Desperate to create the illusion that BC’s housing market is immune from the worldwide economy, we have seen various entities repeat the ‘consumer confidence’ mantra ad nauseam.
Conferences were held by leading members of the Industry to tell Joe Q. Public that everything will be OK and that we really do not have a housing recession.
But the media barrage continues to buck the R/E Pollyanna playbook.
Last week, in addition to Scotiabank and developer Bill McCarthy, we could read in Friday's Vancouver Sun an article in which RE/Max Westcoast realtor Patsy Hui said, "I don't think anybody in this world, and I'm talking about the world this time because it is a worldwide thing, can really tell you what's going to happen and when it is going to stabilize."
The article also quoted Tsur Somerville of the UBC Sauder School of Business who said, “My sense is they [prices] haven't stabilized yet. They have further to fall.”
But perhaps nothing so eroded the credibility of the Pollyanna set more than this article from Macleans Magazine: The Shocking Truth About The Value of Your Home: New evidence shows that Canadian prices could go down, and stay down, for a decade.
Macleans completely exposes the P. T. Barnum approach taken by the Real Estate Industry during the current 'non-housing collapse'.
Noting that the Canadian Real Estate Association (CREA) numbers are riddled with problems, the article quotes Robert Shiller, an economics professor at Yale University and an internationally acclaimed expert on housing markets. “There was a lot of cleaning on their data to be done,” he says. “Their data is actually physically inputted by real estate agents as they sell the houses. And obviously, as a real estate agent, it’s in your best interest to show that prices are not falling too much because that’s how you make your living.”
He was also nervous about the fact that CREA depends on the co-operation of real estate boards across the country to gather the data, and some weren’t thrilled about taking part.
To gain a more accurate snapshot of what is really happening in the Real Estate market, the article cites another data source that adopts a more rigorous number-crunching methodology. The Teranet-National Bank House Price Index. This Index tracks the resale prices of individual single-family houses in selected metropolitan areas, while CREA uses Canada’s Multiple Listing Service (MLS) to add up all the money spent on houses in a given area, then divides it by the number of houses sold.
The Macleans article goes on to say the real estate industry’s data can be misleading because "cities that have a higher level of sales activity have a disproportionately large influence on the national average. In other words, if there’s more sales activity in Calgary than there is in Ottawa one month, then the higher prices in Calgary will tilt the numbers up, even though there are roughly the same number of homes in each city."
Beyond the quality of the data, Shiller is quoted as saying there’s another, more common-sense reason why you should trust the futures market over what the real estate economists tell you: the Teranet investors aren’t trying to sell you houses, and the real estate agents are. “The predictions from those guys are very biased,” he says. “They know that in a declining market, the volume of sales falls dramatically and real estate agents lose their jobs. So they don’t want to say anything that could be seen as contributing to a falling market. If their economist predicted a decline in the market—and then it happens—that’s deadly. The guy would have to watch out for his life.”
As Abraham Lincoln is so famously quoted as saying, “You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time.”
Words of wisdom that are apparently lost on the likes of BC's R/E Pollyanna set. A group intent on trying to 'fool all of the people, all of the time'.