Question

What is the “filtering” process? How is it consistent with the “adaptive” model of the housing market?

Answer 1

Filtering process is a screening method used by companies in irder to eliminate the investors and financial products that it thinks are not in alignment with its objectives or does not consider them lucrative enough. This is done through various stages of the screening process that enables to narrow down its investment circle according to its desires. It may be done by strategically removing very small and unviable companies and those who have a history of not paying up.

In the adaptive model of housing market, the expectations about the housing quality and prices are based on the past valuation and quality of the ventures by the real estate firm. The buyers eliminate the real estate business that have the history of providing bad quality housing at exorbitant prices and filter out the houses provided by real estate companies that have the reputation of providing better quality houses at reasonable prices.