When Tom Kioussis got the listing for a crappy little house on a fat lot in a part of Toronto once reserved for cheap carpet stores and Polish immigrants, he had a big idea. Price it so low there’d be not only a bidding war, but free publicity for him, lots more business and the perception of a stupid hot market.
In fact, back in the real estate office they laughed, and started betting on how many sucker offers would materialize. As Kioussis bragged to the Toronto Star a couple of days ago, “I bet 25-plus bids. I thought if it didn’t break 20, I wasn’t doing my job.”
Thirty-one offers later, the house ridiculously listed at $379,900 sold for $570,000, which was (of course) market value. Reported the Star: “Toronto homebuyers, brace yourself for a hot spring. The short supply of properties — coupled with low interest rates and continuing high demand — played out with a passion this week in a 31-person bidding war in Mimico that has realtors talking.”
So here’s a nice little example of media manipulation, apparently easier now than it’s ever been. When reporters stop chasing facts and start writing spin, they cease being reporters. This is exactly why the MSM is now as respected as infomercials for Pet Potty and No!No! Hair Removal (Bikini edition).
As for Mr. Kioussis, well, he did the job for his clients and was paid well for it. He made the news. He’s made it to this blog. And he gave every homeowner in Mimico wet dreams about untaxed capital gains.
Not a day later Star editors outdid themselves. They published a piece, “Why it’s a good time to buy a home,” written by ‘lawyer, author, columnist and speaker’ Mark Weisleder. It ate most of a page, was definitive and authoritative, and ran as editorial copy instead of advertising content. Is there a distinction anymore?
He gave eight reasons readers should ignore historic high prices, economic malaise, unaffordability, greedy vendors, debt overload and property diddlers like Tom Kioussis, and jump right in. I read them all. I’m very pleased Mr. Weisleder is not my lawyer.
Why is it a good time to buy on Planet Weisleder?
First, low mortgage rates. “They can’t get any lower,” he says. Of course, low rates mean danger since the economy is weak. And as rates eventually go up, affordability and house prices go down. So pity those who locked in a great rate only to see their equity vanish.
Canada is appealing, he says, a safe haven in a volatile world. True enough. But we also have one of the most inflated housing markets on earth, and live next to the biggest economy, where real estate costs half. Canada is cool, but not that cool.
Third, he says, this means tons of immigrants, “often wealthy ones. So in my view while the real estate market may level off in some areas of Ontario, it should stay strong in most of the GTA and likely Canada’s other large urban centres as well.” In the absence of any stats to prove this, his view is worthless. The urban myth of foreigners keeping prices up in a market of 6,000,000 people is just that. A myth.
Fourth, we don’t have a lot of mortgage defaults, he says. Over 99% of us make our payments on time. True, and irrelevant. A lawyer should know this. The danger is not a wave of foreclosures but negative equity among all those kiddies we let buy condos and townhomes with 0% or 5% down. Our lax lending and unique Canadian subprimes have all but assured lower values as people who should have never owned homes sell off for whatever they can get.
In Canada, “loans are almost all recourse, meaning if you don’t pay and there is a shortfall, the lender can sue you for the difference,” Weisleder says, so we’re safe from a US-style crash. Another myth. Many US states have recourse loans, just like us. That sure didn’t stop a real estate bloodbath in Florida or Nevada.
Sixth, houses here aren’t really expensive, we’re told. “If you look at median incomes of Canadians against the median cost of homes, this average comes down to around 3.5, which is not dangerous.” Untrue. The ratio of median price to median income for a detached house in Toronto is seven. By global standards that is ‘severely unaffordable.’
As for record levels of debt, Mark asks, “Why is this so bad? At an interest rate of 3 or even 5 per cent, the amount needed to service the debt is manageable.” Well, apart from the fact rates will rise long before most people have paid off a fraction of what they owe, incomes are falling behind inflation and 40% of people can’t pay their monthly bills. Besides, it was at almost exactly this level of consumer debt that the US housing market blew up.
Finally, the US economy will be fine (and us too) because, “in a U.S. presidential election year, politicians will do whatever is necessary to prevent it.” However, exports to the States are already down $30 billion, which is why our unemployment is rising. And does anyone believe a growing protectionist sentiment in the States is good for bungalows in Mimico?
So many words. So many errors. But at least Mr. Weisleder’s consistent. The lawyer makes his living giving courses to real estate agents on ‘generating referrals’ and ‘avoiding legal and disciplinary proceedings’. He also delivers motivational talks on such sexy topics as ‘the perils of not having proper Buyer Representation.’ Man, he brought down the house with that baby at Re/Max’s giant KickStart 2012 event a few weeks ago (below).
Don’t misinterpret me. There’s nothing wrong with flogging houses. People want ‘em. Insanely.
But when you can’t trust agents, reporters or lawyers, can the apocalypse be far behind?
Note and clarification: The original post (above) referred to Mark Weisleder, a lawyer, as ‘defrocked’. He replies: “I have been a practising lawyer for the past 28 years and continue to practice in Toronto”. The record stands corrected, and I apologize to Mr. Weisleder for any confusion created over his professional standing. — Garth