Sunday, November 4, 2012

Shooting the messenger

Yesterday we profiled a troll that has been posting on the VCI comments section the past few weeks.

It was given as an example of how some people are spending a considerable amount of time on the websites of those bearish about real estate and make bullish claims.

I think we are seeing more and more of this because
  • (a) with the market starting to turn, more and more average people are reading these sites and 
  • (b) there is growing anger from some in the industry about that increasing popularity.
Yesterday's example was from an angry individual spewing insults and childish invective (causing many to ask why I would even bring attention to his diatribe).

But not all attempt to denunciate in that fashion.

Today we profile another who takes a more rational approach.

As you know we posted this week about a Richmond home that sold for 33% below assessed value.

This follows posts about Richmond homes that have sold or are listed for 25% below assessed value.

All on heels of Richmond Realtor James Wong's repeated posts about Richmond homes selling below assessed value, his assertion that in order to sell you must list at least 10-15% under assessment and his view that the housing bubble is now unwinding.

But all these examples... they are just "propaganda" according to one contributor.

Here are the thoughts of 'IAMWILL' who had this to say in the comments section:
I appreciate the authors frustration with house prices; however, this is propaganda. 
There was 972 homes sold last year in Richmond (oct 11-Sept 2012). 
I took a random sample of 18 homes: 
Results    Sold    Tax Assessment    $ above TA % 
1) 520K 482,300 +$37,700 + 7.25% 
2) 640,000 633,000 +$7,000 +1.09% 
3) 678,000 648,000 + 30,000 + 4.4% 
4) 673,800 626,000 +47,800 + 7.09% 
5) 685,000 666,000 +19,000 + 2.78% 
6) 730,000 813,000 - 83,000 -11.37% 
7) 748,000 674,800 +73,200 +9.8% 
8) 733,000 718,900 + 14,100 +1.9% 
9) 747,000 779,000 - 32,000 -4.3% 
10) 775,000 793,300 -18,300 -2.4% 
11) 762,000 842,000 -80,000 -10.5% 
12) 757,683 727,800 +29,883 +3.9% 
13) 805,000 817,000 -12,000 -1.5% 
14) 780,000 759,000 +21,000 + 2.7% 
15) 810,000 740,800 +69,200 +8.5% 
16) 785,000 826,000 -41,000 +5.2% 
17) 798,000 858,000 -60,000 -7.5% 
18) 833,000 856,200 -23,200 -2.8% 
So take an average, and you can figure it out.  
Understand the argument the author is saying... House prices will fall because we all can't afford it. 
Problem with Argument 
  • 1) Circumstantial evidence IE: 1 house You need to take a random sample of all houses or take all 972 homes and take an average. The results will differ. The higher number of the sample, the more accurate is the results 
  • 2) The Author assumes that there is a correlation between Tax Assessment and market value. Wrong- It has to do with Mill-Rate (Money needed to be raised by the government. (Google it) 
  • 3) Tax assessments are done by an assessor looking at the outside of the home. They do not take it account for renovations, even if it is done with a permit; therefore there is no correlation. 
  • 4) Tax assessments cannot take in account for View, craftsmanship, or any unique features that are inside the house. 
  • 5) Check your T.A.-Houses do not appreciate it. Land Appreciates 
  • 6) The Author assumes that we are in a closed economy. - Wrong Check to see how many people are coming into BC vs going out. (There are many more people coming into BC, then leaving, and not just immigration statistics) 
  • 7) Everything is a result of supply and demand. These two forces work dependently and interdependently. Let me give you an analogy: Very few local people can afford to ski with their family in Whistler. So my question is, has the prices of ski passes dropped? If not , why not? The demand is coming outside of Canada. ie Tourist So how does this correlate to housing? 
Just look at the immigration statistics for people coming to BC, both inside the country and from outside. If the population is rising then the demand will increase, if the supply cannot be maintained. 
The Author is correct about Condos. The supply does go out of balance sometimes, and this certainly affects the prices in the short-run, but they get adjusted in the long-run because of supply and demand. 
What the Author is doing is writing a story, then finding circumstantial evidence to support the story. 
No offence. An argument has to be supported with empirical data. It has to be evidence based and done prospectively, not retrospectively , (You can take any statistics and manipulate the information to support a story, if done after the fact- retrospectively) 
Should be double-blind ( In others words the author and the "study" should not know the outcome. In this case single blind study would be sufficient. 
What is the take home message? 
Be careful what you read, question the Author's motive for writing the story and challenge everything.
Oh my!

