The real estate industry’s in crisis mode, which explains a lot. People will fight hard when their livelihood is at stake. Especially those who live or die by commission, with no pensions, sick days, overtime or pity.
Mortgage brokers, real estate agents and those who support them feel their anxiety rise as sales fall. So far the spring of 2013 is bleak and thin. The writing’s on the wall. ‘Worry,’ it says.
One estimate is that F’s killing of the 30-year mortgage will result in a stunning 190,000 jobs being lost between now and 2015. The bulk of those will be in the resale housing sector and 70,000 in the new-build area. That, says the Canadian Association of Accredited Mortgage Professionals (seriously), wipes out about 80% of a full year’s worth of newly-created Canadian jobs.
Of course, the elfin deity did this to try and deflate the housing gasbag he swore did not exist. It’s also why he nixed 2.89% mortgages at Manulife on Monday. If real estate is not corralled and tamed, he knows, it’ll blow up.
Realtors and lenders have been fighting back. They’ve lobbied the feds hard for eight months, but F is unmoved. And sales continue to slide, with prices to follow. What to do?
One tried-and-tested tactic is to publish misinformation about the true state of the market. By obscuring current data, manipulating it or misrepresenting it, the industry seeks to keep people confident about real estate. Booms, rising prices and multiple bids are headline news. But when markets fall they’re called ‘balanced’. A glut of unsold properties means ‘there’s choice.’
We expect real estate marketing to lie. Regulated real estate boards, not so much. Their misleading of consumers ranges from irritating to appalling. For example, the Toronto Real Estate Board leads each biweekly media release with sales data, which is taken as gospel by all those hard-working, never-fooled reporters. TREB compares the current sales to those of the same period a year earlier. Sort of.
As we’ve revealed previously, current sales numbers are ‘raw’ – newly-reported but as-yet unclosed deals. This data is compared to the revised numbers from last year, and not the raw number from that period. And because deals fall through (lots of them), this makes a bad market look better.
Blog dog Axxman did some digging:
In reviewing historical TREB Market Watch numbers I started to question the comparative numbers that were being used. They always seemed to be adjusted and I wondered if there was a pattern. I went back for the last 5 months to test this and they are 10 for 10 in having the adjustments enhance current growth and average price outcomes. It’s beyond pure chance that their adjustments never go against them.
In the last 5 months, almost 900 unit sales have disappeared this way. They seem to systematically adjust the comparative years unit sales down between 2.6% and 3.2% and average prices seem to adjust down around the 0.5% to 1.0% range. The result is that it enhances the growth numbers being reported in the current period.
But this is mere recreational realtor diddling compared to the spreading influence of the MLS HPI – Home Price Index. It’s now in use by several boards after being launched 13 months ago, and is scheduled to snake across the country to cover 16 markets. When the transition is complete most homeowners and buyers will be blind to actual, current market conditions. This, naturally, is the intent.
The HPI is to houses what moving averages are to stocks. Instead of telling you what properties sell for now, it tells you what they averaged over time. Realtors love this since it filters out peaks and valleys, making markets seem serene and predictable. But the HPI is as useless to a serious buyer as a four-month-old stock quote is to a trader.
I shared an extreme example with you days ago. The median price of houses in upscale hoods of Richmond (a Van suburb) have crashed as much as 50% in a year, from $1.388 million to $688,000. And yet the HPI Frankenumber for the area reports a decline of only 4.6%. The raw price data is proprietary to the Vancouver real estate board, which means folks wanting to buy in Richmond could be lulled into paying far too much.
Is this ethical? Professional? Even legal in a regulated industry?
You should know that after this data was published on a real estate bulletin board, then picked up and interpreted by this site, and then reported by this pathetic blog, it has once again disappeared. The incredible, useful and compelling story of US-style housing panic in a Canadian city has been suppressed.
Meanwhile I can tell you, with certainty, that sales in the Lower Mainland in the last thirty days are 54% less than a year ago and 34% worse than during the crisis of 2009.
Many people will lose their work. Some deserving.