Thursday, March 21, 2013

Thurs Post #2: What is the real estate industry afraid of?



On Tuesday we linked to a post on the real estate discussion board Real Estate Talks, a site run by realtor Ozzie Jurock.

Jurock promotes the site in it's masthead as "a friendly, interactive exchange of information on all Real Estate related subjects."

This week that site did not seem quite so "friendly".

Stunning screen shots had been posted there from the statistical data bank of Vancouver's real estate board revealing average and median prices for several neighbourhoods in the suburb of Richmond.

After being on RET for almost a full day, we linked to the post.  Later Garth Turner's site did as well.

Shortly after this, RET wiped the info clean.

The information was so stunning because it provided an intriguing glimpse behind the deceptive curtain of the HPI,  the MLSLink® Housing Price Index. 

Each month the HPI is trotted out by the local real estate boards as a measurement of how the market is doing. But while the Industry was telling us the HPI had declined in neighbourhoods likeTerra Nova by a mere -4.6%, the average sales price in the past year for that area was actually down by -38%, while the median price had crashed -50.4%.

Those are shocking numbers.

In the Riverdale area of Richmond, the data dump on RET showed the average price last month was down -27.5% and the median lower by 28%. In Seafair, the average price was down by -34% and the median by -25%. Compare this with the Industry's published HPI for Riverdale (-9%) and for Seafair (-15%).

How can the public not feel they are being deceived?

So what is the HPI anyway?

Vancouver’s real estate board is the home of the original Frankenumber, the MLSLink® Housing Price Index (HPI) composite benchmark price, blatantly intended to smooth out peaks and valleys, giving the impression of an eternally stable market. 
Critics charge that Home Price Index is designed specifically so that it does not give an accurate view of current pricing or reflect market momentum – elements critical to an informed home-buying decision.

Instead it’s there to mask those swings, obfuscate reality and create an ‘it’s-always-a-good-time-to-buy’ mentality. 

The HPI, as a statistic, is ridiculed as existing to help realtors sell houses - not help citizens know when to buy them. As such it is so complex and convoluted that it takes the Industry 25 pages to explain how it is calculated.

Those screen shots which appeared on RET are significant because they show that the real estate industry clearly values keeping track of average and median prices.  They even track these stats neighbourhood by neighbourhood.

Why?

Because they represent critical elements crucial to informed home buying/selling decisions and even realtors find access to that data to be valuable and important.

But those stats are off limits to the buying public.  They are secret, for realtors only. Presumably that's why RET yanked them.

In the meantime, are the real estate boards on a witch hunt to find out who released the information?


More importantly, why restrict the data?  What motivates the Real Estate boards to keep this from you?

Is it because for almost a year now, Real Estate sales in Vancouver have been tanking despite Industry attempts to berate buyers who are waiting for the market to collapse. Meanwhile burgeoning inventory is hitting all time highs, despite Industry jawboning that sellers won't be putting their properties on the market unless buyers are prepared to pay market value.

These trends are followed by reports today that headline: "Nearly a quarter of Vancouver’s condos are empty", and suggestions about that our market is frothing from the excesses of a speculative frenzy.

Is information repressed as part of an attempt to protect asset prices? It certainly looks that way.

If buyers read that median prices were crashing by -50% in the newspapers and on TV, do you think buyers would be eager to make transactions?

Yesterday we issued a challenge to realtors to come forth and release average and median price data so that the public could balance the publication of the Home Price Index (HPI) with data which, while imperfect,  provides buyers with a more accurate view of current prices and market momentum.

For as Garth Turner notes:
The HPI is to houses what moving averages are to stocks. Instead of telling you what properties sell for now, it tells you what they averaged over time. Realtors love this since it filters out peaks and valleys, making markets seem serene and predictable. But the HPI is as useless to a serious buyer as a four-month-old stock quote is to a trader.
Ideally the Real Estate Board of Greater Vancouver (REBGV) and the British Columbia Real Estate Association (BCREA) will make it a part of their monthly statements.

In the meantime I'm happy to report that one Vancouver Realtor is accepting that challenge.

