Through the roof

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On Tuesday the second phase of “Aspen Ridge” McMansions in the distant GTA burb of Vaughan went on sale. People started lining up on Friday for the chance to buy a particle-board monster home with endless toys. A detached house on a 50-foot lot started at $1,641,990. With closing costs the premium model came in at over $2 million.

This was special pricing for the ‘VIP’ waiting list – people who still felt they had to sleep three nights in a lawn chair. There was another ‘VIP’ event for potential buyers on Wednesday, too. But this time there was an added surprise – a $150,000 increase. Now the basic fifty-footer was going for $1,791,990. By the way, that represented a half-million-dollar increase over the same house sold by the same developer in the same project one year earlier.

Guy lives not far away. “The houses are gorgeous,” he says, “but to go up $500,000 in a year is ridiculous.” By the way, these places are available to the general public this Saturday. If there are any left.

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While obsessed people willing to swallow unbridled risk camp out and pee in jars for the chance to shell out two million on an unbuilt suburban pile, it’s a far different reality in others parts of the country. Like Alberta.

Matt check in from Fort Mac. “Don’t judge me Garth,” he says, “but hookers and blow have gone through the roof here!” Good thing, because real estate is peeling in the other direction.

“Well, one of my workmates bought a lovely little shack in the Mac for $765,000 in the spring of 2014 and then lost his job at Suncor a month before Christmas,” Matt tells us. “He and the wife and baby put said anchor up for sale in late January 2015 for $785,000, it is now listed for $760,000 along with all the other ones mushrooming up on his street. They also had an offer in on a detached home in Edmonton for $450,000 pending the sale of their Northern Albatross. That ship of limes has now sailed, leaving them with scurvy and bleeding gums.”

Actually, across Alberta, sales to the end of April were off 24% with listings up and the average sale price down 2%. That’s consistent with Calgary. As of yesterday sales for May are off 25% and the length of time it took the lucky people to sell is up 52%.

Ratings agency Fitch said this week it forecasts Cowtown prices are still too expensive by a whopping 17%. “With oil prices off more than 40 per cent from a year ago, there are broader worries of a contraction in the region … with employment prospects shakier in a region highly dependent on commodities pricing, uncertainly has begun to chip away at demand for housing.”

You bet. For the first time in half a decade, the number of Canadians collecting jobless payments has increased – and we are supposed to be in year six of a recovery fostered by government stimulus and the lowest interest rates since ever. Unemployment insurance claims have swollen by 9% in Alberta, leading the nation in claims for the third month running. EI ranks are also growing in Saskatchewan and the Martitimes.

Anyway, back to Matt: “Now let’s talk huge oil paycheques: they’ve shrunk. Contractors making $125hr last year are working for $85hr, and many staff hires are working for $65hr instead of $80hr…the pain continues. I (like all great authors) have resorted to selling my self-published novel out of the back of my pick-up truck to make ends meet…300 sales and counting. Jeez, I wish truck-nutz weren’t so damn expensive.”

David Madani is the chief egghead with Capital Economics. In his mind the Alberta misery is vastly overweighing the hormones in Vaughan. This week he upped the ante with a forecast saying things are bad enough the Bank of Canada will cut rates again. And again. “We expect the economy to struggle over the rest of the year, disappointing policymakers. In our central scenario, we have pencilled in another 25 basis point rate cut in July, and another again in October. Reflecting this, we expect the Canadian dollar to resume its downward trend, ending the year at US$0.75.”

So it’s almost like there are two Canadas. On one hand, moany Millennials with six-figure incomes say the system’s unfair and broken because they cannot afford detached houses the way their parents did four decades ago. In this Canada people sit in lawn chairs waiting to spend millions on an unbuilt house in a former field that even the cows thought was boring. On the other hand, economic growth for the nation disappoints, job creation is dry, exports are thinning, houses go unsold and we’re told money needs to get even cheaper to rescue things.

In between the extremes is the most indebted middle class in history, and Albertans voting in socialists.

Can you imagine a better time to be unencumbered and liquid?

‘Mom, that’s not the point’

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“I looked up ‘conflict of interest’ in the dictionary,” says Joe, “and there was a picture of Bob Rennie.”

For those in the gritty East who think only Brad Lamb epitomizes the omnivorous side of real estate marketing, Bob Rennie might not be a household name. But in dreamy Vancouver, he’s Da Man. The 59-year-old is condo king of the Left Coast, owner of Rennie Marketing Systems, the biggest flogger of multi-unit projects, and the genius behind the troubled Olympic Village plus the Woodward’s project. That condo conversion on the lower eastside took useless, affordable housing for society’s displaced and turned it into high-end condos for yuppie princes.

This week Sir Rennie crossed a line.

“I hate when a realtor starts telling people they should give up on something that might actually be attainable if conditions change and they make better decisions,” Joe complains. “It’s just depressing that someone who adds so little value to society has this kind of influence on decent people who might actually add something.”

What did Bob do? He gave a speech saying young people who live in Vancouver should throw in the towel and simply give up on the dream of ever owning a home there. No more land is being  created, he said in a spurt of clarity, so “there’s depleting inventory and increasing demand. I know nobody wants to hear that, but unless we’re going to take a big broad brush stroke and add a lot of density, we’re in trouble.”

And what does that mean? Bingo. More condos for Rennie Marketing Systems to flog.

This kind of message ain’t new. Van property marketer Cam Good famously told the locals they’d just have to accept being priced out forever by foreigners. The numbnuts at Vancity, masters of self-promotion and purveyors of fine mortgages, have warned the average house will go for $2.1 million within a few decades. And now Rennie says if you’re young, get used to living with an elevator and a storage locker.

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Maybe you remember Eveline Xia. She’s the 30-year-old who created the #DontHave1Million Twitter campaign that I scorched a few weeks ago, and which made national headlines.

“We may have more in common than you think,” she said after calling me yesterday. Eveline is now famous, of course. Poster child for the disenfranchised. Spokesgirl for a generation that will never know what it is to clean eavestroughs or have a raccoon in the garage.

“This is about an entire swath of society, and it’s getting worse. This is not about asking for handouts or pity. It’s just that if professionals can’t afford to buy a house in this city then something’s not right. Housing is closer to food than anything else. It’s a necessity. You need it to function properly in order to have a healthy society.”

So we do agree on a few points. Eveline sees massive risk in the level of debt the locals are taking to buy homes, desperately. “People here can barely afford groceries because they’re spending all they possibly can on a house for fear of being left behind. Realtors are feeding this mentality and this fear, and that’s where you come in.”

So, does she feel entitled to own a house? Does she expect a ‘fair’ society to hand her a set of keys?

“No. I’m not young and I am not entitled. I’ve lived on my own for years, don’t have a car. I’m frugal. My mother offered me money to buy a home, and I said, ‘Mom, that’s not the point.’ And it isn’t. Governments are borderline criminal for allowing all of this debt and fear to happen. But they do nothing because they don’t want to be in power when the adjustment takes place, now that they have allowed to massive debt to occur.”

All true. Politicians at every level have been enablers of a bad situation. They’ve pandered to home ownership, using the tax system, monetary policy and social programs to encourage a one-asset strategy that’s now yielded the twin beasts of high debt and high prices. They’ve created the conditions in which predators like Mr. Rennie can prey on the financial illiteracy of the masses, and squish the young in the process.

Nobody’s entitled to a house. And while the current situation sucks for those who feel shut out, let’s hope Eveline and her Twittersphere full of followers have enough smarts to know what they don’t have, may be a blessing.

When condo marketers are newsworthy, we’ve lost our way. This is not over.