Snapped by Norman, in Toronto. (Hey, this could be a regular feature)
If you’re shopping for real estate in Nova Scotia, you have an advantage few other people do – complete and unfettered access to the detailed sales records of most properties. The local real estate board makes it available to the website/broker Viewpoint, which makes it free to you.
Sadly, elsewhere, this critical info is hidden from buyers, along with the number of days a property’s been on the market, whether or not any deals have fallen through, what the current owner paid and how many times it’s been relisted. Buyers in Mississauga or Kelowna are forced to ask a real estate agent for what little of this data is available, and then only for specific properties they identify.
Of course, you can always go to the land registry office (or pay your lawyer to do so), in order to get a complete record of what a house sold for in the past, and what kind of financing was placed against it. At least for now.
There seems to be a movement afoot to strip even this critical information from the public record. That, of course, would go hand-in-glove with the real estate industry’s current push to remove transparency from the system, as I described yesterday. Once average or median sale prices are obliterated by local boards, replaced by meaningless Frankenumber indices, most consumers will have no true picture of market conditions.
“Looks like even a public record for the price paid for a home is also going the way of the Dodo,” says an inside source in Ontario. “So much for transparency.”
Here’s what one lawyer is revealing to his realtor clients:
HIDING PURCHASE PRICE AND LAND TRANSFER TAX ON ALL CLOSING DOCUMENTS
The government has established a procedure in which land transfer taxes may be paid in advance of the closing date and in doing so, allow the solicitor on closing to register the deed as “zero consideration” and the land transfer tax payable would show as zero. In this way, the public is unable to determine the purchase price paid by the purchaser nor the land transfer tax which was payable for the transaction. I have recently had two separate occasions in which it was necessary to invoke this procedure as my investor client did not wish to have his acquisition cost a matter of public record given the plans of renovation and resale.
Call it the Flipper Strategy. If you buy a piece of junk, throw some money at it and double the price when you sell it six months later in a bidding war to an unsuspecting virgin, your lawyer can forever cover the deed.
And speaking of bidding wars, the media obsession continues. “Toronto’s real estate bidding wars are reaching a fever pitch,” reported the CBC yesterday. In fact the public broadcaster’s Toronto TV station now has a daily feature called “The Real Deal” dedicated to pumping the notion that house prices will rise forever, without end, amen.
Actually, in places like Toronto and Calgary, they will. Until they stop.
My political sources (incredibly, I still have some who are not dead) tell me the Big Owe received a stiff memo from Finance Department economists the other day when the price of a detached SFH in two of Canada’s major cities passed the $1 million mark. “That sure caught their attention,” I’m told. “Most of these guys (MPs and the Cabinet) believed Flaherty’s four mortgage rule changes were enough to let this thing cool off on its own. But now they understand the true nature of the problem.”
And what’s that?
As I detailed yesterday, it’s the banks, now increasingly aggressive to scoop up what business they can in a market where mortgage volumes have been sliding. That explains the 2.99% five-year specials. It explains the cash-back loans, the interest-only payments, the skip-a-payment plans and the “Honey, I’m pregnant” emotional blackmail YouTubes.
Naturally the real culprit here is federal mortgage insurance and CMHC, which continues to tolerate these systemic abuses. But it’s easier to blame the banks, especially if you are in the government and read stories about multiple bidders pushing the price of trashy semis into the $900,000 range.
So will Owe stop being a wuss and a caretaker Minister of Finance, and pull a F-like nasty on the lenders? All I can tell you is that he is being urged to do so. The feds don’t want a housing dump, but neither do they want to go into the next election with seven-figure homes and a population more indebted than Greece.
There are two reasons houses cost too much. Money’s too cheap and people have no discipline.
Guess which one they think they can fix?
Snapped in North Van last weekend.
Memo to people living in Vancouver: Yesterday’s blog post was not about offshore buyers or Asians. I know you can’t help yourself. But try to look at the larger issue (which was what I actually wrote about).