Realtor Larry Yatkowsky is out tonight with a post on his blog titled: Median prices of Vancouver Houses.
If kept in perspective Median Prices can be useful information to anyone considering the sale or purchase of a Vancouver property. As is normal practice I bring to my clients all statistical information possible when discussing the sale or purchase of their home. It is also my normal practice that if such graphical information is not readily available as a service from my board I will based on their data, build it. Such is the case with this Median graph. Additionally, in the past while commentators have expressed an interest in having a Median Price graph for Vancouver properties. It seemed appropriate to share this with them. I hope it will serve all well in your Vancouver home selling or purchase deliberation.

Does your real estate salesperson offer this service? If not, you might wish to consider giving me a call when life moves you.

Caution: In the graph below you will find a Median Price graph that includes Vancouver West, Vancouver East, West Vancouver and North Vancouver – the four communities within my service area. Remember that the Median Price is merely another statistical tool to help you make a Vancouver home buying or selling decision. It is a starting point.


Now... anyone care to tell us how much those median prices for February 2013 are +/- from January 2013?

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20 comments:

  1. This is scandalous. Many baby boomers have been relying on their boomers have been counting on their homes as their retirement nest egg. Many have significant mortgages with little saved up in their retirement plans so they will need to sell to fund their retirement. The HPI is lulling these boomers to believe that their home has not dropped yet or minimally and they have still have time to downsize. What they do not realize is it may be too late for them to liquidate and rescue their retirement. http://theaffluentboomer.wordpress.com/

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    1. Can you edit th eabove post? It should have read

      This is scandalous. Many baby boomers have been relying on their homes as their retirement nest egg. Many have significant mortgages with little saved up in their retirement plans so they will need to sell to fund their retirement. The HPI is lulling these boomers to believe that their home has not dropped yet or minimally and they have still have time to downsize. What they do not realize is it may be too late for them to liquidate and rescue their retirement. http://theaffluentboomer.wordpress.com/

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  2. Keeping this information away from the consumer is downright unethical. A significant portion of Boomers will need to sell their homes when they retire. They are being falsely led to believe their homes are holding their value when in fact they are crashing along with their retirement dreams. The should be a public petition started to force the Canadian Government to force the real estate boards to provide truthful information to the public not misinformation. Why is it that retail stores are held to a much higher standard in truthful advertising while the real estate industry is permitted to mislead the public. http://theaffluentboomer.wordpress.com/

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  3. I still do not understand how the information of each home sale is not posted and available to the public. How much was the list what was the sale price. Each date. Each sale. Each house. Every time its taken on and off the market. Simple. Easy. How is it that the MLS can hide this information. Them even are able to twist and manipulate the numbers to straight up LIE about the reality.

    How is this allowed? This is not reality. This is some kind of Kafkaesque nightmare.

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    1. Absolutely agree with you. As a recent immigrant I was really surprised and disappointed with a lack of transparency in Canada.

      No surprise that Canada ranked 55th in the world for upholding freedom of information.
      http://www.huffingtonpost.ca/2013/02/24/canada-freedom-of-information_n_2755036.html

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  4. There really is nothing to stop the cartel, although it would likely need a strong startup company to challenge the MLS system. The only information that the real estate boards controls is the current listing information - and not the sales information. To the best of my knowledge - as matter of public record the sale information of a property is available under the Land Titles (which you'd have to pay for individually for each pull from their system). On that basis it would be the government who is also at fault for not providing this information bank freely, and making collating such data easier.

    But yes, I agree the system does currently suck, especially compared to our friends south of the 49th with their fancy Zillow.

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  5. Someone at work, when they were looking to buy a home, told me that your real estate agent can provide you with access to MLS website that gives info on how long a home has been listed for, and if sold, and what it went for. Is this true?

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    1. Yes, the agents have the data they can present to you (at least the guy we deal with does). But let's be honest, these people need transactions to make a living, how transparent do you really think they are going to be?

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    2. Good question. Real estate listings generally provide a number called DOM or "days on market". The problem with this statistic is that if the MLS agreement with the client is terminated and a new one signed, the DOM is refreshed at 0 again. To get around this, I usually go into the "history" file and compile the total number of days since the property was first listed, even if it is delisted for a month, as my indicator of how long it really has been on the market. Any Realtor acting for you should have instant access to these numbers after a few moments on the MLXchange Fusion system.
      Hope this helps.

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  6. > Affluent Boomer - A few threds ago on the forum, I made such a comment for those who are very near retirement - I said Cash Out Now!

    And in a declining market Reverse Morts are probably not an option to see you into your golden years.

