The Greater Fool - Pump and Dump

There is news, and then there’s sort-of news. Real news might be that the government is about to fall, new home sales in Toronto last month plunged or that twenty million Americans have mortgages which exceed their home values. Oh yeah, and Mumbai. Real news these days tends to be real depressing.

That may be why there`s so much sort-of news, especially online, where anybody can turn out a spiffy blog with passable gfx and look credible. That’s ok. It’s a free country. But if you were to start a blog and claim Stephen Harper is in control or that the west coast of India is lovely this time of year, few people would believe you, and the consequences would be thin.

However, when it comes to real estate news, it’s a different story. Legions of potential homebuyers and misty-eyed young couples use the web to search out a home and to research current conditions. Often they turn to ‘real estate professionals’ who position themselves as authorities, or the purveyors of credible market information. Big mistake, kids. Almost every realtor out there masquerading as an analyst seems unable to resist the temptation to pump and dump.

And I’m sad to say this. It drags down the entire professional. Maybe there should be something radical – like regulation.

Anyway, here’s a taste of what I mean.

In Vancouver, condo flogger Ken Stef says “Housing prices will not stay low for long!” Hmmm. Based on what? Oh yeah, a story in the Homes Section of the Vancouver Sun by developer Peter Simpson. “Six months ago, people were dancing on the ‘don’t-worry-be-happy’ bandwagon. A couple of those same guys now believe the world is nearing its end,” Stef says, “and have assumed the fetal position in some dark, clammy corner… The return to a balanced market offers many opportunities to buyers.”

Vancouver. Average home price down $75,359 in six months. Annualized decline, 21.7%. Welcome to a balanced market. Next stop, the Taj Hotel for a quick drink.
(Speaking of Van madness, please see chart, and my note, below.)

In Toronto, condo pumpers Laurin and Natalie Jeffrey boldly headline, “Buyers not deterred by doom and gloom reports.” They point to a fluff piece in the Star which reports 2,100 new homes and condos were sold in the GTA (population 6,000,000) in October. If there is a lesson in all of this, it’s not to get caught up in all the exaggerated doom and gloom,” the Jeffreys exude. “If the circumstances have finally come together and you are in the right position to buy that new home or condo, don’t let it slip away to someone else because you’re psyched out by all the negative headlines or thinking you might get it for less down the road.”

“Unlike the US or Western Canada where prices spiked dramatically, driven by subprime mortgage lending in the US and commodity wealth out west, GTA new home prices have risen gradually, and according to Canada Mortgage and Housing Corp., will rise a further 1.8% in 2009.”

Sure they will. Say, is that the same CMHC which forecast a 6% increase for prices in the GTA in 2008? Amazing how those pointy-headed guys missed the $45,713 average price drop in the last six months, a 25.9% annual decline. And as for new home sales last month, they were down 44% in Toronto. Hey, condo babes, where do I sign? Pant, pant.

Now, I understand fully real estate practitioners are sales people. I also understand most are honest, decent and ethical. And I know this is a bitch of a time in which to make a living on commission. But real estate is a commodity which moves higher and lower in response to a myriad of factors and after more than eight years of up, it’s going to have at least three or four years of down. That doesn’t mean the world stops or that people will cease buying and selling houses.

But it does mean purchasers will be more wary, value-conscious and discerning, while sellers must be realistic, pragmatic and pliant.

It also means realtors who hope to weather this storm must be seen as credible and trustworthy. If they set themselves up with blogs and snazzy web sites full of opinion, at least what they have to say should be believable. This is not a market anybody with a sales license can wish better. Shame on those who lure in buyers with false prophecies or prey on the uninformed with misinformation.

When the buyers return, you won’t.

David Pylyp; I don't want to argue the points, The Facts are the Facts, But look at the facts yourself contained in the report below vs reading a headline. Garth predicts a decline and Canada Mortgage and Housing predicts a flatline (1.2% increase year over year.) Employment stats indicate with a continuing depression in jobs (manufacturing in Southern Ontario) our unemployment rates may skyrocket from 6.5 to 7.0 or maybe 7.2%.

The seminar that I attended (December 1st, Hosted by Denise Pisani TD Mortgage Manager and CMHC economists) revealed some interesting staticstics about confidence in the market place and pent up demand. The highest jump in values was the condo market quoted at 9% where the detached homes increased 4.2% over the same one year 2007 - 2008 period. This is fed by affordability where first time buyers entering the market place are limited by their downpayment and monthly budget restrictions. If you are Selling and Buying at the same time, local market conditions do not affect your purchase. Yes, You may sell for less, But you will buy for less too.

Check The Bank of Canada website for interest rate trends. Check the How the Government bought Mortgages from the Bank for yourselves. Read the source material. It is all available to you. Unfortunately CMHC is not in the business of selling newspapers or books, they merely report the facts.

This Outlook report for the Greater Toronto Area is published semi-annually and offers forecasts and analyses of trends in the new, resale and rental housing markets. For the new home market, housing starts and price changes are examined in detail, while the resale section presents sales activity, average prices, and listings. Analysis of the rental market focuses on vacancy rates, average rents and related forecasts. An overview and forecast of key economic indicators is also detailed, along with other factors affecting the local economy and housing market.

If the report will not download for you, send me an email and I will forward the actual pdf file,

Your comments are always invited.

If you are considering selling or buying I would like to hear from you.