Gregg says he’s been arguing with a real estate agent friend in Vancouver, “who is absolutely convinced that residential real estate is the only sane investment decision that can be made.” This week that ‘friend’ send this poor Gregg, just to mess with his head:
“To buy is to build equity in your future. To rent is a virtual license to pour hard earned money down the drain. To buy is to see gains surpass those in a good stock market portfolio during rockier times on Wall Street. To rent is to enable landlords to own and often prosper.”
Wow. Just imagine if this was a pitch to sell stocks or a corporate bond issue. The promise of guaranteed returns, the absence of risk and the assertion that not investing means losses. A statement like that would have a financial advisor up before a regulatory board, and on his way to delivering pizzas. Not only is it unethical, it’s also false. Gregg needs a new friend.
As you may know, the April numbers are in for Vancouver and Toronto. This is arguably the most important month of the entire year for real estate, especially now. It’s prime time for house sellers and hunters, and coming after months of year/year sales declines – amid a new round of cut-rate mortgages – all eyes have been on the stats to see if this is turning into a soft landing, or a crater.
Sam Wyatt is a no-nonsense realtor working the rich streets of Van’s Westside. What he’s telling clients is far different from Gregg’s deceitful little compadre:
“Months of Inventory (MOI) turned upwards in April, likely signaling the crest for sales volumes this spring. If the MOI follows the pattern of 2012, then we will see it rise again to a new high point late in the year. Last year the MOI figures bounced up to high points not seen since the credit crisis – to over 14 months for detached homes. Attached homes enjoyed the lowest MOI in April at 4.89 months while detached and apartments were both back over 6 months.
“A rising MOI will likely mean that May will be the last really good month this year to sell a home so list the house now.”
Hmm. Seems like we have competing versions of reality here.
For the record, there were 2,627 home sales in Vancouver last month, which is a 6% decline from last year. The total sales for April were the lowest since way back in 2001, and are running 21% below the 10-year average. The real estate board, with a straight face, calls this ‘balanced.’ The realtors are also massively relieved, because they expected worse – something more along the lines of the 18% year/year drubbing that took place in March.
As for prices, they fell about 6% in the last few months of 2012, with the Frankenumber down 4% from a year, and up 1% from January. But, as you know, there are pockets of Richmond where asking prices have been reduced by 50%. Careful what you believe. The bottom line, however, is that the average SFH in Van still costs more than $1 million, and is out of the reach of the vast majority of the population. This puppy is far from being spanked.
Now, Toronto. There is so much spinning going on, it’s a wonder anyone can still stand.
“Despite the headwinds we have experienced in the housing market this year, April sales came in quite strong in comparison to last year,” says head realtor Ann Hannah. “As we move through the spring and into the second half of 2013, the demand for home ownership should continue to firm-up relative to last year.”
Tweeted Canadian Real Magazine, “We hate to contradict CREW readers, but those new TREB numbers suggest condos still have some life in them.”
Sales of 9,811, to Hannah’s relief, were down just 2% from last April (well, actually down more, but TREB fudged the numbers again). The average price is now 2% higher than a year ago and as for condos, the real estate board says prices have edged higher while sales fell slightly. Its conclusion: “this suggests that interest in condo ownership may be improving.” (And how is this for spin?)
However, here are some facts everyone should be aware of. The daily volume of sales last month, compared to a year ago, is off 13%. Sales of detached homes under half a million fell by 10%, and over a million were fewer by 7%. Hardly sounds like a strengthening market.
And hot off the press is this report from Toronto’s Urbanation: New condo sales were down 29% in the first three months of this year from the end of 2012, and year/year have crashed 55%. There are now 18,845 unsold units sitting vacant, a record. Resale condo deals are 18% below year-ago levels, while listings have ballooned 25%.
Is this the trajectory of a soft landing? Many economists believe so. Thousands of realtors pray so. Yet nobody has a clue. Which means buying a home now is a major financial gamble.
This is what makes Gregg’s realtor pal so irresponsible. Renting’s far cheaper than owning – especially in Van or 416, and even with sub-3% mortgages. If real estate doesn’t have sustained and substantial capital appreciation there’s no equity built. You’re simply retiring debt on a depreciating or non-performing asset, trading dollars which could be far more effective elsewhere.
Most people know this. But they don’t care. Houses are emotional. It’s why realtors so often lie, yet so seldom are rebuked.
Unlike, say, bloggers.