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Lisa, a new college graduate with co-concentrations in
Economics and Math, is interviewing for a Research Analyst position.
Question # 1
Interviewer: Take a look at the above graph and tell me if
you see any inconsistency in the construction.
Lisa: The Chicago data range is totally out of sync with the
rest so it should be graphed as Y2. In other words, instead of just X and Y, I
would graph it as X, Y1 and Y2, where Y2 would represent the Chicago value
range.
Question # 2
Interviewer: In that case, how would you redefine the Y
ranges? Will that rearrangement help the other markets?
Lisa: The Y1 would be compressed down to a range between 200
and 325 with an increment of 25, while the new Y2 range would be between 130 and
160, with an increment of 10. And yes, the rearrangement would help project the
other markets better, with a more meaningful Y1 range.
Question # 3
Interviewer: Is there any other room for improvement between
the graph and the data table?
Lisa: Yes. The data table is redundant. The data with the
legends can be placed right under the months in the graph, making the table
irrelevant.
Question # 4
Interviewer: What about the growth rates? How would you show
them?
Lisa: Anyone can eyeball the overall growth rates. The
monthly averages are not indicative of anything meaningful here. I would
therefore combine both into one more meaningful graph.
Question # 5
Interviewer: Can you make a comparative analysis of two
market groups from the data table?
Lisa: The West Coast markets are moving in tandem, while the
East Coast markets have forked. Specifically, LA and San Francisco have
produced very similar returns, but New York and Boston are surprisingly
divergent. Boston has the best return but NYC has been flat.
Question # 6
Interviewer: You just graduated from Columbia so you will
know Manhattan RE quite well. Why do you think the Manhattan market has been
flat-lining?
Lisa: Two reasons: (a) the cap on SALT has been impacting the
high-end Co-op and Condo markets in Manhattan and (b) as you know, the foreign
buying of the US real estate has tumbled in last two years, which has dealt a
serious blow to the Manhattan market, especially the high-end condo market.
Question # 7
Interviewer: If foreign buying is impacting Manhattan, it
should impact LA as well. But LA has been strong. Can you explain?
Lisa: Unlike Manhattan, the foreign buyers in that market
invest more heavily in private homes, rather than condos per se. Manhattan is
essentially a coop and condo market.
Question # 8
Interviewer: How would you characterize the Boston condo
market? Why isn't it showing the same pattern as NYC?
Lisa: Boston is a more natural market. SALT and foreign
buyers do not impact Boston that much. It's guided by its own economic
fundamentals. That is why, it has responded well to the falling interest rates
in recent months.
Question # 9
Interviewer: Based on the above data, would you recommend any
of these markets to our clients and, if so, why?
Lisa: Yes, I would definitely recommend Boston. As I said,
Boston is a more natural market. Additionally, for the analysts and modelers, natural markets are
always better as the universe of predictive modeling performs better for those
markets.
P.S. These are Case-Shiller’s seasonally-adjusted indices so the
month-over-month comparison is fine. While using Case-Shiller’s seasonally
unadjusted indices, one should compare July 2019 with July 2018 and July 2017,
etc.
-Sid Som, MBA, MIM
President, Homequant, Inc.
homequant@gmail.com
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