More shameless spinning by the real estate boards
OCTOBER 04, 2012
Ottawa joins the spin-fest. Shameless misleading of consumers in monthly sales update
Yesterday I highlighted the recent sales data out of Toronto and Vancouver and discussed some of the ridiculous spin tactics used by the real estate boards to either assign blame for falling sales or to spur consumers to keep buying.
Today I have to highlight an absolutely ridiculous press release by the Ottawa Real Estate Board, which by the way is the only major board that refuses to disclose inventory and new listings data to the public. That desire to keep consumers in the dark is shameful enough, but this month's press release tops it:
September sales historically on track in Ottawa
Ottawa, October 4, 2012 - “There has been a lot of attention recently on the need to “cool” the real estate market across the country,” said Ottawa Real Estate Board President, Ansel Clarke. “While there may be a need in some areas, we emphasize that real estate is local, and conditions and prospects will vary among major market areas and indeed within market areas. Historically the Ottawa housing market has not experienced volatility in prices or number of units sold.”
“While average price information does not indicate the value of a specific property, it is useful to identify trends,” continued Mr. Clarke. “Since 1956 the average price in the Ottawa area has decreased only five times year over year and has increased by 15 per cent or more only five times as well. The Ottawa market can be characterized as stable and steady although there are pockets of our market area where we see larger increases in price.”
“As for the number of sales, we are on track this year to match historical levels of activity. Since 1999 the number of sales through the MLS® System in Ottawa has ranged from a low of 11,329 to a high of 14,783. Sales for the first nine months of the year are just under 11,700.”
New mortgage rules and continuing uncertainty about job losses in the public service may have contributed to recent decreases in the number of sales through the MLS® System of the Ottawa Real Estate Board. Members sold 993 units in September 2012, down from a near record high of 1,201 in September 2011. The average price of properties sold for the month was $351,585, up from $347,236 last month and $335,623 in September 2011.
“Some buyers are deferring their decision to purchase until their employment status is clearer. Meanwhile, sellers will want to ensure that their properties are priced appropriately. We encourage buyers and sellers to talk to their Ottawa and area REALTOR® for more information about the housing market outlook where they live, or want to live,” concluded Mr. Clarke.
You wouldn't know if from reading the press release, but sales actually fell 17% year/year in September to the lowest level since 2004. And as far as them being "historically on track", judge for yourself:
That press release is absolutely embarrassing. If you're a realtor working in Ottawa, this sort of nonsense unfortunately reflects poorly on your entire profession. You owe it to yourself and to the consumers you serve to let the board know that this is not how a businesses ought to operate. If you are an Ottawa area realtor who agrees with this sentiment, email me. I want to hear from you: ben@theeconomicanalyst.com
As I noted before, I think buyers should reward those in the real estate industries who have shown integrity in at least presenting the stats free of this sort of nauseating spin. I don't know a realtor in the Ottawa area that I can recommend to readers, despite a number of inquiries.
In line with this theme of shameless spinning, Garry Marr wrote a great piece for the National Post:
As housing market slows, industry scrambles to paint positive picture
Organized real estate is unable, it seems, to admit the glory days may be behind it.
Sales plummet in major markets and the industry comes up with a new explanation for the decline, draping its comments with a sense that everything is just fine. The excuses are piling up.
This month’s gem comes from the Toronto Real Estate Board: It complained September didn’t have enough working days — too many weekends.
I always thought people bought homes on weekends, but it seems the transactions are registered during the week.
“The number of transactions was down 21% in comparison to September 2011,” said TREB in a release. “However, it is important to note that there were two fewer working days in September 2012.”
This logic has produced a new measure from TREB: Sales were down only 12.5% — not the actual 21% — from a year ago on a “working-day basis.”
Sad!
-Ben
Posted in:
38 Comments
Hi Ben. I need an honest real estate to buy in the Beaches area in Toronto. Any recommendations? My plan is to start looking next year. But I want to reach out to someone now.
Thanks!
I couldn't believe my eyes when I saw this news release from OREB. They normally follow a standard template for the start of the release but they threw that aside this time to spew realtor propaganda. Incredible.
