Some days ago I told you of an email thread which will become a mag article in Toronto. The weavers are some real estate ‘experts’ and the point of it is to update a cover story on the future of the housing market which appeared back when we had snow.

The poohbahs include the condo king, a flamboyant developer, a financial media guy, a big-name economist, an architect to the stars, a tony realtor of million-dollar digs, and moi. Interestingly enough, the email ordeal continues, these being the latest words from the Purveyor of Fine Homes to the Pony Set:

Feb was 100% better than jan, mar was 67% better than feb, apr was 50% better than mar, may 42% better than apr, june was 17% better than may. May and June were the best single months in our 52-year history.

Consumer confidence is up. Interest rates are at generational low levels.  People are getting back into the real estate market. This is not pent-up demand, it is a change in attitude positively directed at real estate.

And to that, the excited editor asked the others:

“Do you agree that the turnaround represents a change in attitude, with consumer confidence up? Or is it simply a matter of savvy buyers striking while the market was low?”

True enough, sales in the GTA republic – home of 20% of the country’s pop – have been on a steady trajectory higher. This is in contrast to not only some stagnant markets in, say, Alberta, but also a dejected decline in cities less than two hours from Toronto (sales in London and St. Thomas are lousy, and prices have crashed 13% y/o/y. Don’t even ask about Hamilton and Windsor).

But is this true confidence? A fundamental change in attitude, as the jewel-encrusted realtor surmises? Or a return of savvy buyers, as the urbane, designer java metrosexual editor suggests? What, truly, is driving this phenom?

Seven things. None of them having the slightest thing to do with economic fundamentals. Sadly, though, they’re affecting the economy:

• Supply – listings are down sharply from 100 days ago. Why? Because the market is going up, silly. People are only desperate to sell their homes when prices are plunging and buyers have vanished. Now that the buyers are postal, sellers are coy, waiting for values to double.

• Demand – of course it’s pent-up. The sexual frustration of a combat soldier on an eight-month rotation is nothing compared to young buyers who lusted for granite, stainless and polished concrete. Of course, who could have expected them to buy a house in March when prices were off 15%, lowball offers were being accepted on the spot and listings abounded, giving unbridled choice? I mean, really, c’mon. Sheesh.

• Affordability – don’t know how many times I have to say this, but cheap rates are the one and only reason we have a bubblette. Central bankers have now shamelessly sacrificed monetary policy on the altar of politics. Guys like the Bank of Canada governor know flooding the market with 2% and 3% mortgages, LOCs and car loans will only cause more borrowing, worse household balance sheets, brought-forward demand and asset inflation. But there’s only one motto in government right now: “Not on my watch.” Let the next leader manage the consequences.

• Misinformation – Phil Soper. Jim Flaherty. Ozzie Jurock. Mark Carney. The ShamWow Slap Chop guy.

• Peer pressure – in rising markets, real estate’s hot, and everybody’s an expert. A house is far more than shelter, and transforms from need to want. Parents berate children for not plunging into unrepayable mortgage debt. Spouses normally obsessed with financial security needle their partners into McMansions. Girlfriends do the lysistrata until they get a signed offer. Guys mercilessly beat on their buddies until they, too, trade testosterone for pool cleaning fluids.

• The herd – a mass delusion in certain areas (most of Toronto) has replaced rational financial thought. Suddenly real estate editors at the Toronto Star and the National Post have convinced people it’s actually 2007, when nobody had ever heard of collateralized debt obligations. Forget the unemployed and the credit bubble, the hollowing-out of the manufacturing sector and sending Nortel to Sweden. Let’s condo!

• Economic illiteracy – at the end of the day, this is what we face. It may be the woeful inadequacy of our media. Maybe it’s fault of schools. Or big financial institutions. Or parents. Or government. Whatever. But when people don’t understand what happens when a country’s biggest client is on its knees, when their government is choking on debt, when policymakers have fired their last silver bullet, when a population is aging and unprepared, when factories and jobs have been exported, when we’re uncompetitive and when consumers have to be bribed and misled, well, we blew it.

But, whadda I know?

Buy a house if it turns you on. Just don’t call it a plan.

Actual, unretouched photo courtesy of visitor Paul Kett.

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