Retroactive Backtesting: Historical Performance
Evaluating our quantitative model against nine years of verified cottage market data.
Testing the Theory
The live Ontario Cottage Market Forecaster™ operates on a 90/10 split: 90% hard macroeconomic and inventory data, and 10% "boots-on-the-ground" human sentiment (to account for unquantifiable market urgency).
To provide transparency into how our system works, we built this historical backtest. By stripping away the 10% human element—which cannot be accurately simulated retroactively—we isolated the pure, 90% quantitative engine. As you slide through the timeline below, the variance between the Algorithm Valuation (dashed orange) and the Actual Price (solid blue) perfectly visualizes that unquantifiable human factor. Despite this strict constraint, the data successfully identified major structural pivots—such as the 2021 surge and the 2022 peak—well before they appeared in traditional, lagging sales reports.
Macro Economic Signals
Segment Performance
Complete Data Architecture & Methodology
The Forecaster synthesizes inputs across three distinct categories to establish a forward-looking valuation. Here is exactly what the engine tracks:
- The Bank of Canada Target Rate (The Gravity): In highly discretionary markets, borrowing costs act as gravity. We track the prevailing overnight rate to determine the baseline carrying costs for recreational assets. When rates hike, purchasing power diminishes rapidly.
- TSX, S&P 500, and the VIX (The Wealth Effect): High-net-worth buyers fund cottage purchases through liquidated equities and leveraged portfolios. We track the S&P/TSX Composite and S&P 500 to measure the actual capital available (The Wealth Effect). Conversely, we track the CBOE Volatility Index (VIX) to measure the confidence to spend that capital. A high stock market means nothing if the VIX is spiking, as investors will prioritize capital preservation over luxury real estate.
- Months of Inventory - MOI (The Friction): Sourced directly from local real estate boards, MOI dictates negotiation leverage. It measures how many months it would take to sell all active listings at the current pace of sales. We calculate unique MOI thresholds for entry-level versus prime/luxury tiers, as premium assets inherently carry higher baseline inventory.
- Median Days on Market - DOM (The Velocity): We measure the speed of the market. Rapid absorption rates indicate buyer urgency, while climbing Days on Market act as an early warning signal of buyer exhaustion before prices begin to drop.
- The 10% Human Sentiment Modifier (Live Forecaster Only): While the historical chart above relies purely on the four metrics above, the live Forecaster applies a human modifier to capture real-time, unquantifiable shifts—such as sudden changes in remote work policies or localized buyer urgency.