I hope the term "working-day basis.” gets coined as one of the more comical explanations of prices falling, that's absolute gold
Anyone else notice that the Calgary market did very, very well in September? I can't say what will happen in Toronto and Vancouver - sure seems like prices must come from today's levels - but Calgary seems completely healthy to me. And the naysayers always ignore the evidence by spewing cliches like "sure, sure - it's different in Calgary."
Well, hello. It is!
The numbers don't lie. As far as big cities go, Calgary's affordability index is one of the best in Canada. And sales went up in Sept. As did the average price.
At some point soon, the bears are going to have to take a cold hard look at things and say "oh wow, it really is different there."
Talk of a "bubble" in Calgary is simply ridiculous and not backed up by the evidence.
Agreed Calgary looks VERY solid from a short-term supply/demand perspective. Definitely the best looking major metro. From a longer-term perspective, there is still some dead air between current prices and underlying fundamentals that I suspect will constrain price growth going forward. Nothing like Vancouver, but you're still looking at a 2 standard deviation parabolic move from base levels in things like real prices, and price/rent and price/income indexes. I'm far less concerned about Calgary at the moment, but don't fool yourself into believing that the economy out there isn't still tethered to a notorious boom/bust commodities cycle
May be there were more working days in Calgary in September than in Ottawa?
Hello Brad, Calgary home prices fell 15% in 2007 and have lost 3% per year since (inflation) So in my calculation Calgary real estate is 35% cheaper now than it was in 2007 and that doesn't account for 50% cheaper interest rates.
In my opinion no where in the country will real estate fall harder and further than it will in Alberta,
Brad Mitchell..... river in Egypt!!!
Hey Ben, from what I see around me, 99.99% of the population will read these type of biased reports and blindly believe them. Most people don't know what going on around them or in the world and in this case ignorance is not bliss. The blame lies in both the believers and the liars. I'm glad there are people around who are realistic and provide non-baised subjective information. I read a lot of the "doomer info" and then try to validate it buy talking to people around me and its scary how accurate you are. I'm on the sidelines waiting for a reasonable price, until then I don't mind paying my landlors interest/maintenance payments.
Ben,
Here's another piece of the puzzle...
Got kids? No property tax for you. (til you sell)
http://www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Tax_Deferme...
Over 55? No property tax for you too.
http://www.sbr.gov.bc.ca/individuals/Property_Taxes/Property_Tax_Deferme...
These numbers probably won't show in any conventional credit stats.
“However, it is important to note that there were two fewer working days in September 2012.”
Because no real estate agent has ever worked or hosted an open house on the weekend...
And even if this were a valid excuse, I'm sure the real estate boards have always mentioned that certain months contain more working days whenever that's the case.
I live in Ottawa. Thanks, Ben for setting the record straight. Really appreciate your posts.
Some observations in contrast to OREB's propaganda:
I live in the Ottawa Elmvale Acres area. I've been keeping tabs on this admittedly small sample but very typical neighbourhood of mainly 1950's and 1960's bungalows priced from $350k-$450k.
Sales over the past few months have been pinched to a trickle. It was like someone turned the ignition switch off this summer, and the RE engine coasted to stop. Many homes have reduced their prices, some with several reductions, but no sale. Don't try to find a "reduced" on the lawn sign or on the MLS listing. I suppose agents don't want the secret out- that prices can drop!
A few are for rent now. There was an open house two weekends ago at a house across the street, and while I didn't sit there and monitor it, I was working outside our home, and going in and out, and I didn't notice a single car, besides the agents.
If Elmvale is typical of what's happening in Ottawa, the the OREB's gotta whole lotta spinning going on!
Construction corruption tied to mafia is “bigger problem” in Ontario
Ontario must root out the Mafia in its midst
“At the Quebec inquiry, a police Mafia expert let it drop that Peel Regional Police may be investigating government contracts awarded to organized crime groups”
-----
This is getting exciting.