Real estate is unaffordable most places, and a complete mess in Van, not because the Chinese or aliens are driving up prices, but more because bankers are driving down standards. By lowering the bar for a real estate purchase, and encouraging dollops of new debt, the enablers are helping to inflate prices.
That’s why Vancity’s mortgage-helper program, which drops the required down to just 2.5%, is worthy of dissing. Ditto for its interest-only payments mortgage and the one aimed at financing conversion of your garage into rental space, so you can pay the other mortgage on your house.
Of course, it’s not just Vancity. The big banks, like RBC and CIBC do the same thing – offering cash-back financing for virginal homebuyers so they can get around the requirement for a 5% downpayment. In fact the Bay Streeters will proffer up to $20,000 on a mortgage of four hundred grand – again making a mockery of the 5% rule.
Worse, almost every moist new homebuyer with less than 20% to put down on a home (thus avoiding CMHC insurance) adds the premium to the principal borrowed. Right now that’s 2.75% of a mortgage taken with a 5% down payment, which rises in a couple of weeks to 3.15%. So, by borrowing 95% of the cost of the real estate and adding in the CMHC premium, the kids are actually able to finance 98.15% of the property. And let’s remember if this is a CIBC or a Vancity deal, they might have been gifted half of the other 1.85%, meaning they bought the house with cash equivalent to 0.9% of its market value.
Not only that, but this could have come from a credit card advance.
Last week the bank cop, OSFI (Office of the Superintendent of Financial Institutions), grumbled once again about the impact of cash-back mortgages, urging insurers like CMHC and Genworth not to cover deals where bank bribes were involved. “Incentive and rebate payments should not be considered part of the down payment,” it said. So far, nobody is listening much. That includes the new F, Joe Oliver.
By the way, it’s worth noting that credit unions (like Vancity) can actually write 100% mortgages if they want, since they’re not federally-regulated (but borrowers still need high-ratio insurance).
And here you are worried about Asians.
Looks like hundreds more homebuyers and citizens will soon be losing their ability to watch what’s happening, in real time, to real estate prices in their community. It’s the spread of the deadly Frankenumber – CREA’s indecipherable, homogenized, trend-masking, faux housing index – which realtors are hoping will supplant average or median prices in the data they gingerly release to consumers.
And why would they wish this?
Because a Home Price Index is not scary. It’s an index, not an actual price. It doesn’t allow for meaningful comparisons of one month’s numbers with another. And nobody outside of CREA’s geeks actually knows what the hell it means.
Remember the example I gave you a few days ago from Victoria, where the Frankenumber is in full use now? Said the board in its monthly media release: “Current MLS® HPI composite (inclusive of all single family homes, condos and townhomes sales) for the Victoria Real Estate Board area is 139.3 – compared to 139.1 this time last year. While these overall numbers indicate little change in the last 12 months, some areas have changed more than others. Local REALTORS® can interpret what this means to specific neighbourhoods in the region.”
Your house is worth 139.3? You’re confused? Then you need a REALTOR®.
The latest victims are the 750,000 people who live in Hamilton and Burlington. The local board is apparently poised to Frankenify its reporting. According to an internal memo, here’s why:
Members would benefit from the HPI by being able to:
• Help their clients understand home price trends
• Position themselves as credible, reliable source of insight into the real estate market
• Broaden their knowledge of municipal, regional and national real estate markets, and compare trends in those markets
RAHB would benefit from the HPI as well; when monthly statistical reports are sent to the media, the HPI will add credibility to the association’s reports and to the association’s position as “the” voice for real estate matters in its market area.
In other words, the board wishes to relieve citizens of the burden of actually knowing what the market is doing (in a way they understand, ie, the price of houses) and instead ensure they need to talk to an agent who can tell them what to think. This is especially handy to get established during a time of bubbly conditions and inflated markets, so it will take the public much longer to realize when it all starts heading south.
No wonder they have nice cars.