Which of the following would make you more excited about the outlook for a hypothetical real estate market?
- We expect prices to double over the next two decades.
- We expected prices to climb a little less than 3.5% per year.
Most people, I think, would say #1. But, as you likely already know from me asking the question, the two are the same, with 3.5% per year compounded over the period equaling a real estate pricing double.
Why do I ask? Partly because I’m always interested in these kinds of framing questions — so little changes so much — but also because I ran into just such a thing in a CIBC real estate report today. The report said that Canadian real estate prices were expected to double over the next two decades, and then later wrote that prices would climb 3.4%-3.5% a year over the next few years. Subconsciously, I was more excited about the doubling than the latter figure, even when I reminded myself that they were the same thing.