Data manipulations are always back fired. The only way to revitalize the RE market is to let it correct itself and only after significant correction downward it would get more affordable for the mass consumer - not for the selected few. But the sellers are not going to consider dropping the price reading the news releases like this one from OREB. So they keep deferring inevitable and the market dries up. They are themselves (OREB and other players from FIRE) are going to suffer longer than necessary. Wrong move on their part, unless the people on the top of the OREB are heavily invested in RE and are trying to get out first before the panic started. Than they are at the conflict of interests, as the industry would benefit from correction.
Real estate industry does not believe in improved affordability through lower prices. Instead, they will lobby endlessly for lower rates, longer amortizations, more tax breaks, and more grants and assorted buyer "assistance" programs at federal, provincial and municipal levels. Which only serve to drive prices higher, loading young families with a lifetime of crushing debt.
A while back Ben had an article talking a bit about asset-based lending... the upshot was that while asset:debt ratio does not look too concerning, asset values (most of which is real estate) are artificially inflated. Mark Carney himself pronounced asset-based lending unsustainable over long term in any economy, and that while asset values can fall, the debt remains, and we should keep the household balance sheet in perspective.
Let's take a close look at the latest stats from TREB. MLS inventory equals 2.4 months of supply, which is low by historical standards. However, condo supply on it's own is near historical highs. This implies that low-rise inventory is at all-time lows - which it is.
The demand for detached homes in the GTA is obvious. There were 5,879 sales last month on TREB, of which 2,864 were detached, that's 48.7% of all sales! Average price was $627,111.
Detached home prices last month were 10% higher than they were in September of 2011. Based on average prices, that's over $60,000. Those who waited are paying much more than they would have last year for a detached home.
The question I pose is simple, with supply at all-time lows and demand at almost 50% of all sales, "should one wait to buy a detached home in the GTA" ?
"The question I pose is simple, with supply at all-time lows and demand at almost 50% of all sales, "should one wait to buy a detached home in the GTA"
Has it ever been different App? Chart
You're a genius.
@ Greg:
Your chart only tracks demand for detached homes, not supply. So yes, it has been decidedly different historically.
Recently enacted provincial legislation in Ontario has greatly restricted the availability of land for low-rise, low-density development, resulting in exceptionally low inventories of both new and resale detached homes.
P.S. Thanks for the compliment, I think you're pretty smart too.
If you think TREB active detached + RealNet low rise is total inventory, then you're way off. Developers are sitting on tons of shadow inventory that is not listed on MLS, not to mention speculators holding properties that will be dumped on the market when units register, and lastly, FSBO and private sales are bigger then ever, of which many are not listed on MLS.
It's already looking like a non-linear event coming this spring as every seller is currently in a state of complacency thinking the same thing, that is, to get out this spring.
Not sure where you are getting your data regarding developer's "shadow inventory" of detached homes, but I'd be pleased if you could provide some proof. Also, detached properties do not need to be "registered" so I don't understand that part of your analysis either.
FSBO's are the same as always - a very small part of the market.
Do you know how a futures market works? Did you know banks and lenders are now starting to realize how developers secured a large portion of the 70-80% pre-sale requirement to receive financing? Assignments App. Assignments sold to investors, real estate agents and other speculators whose expectation was to flip a property (or more) before completion.
This scheme works well providing there is sufficient sales (liquidity) for speculators to assign before a developer registers. However if sales decline, you now have an illiquid market where many speculators are trapped and must fulfill their obligation to mortgage the unit(s). Surely they have no use for a home because their intention was to sell it, therefore they are most likely to list on MLS. This is what's been unfolding over the last few months.
There is no hard data because developers do not report their assignment allocation to any board or data collection agency. As of recently for the condo market, Urbanation has coordinated with CMHC to survey developers assignments based on concerns coming from lenders, brokers, appraisers, municipalities, suppliers, insurers, mutual fund managers, hedge funds and private equity firms who are the key drivers (as I've always stated) of demand.
The market is contracting more rapidly, and this time the government can't help because they've done all they can by lowering standards and providing guaranteed insurance to keep premiums low. However I don't rule out further intervention if the market unwinds faster then was anticipated, but even then, there's only so much they can do.
Buckle up App. It's going to be a rough ride.