As more and more people are turn to blogs like VCI to get an accurate portrayal of what is going on,  I suspect we will see more and more critics attempt to counter the information we provide.

What you cannot deny is that properties are being listed (and selling for) more than 25% below assessed value.

What you cannot deny is that the housing bubble has been fuelled by excess credit and that the credit is now being withdrawn.

The process is only just starting.

What is the take home message?

In the Vancouver market, Global came out with this reality check yesterday. Reality checks going on everywhere right now, particularly Richmond.

People like IAMWILL do not like what that message is right now.

Trying to discredit the messenger won't make that message go away.


Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.


  1. > It has to be evidence based and done prospectively, not retrospectively , (You can take any statistics and manipulate the information to support a story, if done after the fact- retrospectively)

    OK, fine. Let's find lets say ~100 randomly chosen currently listed houses each of the cities of the GVRD. Then follow them until they are sold. Anything that doesn't get sold is simply taken off the list (the bias this introduces will be noted.)

    Let the data set speak for itself.

    Village whisperer- you gonna take this guy up on his challenge?

  2. The Province just ran an article on how heavily indebted BC'ers are.

    Average individual in BC is almost $38,000 in (non-mortgage related) debt.

    Almost 45% got there by "overextension, financial mismanagement, and unexpected expenses."

    Says a lot.

  3. It occurs to me that Will sets up a bunch of strawman arguments, but then can't even knock them down successfully.

  4. This person had aceess to all sales and yet presented a random set of picks. Could have easily presented the average for all sales and not made exactly the error that the data points presented were purported to be making.

    1. The only thing better than a representative sample is data on the whole damn population.

      Take it from a benchwork scientist- a large sample is good. The whole population is enough.

  5. Mr. Shameless Realtor Shill just listed a bunch of knife catchers and held them up as examples of winners at the game of life.

    whatever floats your boat

  6. "(There are many more people coming into BC, then leaving, and not just immigration statistics)"

    Say what? Actually BC is losing people inter-provincially.

    1. in realtor speak, it's coded language - white people leaving is of little consequence, they think..

  7. The entire rainbow of people are leaving! Once RE prices start to crash the whole region will be screwed as there is no other major industry to support the population.

    Too many people in Van are employed by the RE industry:
    Realtors,mortgage brokers,construction workers,landscapers,interior designers, architects, home improvement stores, lawyers, notaries, home/building inspectors...and all the offshoots of those professions.

    What did I miss? ;)

    1. I forgot to mention almost the entire print industry in the city.

      Read a local paper and check out how many real estate ads there are. They are the only ones keeping these papers alive...

  8. It would be a simple exercise to collate and parse the data this person wants, alas the data are behind a firewall and available only to those with connections to Realtors.

    Until that changes and the sales data are made public, don't be surprised if the portrayals of the market appear biased.

  9. "Everything is a result of supply and demand. "

    It turns out this particular comment is correct. But not in the way the author thinks.

  10. "No offence. An argument has to be supported with empirical data. It has to be evidence based and done prospectively, not retrospectively , (You can take any statistics and manipulate the information to support a story, if done after the fact- retrospectively)"

    I spent 15 years as a scientist doing basic and R&D research. The whole scientific method is based on retrospective analysis and forming a hypothesis that is typically based on previous evidence and knowledge (housing bubbles have been caused by easy credit and correct), proposing an experiment (looking at sales data) which not only proves or disproves your hypothesis but hopefully a window into why, and then you do the experiment. You form a conclusion based on the evidence not the other way around.

    1. Prospective studies and retrospective studies have their own problems. But overall, anyone who has been trained in good experimental design and actually has done _real_ research, will agree with you.

  11. Anyone can see that this is just the beggining of RE inventory build up. It will compound tear over year from now on. Then on top of that if we have a slight increase in interest rates? Watch out. It will be a slow bleed not a big pop I predict.