Thirty years ago she got into real estate. “I became a Realtor because I enjoyed helping people find a home they could afford, and over the years I’ve introduced hundreds of people to the concept of owning income property and helped them to find profitable investments,” she says. But no more.
“Now I am discouraged with my chosen line of work as the field has attracted a slew of smarmy money-hungry types who couldn’t give a hoot for anything other than the next commission. I was particularly discouraged to attend a compulsory realtor seminar, where a lawyer taught the class how to attract and deal with multiple offers to get the highest price over list. The result of the government’s emergency interest rates and the current cohort of realtors is property prices which have reached the stratosphere.”
Susan’s note reached me the same day CREA pushed its latest numbers onto the media, creating the meme of a vibrant real estate market. Sales in August jumped 11.1% from the same month last year, the realtors said, and prices are ahead 8.4%. Unknown, though, is the number of sold houses which were counted two or three times, as listings were double- and triple-listed on various boards, as I showed you last week.
Also, are the headline numbers even accurate? Are they correct? Would people reading them be lulled into believing it’s okay to buy a house at an inflated level, because the market’s strongly rising? If so, would they be misled?
It’s hard to tell. CREA said on Monday, “National home sales rose 2.8% from July to August.” But this is apparently untrue. Here are the realtor’s monthly reports for June, July and August. Read each and you’ll be able to determine the total number of monthly sales across Canada. In July 44,797 properties changed hands. In August, deals totaled 40,315. Yup, that’s a 10% decline – not a 2.8% increase. The magnitude of the ruse is significant Not a rounding error, or a difference of interpretation, but an apparent falsehood.
But, the idle realtors sulking on this pathetic blog cry, sales last month were w-a-y above those of a year earlier, explain that away, Bilious Blog Boy.
Sure. Last August sucked. Activity collapsed 9% in the wake of F’s blowing up of 30-year mortgages. In fact, it was the worst performance in almost a year. Even CREA’s chief economist said so at the time: “August’s sales figures will no doubt provide comfort to policymakers, providing the first clear indication that the recent changes to mortgage regulations aimed at cooling the market are working as intended.”
So why are prices higher in 2013 when sales are actually lower than a year ago? That’s easy. More debt. Money’s cheap and the housing-industrial complex has persuaded enough people (with news like today’s) that it’s safe to buy something even when it’s the most expensive ever. Keeping this up in the teeth of lousy economic fundamentals has been heroic. Monthly stats have been silently revised. Houses counted twice. Performance numbers fabricated. Rosy forecasts floated.
Add in Susan’s professional observations – mandatory seminars on how to create bidding wars and commission-obsessed realtors – and that’s all you need to know about the market today. It may not be rigged, but the poor buyers are seriously diddled.
Until everyone reads this blog (I have a dream…) expect this all to continue, until it stops. Of course, the longer it goes on, the more painful will be the revision to the mean. The elfin deity knows that. It’s why F intervened in the manic housing market (he helped to create) four times, trying to cool the sucker off. Every time he does, the real estate cartel just works harder to obfuscate reality – which is why you should expect a fifth, and final, federal intervention.
Now here’s Amal. He’s in his mid-thirties, and feel free to hate him. But his comments to me in an email this morning, as he thought about Toronto real estate, are germane:
Garth: I wanted to commend you for being what seems at times the only rationale lone voice in the housing market debate. I have been working for over 10 years now in a well-paid job since graduation. I make over $400K a year in the finance industry, have saved up $600K towards a down payment, but still feel ‘poor’ when it comes to buying a house. I know that wealth is relative and that I am in a very fortunate position. But I struggle to think how the average Canadian can afford a decent house in a good neighbourhood these days. I think about my parents and the level of incomes they earn; their house has more than doubled in valued since they bought it 20 years ago. But they would not be able to afford the same house in the same neighbourhood with the same job today.
The rich little whiner’s absolutely right. Seventy per cent of Canadians own houses, but I’d bet only a fraction of them could actually buy the homes they occupy. Prices have outstripped income gains or economic growth, and are supported now only by a foundation of debt. It’s illusory equity. That people would continue to borrow is epic validation realtors are more influential than me.
Now there’s a shock.