Your analysis amounts to talking points and buzz-words, that I'm pretty sure you don't understand. You keep falling back on the condo market while pontificating about assignments, which has nothing to do with my proposition. If it is your contention that there are a large number of assignments in the low-rise market, you are a fool. Now back to my question.
Does it make sense to wait to buy a detached home?
Between the leverage on assignments and deposit structures, there is already enough risk forcing the banks to pull the plug.
Buckle up.
Just In:
Insured Buyers are the Majority
For those purchasing from 2010 through spring 2012:
41% had less than a 10% down-payment
21% had a 10-19.99% down-payment
Only 39% put down 20% or more.
This is good news right App?
@ Greg:
And down payment size is indicative of what exactly? As long as mortgagors are making their payments, what's the issue? HELOCS? But mortgagors with small down payments don't qualify for a HELOC.
Show me the mortgage defaults. Oh yeah, almost forgot, CBA's latest report says they're at a 4-year low in Ontario. (I know, I know, the CBA are just a bunch of liars).
@Appraiser
I already explained that delinquency rates indicate an overflow and does not capture consumer proposals defaults and insurers' work-outs. I asked CBA on twitter if stats are audited or confirmed by them; they said stats are submitted by banks as is.
You are completely out of your league on this issue. Mortgage in arrears ocurr BEFORE consumer proposals, bankruptcies and insurer work-outs, so of course they are "captured" in the CBA MIA index. It remains the best barometer of future defaults. And there has been no change in the reporting method.
Consumer proposals, bankruptcies and mortgage insurer work-outs are nothing new and they are miniscule in relation to the overall market, regardless. Oh, and insolvencies are far more prevalent amongst renters than owners (look it up).
Your lack of real world business experience never ceases to astonish me.
Yep, it makes sense to wait to buy a detached home in the GTA. I'll give you two good reasons:
If anything, Vancouver has an even greater scarcity of SFH, as the region is chopped up by rivers and inlets, not blessed by an abundance of natural freeways and has had the ALR far longer than Ontario has had the greenbelt, with long, congested bridge crossings and commutes as a result. Living close to work is a psychological imperative. Nonetheless, SFH prices in the GVRD are dropping, and not because of any obvious recent economic shocks. So why is it different here?
Your independent analysis of GTA SFH demand belies the fact that many, many people have hopped onto the condo/stacked town segment of the property ladder while fully intending to buy a bigger place with more greenspace to raise a family. Gains made in that segment of the market inevitably drive prices in entry level SFH, and so on up the chain. Losses will translate, too, unless their parents are just gonna write them a big ol' cheque to cover the money they didn't make on the first rung.
@Ralph:
Comparing Vancouver to any other market in Canada is a complete waste of time. Prices are stll insane in Vancouver and will remain so even if there is a sizeable drop. Get real.
Your thoughts on the huge condo market in T.O. plays right in to my theory; they all want to buy the holy grail of real estate eventually - a fully detached home. Thus huge demand, pent-up or otherwise. But there is no supply and almost none being built, especially in the 416. Prices have only one way to go - up.
And if you think parents aren't helping out their children with the d/p, you are dead wrong. There's a ton of boomers in the GTA sitting on so much equity, they don't know what to do with it.
Fully detached homes will be even more expensive this time next year. Waiting is for the fearful and uninformed. Waiters in the SFH market are already $100,000 behind since this blog began. Good luck making that up.
Well then Appraiser, YOU pick the comparison city. My point was that even a place more constrained by geography and more affected by "it's different here" boosterism, SFH prices are dropping. Your response is that it's different here AND it's different there.
And please spare me the tale of how far behind I am. I know about what I'd have been comfortable purchasing when this blog began. I'd be in a middling detached or semi in a middling school district with decent but not great transit. I'd be grumpy about my street parking or my falling-down garage, spending most of my spare time renovating as I'd have bought a fixer-upper, furious about the previous shoddy renos I'd be discovering, worrying about whether I'd be staying long enough to upgrade insulation and furnace as I know the next buyer wouldn't pay its NPV, paying down my mortgage but not having much in savings outside of that, wondering about whether to pay 8% to sell and get my kid into a better school district, whether to sell high and buy high or sell low and buy low, whether to buy first or sell first... And that's as a responsible, frugal saver. Others in that position would typically have a five figure LOC and possibly an auto loan and some credit card debt as well -- all part and parcel of being a homeowner sitting on a theoretical six figure capital gain.
