What Supermakets do not want you to know? - And, how does it relate to Real Estate?

There is a perception that Wholes Foods is more expensive than Albertson's, for instance. However, both of them charge the same for bananas, exact same or carton of cherries or grape tomatoes. Admittedly, Albertson's prices usually lower on yellow onion, Irish butter, and Cheerios, but Whole Foods charge less for Tropicana Premium Orange Juice and mineral water. The simple truth is that if you purchase the same basket as you usually do from Albertson's in Whole Foods, and it will cost you almost the same with few dollar difference.

Analysis from Undercover Economist, by Tim Hartford

But, the secret of customers' perception is Whole Foods is more fun to shop in and full of more expensive varieties.

When push comes to shove though, it is still supermarket and you wander around filling your own cart just as in Albertsons.

So, Whole Foods is not expensive in the sense that it charges more for the same goods. It is expensive because of where its price-targeting policies are focused: prices for the basics can be competitive, but the selection in Whole Foods is aimed at customers with a different view of what "basics" are.

For instance, for typical Whole Foods customer, Tropicana Premium Orange Juice and mineral water are basics, but in Albertsons, people often consider tap water and concentrated orange juice.

That is exactly why a basket of goods from Whole Foods can cost so much more than a basket of goods from Albertsons.

So, my advice: if you want a bargain, don't try to find a cheap store. Try to shop cheaply.

How does it relate to Real Estate?

Often, my clients, giving me their price range for finding the house, tell me: "I probably will never find anything in this price range in Sugar House, or generally on a East Side of SLC area. I probably should go to West Valley to find what I want."

The truth is it will certainly be easier to find what my client wants in West Valley. But, it is not impossible still to find what you want in Sugar House. If you look for a bargain or for precisely the price you can afford, start with your desirable place first, and look through all these places, chances are you will find what you want...you just need to react quicker...

In comparison, if you know you need only bananas, and if you know you can get bananas cheaper in Whole Foods then Albertsons, where would you shop?

I would shop in Whole Foods or Sugar House(on condition that I am getting only what I need and can afford, not destructing my attention on other choices I cannot afford),I will always have chance to go to Albertsons or West Valley. Please keep in mind that I am not prefer one store or neighborhood verse another. I am only trying to suggest that if you are for bargain shopping, start with place you think you cannot afford, and you might be pleasantly surprises.

Who Pays for your Coffee? - Location, Location, Location...

At $2.55 (in 2005), a tall appuccino from Starbucks is hardly cheap. But of course, I can afford it. Like any of the people stopping at that cafe, I earn the price of that coffee every few minutes. None of us want to save some money early in the morning getting coffee in incovient location.

The truth is that Starbuck's most advantage is its location on the desire line of thousands of commuters. But who controls that location?

In trying to work out who is going to make all the money , simply remember that there are at least half a dozen competing companies on one side of the negotiating table and on the other side is a landlord who owns the single prime coffee-bar site. Landlord is often plays companies against each other..

So, in reality? if you check the accounting books, few companies are making very good moeny after they pay their rent. (text from Undercover Economist by Tim Hartford)

Now, you can ask me well how does it apply to real estate?

Economy is like engineering, same principles apply to many industries:

1. Stregth from Scarcity - the person in possession of the desired resource- may or may not have as much much power as one would assume. For instance, particurlar neighborhood od Salt Lake City might be very popular and prestigious to live in now (AND, therefore, price stay stabally high there), but in few years- the new place can get more attention. So, scarcity can certainly shifts with many reason; one of them nowdays, can be the cost of gas... If it is getting so expensive to travel, and people are not good yet to use public trasportation, then certainly downtowns become more and more attractive option to live especially if your office/work is located here.

2. Different Reasons for High Rent - for instance, there are no not many apratments overlooking Central Park in NYC or Hyde Park in London. Because so many people want them, those apratments always stay expensive, so some people would stop wanting, and can only fream about them.

3. In other industries it is not shrinking demand but powerful employers that curtail the poer of unions. In the United States, Wal-Mart has a tremendous bargaining power, and there are only two unionized shops in North America; after the branck in Quebec went union, it got closed. There is a huge shortage of teachers in United Kingdom, but government being a single employer controls the rise of salaries.

Imagine, what can possibly happen with new construction costs: if the price to deliver product (gas goes up) is higher, the price to produce material and union of workers - we will see and already see the new prices of construction even though the house economy may not support it yet...

So, sometimes, you can have power from scarcity, but not in cases where government or powerful employers have more.