First of all, I partly agree with a classmate that Moon is misreading real estate pricing displays. It should be noted that the real estate market is a very inert area of the economic system. The high inertia of the real estate market is due to many reasons. On the one hand, for the vast majority of people, an apartment is the most expensive commodity. The decision to purchase or exchange matures for a long time and requires consideration of many personal circumstances.
On the other hand, the duration of the simplest purchase and sale transaction is about two months due to the time it takes to select the right apartment and collect and process all the documents. During the transaction, prices are fixed by contracts and advances made, as a result of which the period of two months becomes the minimum time during which new trends and significant price changes can occur in the market.
The next indicator of prices in the real estate market is precisely the trend of the secondary market. First, it is the market of monotonous finished goods. In contrast to the market for new buildings, apartments do not differ in different degrees of completion of the house, the level of finishing, as well as the legal status.
Moreover, the condition of competition is observed in the secondary market. There are many independent sellers, in contrast to the market for new buildings, when the price for the entire volume in a particular house is an expression of the political will of the developer company.
Finally, the third variable here is the idea of the existence of a curve expressing a change in the general price level in the market. Observing the cost curves for different types of housing, housing in different districts, or simply for individual apartments, it is clear that although they all have their own characteristics, they change synchronously in the first approximation. Within one city, prices for all types of housing either rise or fall or are within a certain stable level, and such changes occur approximately in proportion to each other.
This leads to the conclusion that it is possible to divide all the reasons that affect prices into two main groups. The first group is local reasons that lead to the fact that the prices for all apartments are different. One is more successfully located, the other has a larger kitchen, and the third has been well-renovated. These causes create the whole gamut of house prices at a given time and, generally speaking, are weakly dependent on time.
The second group of reasons that affect pricing is global reasons. They are associated with macroeconomic parameters, such as the level of development of the economy and business in the city, the level of income of the population, and, in general, the standard of living in this city.
Moreover, the difference in prices for similar real estate located in different cities is also approximately proportional to each other. This allows us to talk about comparing the general price level in one city with the price level in another and to argue that the ratio of prices for a similar apartment in different cities will be approximately proportional to the ratio of the price level in these cities.