I'm renting. I've got a two million dollar view, my child just started in a school that people winning $900,000 bidding wars can only dream about, walking distance to an uncrowded station on the least crowded subway line to downtown, maxing out my tax sheltered contributions, maxing out my employer match contributions, a decent sized and decently earning portfolio outside of the shelters, and every dollar I spend in interest is tax deductible. If things go reasonably well, I'll be able to pay cash for a home in a few years, borrow against it, and have a tax deductible mortgage with a decent portfolio producing tax efficient income. If things go a bit better, that income will be enough to pay all my housing costs. You wanna bet I'm doing better than a wage-slave home owner who's in a top tax bracket with few deductions save that his home's capital gains are tax free? Spare me. I'm not on the sidelines, I'm not fearful and I'm not uninformed.
Nice diatribe, and way more than I needed to know. Bottom line is that you are already way behind and falling further behind every year. Market timers get crushed, deal with it.
Is there any organization in Canada that can step-in and STOP this kind of non sense?. this misleading information IS RUINING so many lives and should be out right CRIMINAL.
I just started studying economics, and I am trying to break this down into the fundamentals of supply vs demand; I am a little confused......I can see lots of information on the posted sales, so the demand side of the equation, but I would like to see more information on the supply side. Does a graph similar to the one above, but showing new (not just active) monthly house listings on a year to year basis exist?
When I picture the supply-demand curves, and assume that the new mortgage rules drove down demand, then it follows that price should decrease. But when you look at the data, it seems that the price rose by 3.4%. Even with an inflation rate of 1.25 from August 2011 to August 2012, the prices still increased.
But, in order for prices to rise, supply must have decreased, or demand increased. It doesn't seem that either of these events have happened in the recent past. What am I missing? Interest rates have not decreased in the last few months, is there a considerable time lag that I need to consider?
I may be wrong, but desperation to sell sometimes takes months. When supply is greater than demand for a period of time is when price drops happen. Unless you're in Vancouver, where prices are way out of line with fundamentals, and that prices are so high that it may be quicker for price drops to happen. Just an opinion, really... Ive learned everything from Ben, starting at zero last year. Happy to see others learn about the inevitable housing correction in Canada because I think it will affect us more than people believe. Ben really is the best analyst for Canadian housing & explaining certain things so youve come to the right place
'Price' in real estate isn't the price of an equivalent unit, it's the average price of houses sold that month. If mortgage rules disproportionately affect buyers of low priced houses, average prices could increase even as sales fall and the achievable price for any given house fails to rise, or even falls. See also median prices and Teranet's (lagged) repeat sales index.
Correct you are Ralph. In more detail regarding GTA: sales for lower priced homes are declining faster then higher priced homes, at the same time, higher priced homes still make up around 60% of total dollar volume, so when average prices are calculated, there is more dollar volume representing fewer sales.
GTA Detached Price Range Curve
GTA Condo Price Range Curve
At this stage, the best way to monitor prices is to look at inventory changes. Not what's sold.
The Ottawa realestate board is a joke. My wife and I sold and have been renting in Ottawa for several months. I have been to about 20 open houses over the last 3 months. The tone of the realtors has changed over that period of time. The realtors are starting to panic as they know sales are in the tank. In my area of Alta vista I have been tracking listings and sales for the last 3 months. It is a small sample area but listing are up from about 54, 3 months ago to 73 for the last 2 weeks. Of those 73 listings 30 have taken a price drop. Many of those homes have disappeared off mls for 1 day or 2 to pop back up again. Very few are selling. I can't wait to see the sales numbers for Oct. I bet they will be down again.
The blame lies in both the believers and the liars. I'm glad there are people around who are realistic and provide non-biased subjective information. .I can see lots of information on the posted sales, so the demand side of the equation, but I would like to see more information on the supply side.