“Garth Turner has never been more wrong,” the note said. And attached to it was the latest pumper piece (above) from the house hornies who run GlobalTV in delusional BC. The vid is dished up as proof that real estate is hot since hordes of Asians are swarming West Vancouver, paying insane prices – like $1.5 million for a shack listed at $1.2. The experts who confirm this: one realtor, one juiced-up resident and one unintelligible recent immigrant-investor. Wow.
Of course, this rush into one area of Vancouver comes just as sales crash in another – Richmond – which two months ago was also overrun by little people with bags of money, presumed to be Mainland Chinese. And back in March GlobalTV (and the rest of the media) was forecasting ever-higher prices in Richmond which, of course, have started to fall. So now the west side is touted as infallible, just as hot Asian money (HAM) is believed endless.
Of course, this tells us nothing about where housing is headed. But it confirms human stupidity.
This is classic frenzy at the top of an unsustainable market. People rush to buy because others are buying. Objects take on added value because they’re coveted. Emotion trumps reason as valuations detach from reality. Bad decisions are piled so high atop other bad decisions that they start to look reasonable. Then somebody stands back and sees the whole rotten towering pinnacle of greed and want is without foundation. And down it goes.
This is Bre-X. It’s Nortel. It’s RCA. It’s Pet.com. It’s LinkedIn.
All the video posted here shows is how collections of humans can believe their own bullshit. It’s called mania. And it always ends the same way.
Why? Simply because manias create their own demand, so the fundamental reasons something should rise or fall in value, are swamped with pressing bodies. For example, when everybody in west Van or Leaside believes houses there will shoot higher in value, they try to profit. Homeowners sit tight on properties they’re convinced will appreciate wildly, while buyers clamour to get in at any price.
Demand outpaces supply. The crowd hears on Global about shacks selling for $1.5 million, and more demand bubbles up as greedy money moves in. No longer do economics apply. Houses don’t appreciate because of wage growth, consumer confidence, new jobs or economic expansion. They jump instead simply because people want them. Then fools rush this blog to loudly proclaim, “Holy crap, it IS different this time!”
Trouble is, people are people. There was a time, remember, when everybody wanted Tickle Me Elmo.
Others, I noticed, seized on a Friday mortgage rate cut by a few of the banks as more ‘proof’ housing will continue to swell. Oh, how wrong.
First, the banks are trying to squeeze every possible positive fluctuation out of the bond market. It’s called ‘marketing.’ As stocks wobble, money flows into the fixed income market, driving prices higher and yields lower. Two months from now, it could as easily be reversed. What really matters is the Bank of Canada, which will raise its key rate this year. Several times.
Second, let’s get a grip. The reduction was one tenth of one per cent. Oh. My. God.
Third, rates can rise or fall, but the impact on real estate will be moot. There’s no hope of sustaining this market in a nation where people have never owed more money, and have already pushed home ownership to unheard-of levels.
So remember these days. Listen to the voices.
Pray for Global.