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  7. The Land Titles info should be open to the public online for free. We already pay for it through our taxes. I use BC Assessment but the sale info is only good for some months in the most recent last year so it's quite limited in scope. The manipulation of the HPI and restricting of info by the RE cartel is dishonest and scandalous! It is inconceivable to me the competition Bureau has not stomped these guys into the dirt where they belong.

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    1. Land titles, including transaction details, are very much a matter of public record. In fact, could be argued that modern liberal democracies evolved entirely because of public property records.
      http://www.imf.org/external/pubs/ft/fandd/2001/03/desoto.htm

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  8. Can you elaborate on this comment, "This week that site did not seem quite so "friendly""?

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  9. I'm a resident living in Langley. If these numbers are so bad why are the developers out here still going nuts putting in infrastructure for new developments. These are business people who have to be getting advice from their bankers. They are not stupid people. Do they know something we do not?

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    1. A couple of reasons. Many are already contractually committed to the work, so they have to do it. The other is there are simply people who refuse to believe that a large correction is underway, they have gotten wealthy in the runup and are drunk on the coolaid, they don't understand the fundamentals, they don't understand how much of the BC GDP and employment is tied to the RE and construction industry, they can't grasp the pain that is about to happen here.

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  10. Start a online petition to release data for public viewing.

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  11. not a feng shui readerMarch 22, 2013 at 11:13 AM

    This might be of interest since Cyprus is in the news as either potentially being bust or facing having its banking industry, 45% of the economy, being untrusted and ruined.

    I came across it, and, though I don't know if it's true, it at least reminds potential investors of overseas property (is there one reader of this blog who's tempted by it?) to really do their homework beforehand.

    An older article about how disasterously inept and untrustworthy its leadership, regulators, and legal system was - and judging by its problems now, still is:

    "Another Eurozone Country Bites the Dust

    Saturday, October 29, 2011 at 11:26AM

    Real estate in the Republic of Cyprus has been popular with foreigners who own about 100,000 homes—in a country with 803,000 people. The British alone, whose colony this was until 1960, own more than 60,000 homes. Turns out, real estate is Cyprus' national sport sponsored by dumb money. But now it has become a nightmare that is unraveling the finances not only of home owners, but also of developers, banks, and the government. Yet it's hushed up. By comparison, the banks' impending losses on Greek sovereign debt, significant as they are, seem outright manageable.

    "The most common mistake people make when buying property in Cyprus is to use a lawyer who has been introduced or recommended to them by a property developer," says Nigel Howarth who has helped foreign property buyers in Cyprus for more than 10 years. Foreign buyers are sitting ducks. They're unaware of the local business culture and don't suspect that their lawyers are in cahoots with developers—aided and abetted by the banks..."

    http://www.testosteronepit.com/home/2011/10/29/another-eurozone-country-bites-the-dust.html

    (I wonder if all the Zero Hedge followers out there already know about this. Probably.)

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  12. Well with an election coming.. go talk to your MLA make it an issue for the election... I would most certainly vote for housing market data reform. The MLS is a sales tool so I can't see much headway there for getting info if they dont want to provide it.. the Land Title office is something we all pay for and it should be made available to serve us better, and it could so easily, the only missing link is political will.

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  13. Whisperer, playing devils advocate here a bit, being a professional data analyst I think the problem with the Richmond stats that were provided on RET was the exceptionally low sales volume. It's entirely possible that the sales volume for those areas based on what I have read is that there were only 1 or 2 sales each. And do those numbers include land transactions? Had there not been a single sale in those neighborhoods that month would the median be zero? There is zero doubt there is a huge correction happening in Richmond, but let's be responsible about this and properly inform people about the catches of such data.

    Thanks again for all your hard work.

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  14. Agree the volumes are thin, but they are not THAT thin -- i.e., more than 1 or 2... but the fact remains, that is where the market is for deals that are being consummated, and we DESERVE to have access to that information, unfettered. Apples to apple is complete and utter bullshit if you apples have become so over-priced I can only afford oranges!!!!

    Whisperer, your site is frickin awesome. You are providing a very cutting edge, fantastic service. I do worry for you re those who are not well-served by your pulling back the curtain... they are vile, manipulative people who have proven they will do ANYTHING for money -- I hope that when you are under attack (which I assume you will be at some point, either cyber or legal, and quite possibly both) that our online community not only has your back, but hits the f*ckers back harder than they come at you.

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