About the same time (2 pm), on the same day (Sunday) in the same town (Oakville), two blog dogs went a-sniffing.
To the historic south part of town near the lake, headed Jay and his squeeze, in their black Range Rover with the golden doodle (Rexy) in the back. Price range: $1.5 million to $2 million – about average for that hood, but less than half the average price of homes to the immediate east. “The tough part,” he reports, “is that there’s, like, only four houses available that we’d even look at. And one’s kinda a beater.” That one’s on at $1.7 million.
Half a dozen clicks to the north, Shaun and his fiancée were also shopping, with a focus on ‘affordable’ towns and row units in the $500,000 range. They mapped out a route between open houses peppered around the sprawling new suburbs splayed across fields once populated with ruminating bovines. As opposed to realtors.
“After going to the open houses today I can officially say that people have lost their minds,” Shaun reports. “Never really noticed it before ‘on the ground’ but it was a zoo everywhere.. Crammed houses, nowhere to put our shoes, no one smiling or saying “hi” back as everyone had a stiff look of concern/competition on their faces, as if they were heading into a UFC match and we were opponents.
“We were also the only one of very few ‘young buyers’ that were not with their parents or grandparents or relatives. Clearly, parents/family need to approve these purchases as I can only assume they are co-signers on mortgages and/or gifting the down payments. Let’s see where this market goes. Madness has ensued and I’ve just witnessed it first hand. Scary. “
Well, it was all too much. Shaun says they’ve now decided to rent a place for $1,800 a month, “and wait this thing out.”
And upscale, downtown Jay?
“Horrible. Hideous. We had to line up to get into two houses, and once inside it was impossible to pick your way through the boots, shoes and mittens thrown on the floor. The agents on duty looked harassed and made sure they called out loudly – ‘if you’re not that interested, don’t take a brochure. They’re expensive.’ Holy crap.”
It gets better.
“So I thought I’d head into the basement of one house (the $1.7 million listing) because it’s a heritage place and you never know what people have done. Glad I did. Knob-and-tube wiring everywhere. Main support beams sawed through on both ends. Lead water pipes soldered into copper, patched into PEC. Holes through the basement walls. Broken stairs, no handrail, bugs in the corners. No women went down there, of course. Two guys who did but neither had ever heard of knob-and-tube and thought it was a great house. We’re all doomed.”
You bet. When sellers don’t even try to prep or repair houses for the market, when realtors routinely overprice listings yet open houses are thronged, you know supply and demand are seriously out of whack. You should know the consequences, too. As mentioned here days ago, there’s a scant 41-day supply of houses in the GTA, a 51-day supply in Vancouver and yet a 440-day supply in Montreal. (By the way, here are the supply-days in a few other markets – Winnipeg, 173; Calgary, 157; Saskatoon, 107; Victoria, 96.)
In the GTA and YVR owners aren’t selling for fear of having to buy back in, or missing more gains. Reduced inventories lead to frenzied buyers (especially where the specter of Chinese bidders is raised), bidding wars (fueled by 2.5% money) and new price plateaus. The longer this goes on, the greater the systemic risk, the worse the correction. And so we’re reminded of the raison d’etre for this blog. The greater fool. The fool who follows.
In markets where there’s a reasonable whack of houses available, prices are under control. Where new listings are tumbling onto the market, prices are static or falling. So it’s an easy argument to make that supply, not demand, is the immediate problem. We should be worrying a lot more about ultra-low interest rates and buyer incentives (like those announced in the last BC budget) than what some rich Chinese dudes may be doing to the demand side of the equation.
Of course, nobody gets that. Right now at least two levels of government and a plethora of public agencies are burning through mountains of taxpayer cash trying to figure out how to quantify foreign buyers. CMHC is leading the charge, working with eight agencies, including the CRA, Fintrac, the Bank of Canada and provinces like BC, to define what a global buyer is, then figure out how to count ‘em.
It’s useless. Dangerous, even. A government vendetta on non-resident (Chinese) buyers, taxing them punitively, might stem the flow of that investment, be a huge media and political event, kill speculation, precipitate a rapid outflow of capital, tip a market drowning in risk and lead to the kind of hard landing which would decimate every recent, over-sexed, mortgage-pickled buyer in Vancouver – 95% of whom are locals. Great outcome. Is that what the house-horny want? Fine. Then keep whining.
By the way, no yellow peril in Oakville on Sunday. Just the usual kind.