toronto in 2017 was $822,572. And there is absolutely no way that 2018 is going to beat that.
So before I show you why, and how that’s a certainty, let me show you one more chart, just to drive home what an incredible Boston Celtics, UCLA Bruin esque dynasty the Toronto real estate market built:
The bears are going to have a field day with this, but something tells me, so are the bulls.
There’s much to talk about here, whether it’s that 0.8% increase in 2008 that barely kept the streak alive, or the 315% total increase in value through the streak, or perhaps the 17.3% and 12.7%, back-to-back, double-digit increases in 2016 and 2017 that simply made it impossible for 2018 to follow suit.
But let’s keep that $822,572 number in mind, as I show you why the 2018 market won’t keep pace.
Here is the average sale price in Toronto for every month recorded thus far in 2018:
As you can see, even the highest month, which was June, still didn’t beat the overall 2017 average of $822,572. In fact, it was off by 1.8%.
So how can we predict what the overall 2018 average will be?
We could look at the average of all these averages, which is $786,073, but that ignores sales volume.
So I took a weighted-average of all eleven months; the number of sales, times the average sale price, divided by the entire 74,128 sales recorded from January through November.
And that number is $789,319.
December has yet to be recorded, but if history is any indication, it will be lower than November.
So let’s just use that $789,319 number for now.
If 2018 were to finish with $789,319 as the average Toronto home sale price, we would see the end of our twenty-one year streak, and we would also be able to put a number to the decrease, year-over-year: 4.04%.
So what is your spin on this?
Is it the “beginning of the crash?” The one that people were predicting back in 2006, before prices increased 134%, and those prognosticators lost out on a lifetime of tax-free capital gains they will never, ever be able to make back?
Sorry, I couldn’t resist. So much for my attempt to be impartial here, but my experiences weren’t just with statistics and headlines – they were with people. So it is most certainly all the more real to me, as I look back in hindsight.
If this isn’t the beginning of the “crash,” what is it?
Is this a down year?
Is it a return to normal?
Is it the market taking a breather?
Is it much ado about nothing?
If you were an equities trader, and a 38-year-old investor was looking at an RRSP with returns like those above, and there was one year down 4.04%, would it even be a talking point?
Actually, scratch that question. A friend of mine is a wealth manager, and he says that after eleven straight “winning” months, one down month will make the phones ring like crazy, with old men bitching and complaining about the market, predicting doom, and asking if they should move to a cash position. The same goes for one down year, in the context of a 10, 20, or 30 year time horizon.
So while we’re sitting here at December 10th, there are still three weeks left in the month, and a lot of real estate yet to be sold, I think we can all agree on the numbers I have outlined above.
Then why not get a head start on the “I told you so’s” and the predictions, right?
I welcome your thoughts.