"Little chance of correction in Vancouver real estate market" - shades of David Lereah?

Meet Roslyn Kunin.

Making the rounds this morning is an article she wrote which appeared in Troy Media titled "Little chance of correction in Vancouver real estate." (hat tip Many Franks)

Kunin stresses that when she says ‘Vancouver’ she means the greater Vancouver area, sometimes referred to as Metro. She also adds that she defines a crash as "a large and sudden price decline where prices do not recover to previous levels in the short to medium term." Noting that housing prices did crash in the 1980’s, a major difference then was that at that time many homes had been bought by speculators on very small margins and interest rates soared well into double digit levels.

Of course it's different this time around.  Here are excerpts from her argument of why we won't crash:

[Today] very few homes are held on spec and any anticipated increase in interest rates is expected to be very modest. Mortgage rates may even go down. Canadian banks make a significant share of their profits from mortgage lending and it is a low risk part of their business since their prudent lending standards reduce the chance of default. Also, many mortgages are guaranteed by the Canadian Mortgage and Housing Corporation (CMHC).  

The cost of housing in Vancouver is not likely to change dramatically for the foreseeable future.  

February sales in Greater Vancouver and the Fraser Valley are still below trend, but are higher than they were in January and attendance at open houses has been rising. The housing industry has been expressing optimism about housing sales and prices.

Retirement age baby boomers across Canada hope to spend their golden years in this small corner of Canada where you don’t have to shovel snow... They [are] one of the main reasons why a housing crash will not occur. Any drop in prices will lead to retirees entering the Vancouver housing market, putting a floor under prices.

Those in the international community do not seem to mind our house price levels. When looked at in a global context, home prices in Vancouver are not unreasonable. Ask anyone from London or Hong Kong. And people from around the world see not only good value in our real estate, but also an open society, a pleasant climate and a stable political environment.

Finally, the majority of people in greater Vancouver already own real estate, benefit from current housing values and would be hurt by a crash or any serious drop. They do not want to see the value of their biggest asset decline. Home equity often forms a large part of retirement savings and people count on it in their financial planning.

The assumption in her last paragraph is that the majority of people in Vancouver won't sell their homes for below market value. You can click the link above for the full article.

I wonder if Ms. Kunin has ever heard of David Lereah, chief economist of the US National Association of Realtors.

in 2005, 2006, 2007 and through most of 2008 when bubble watchers were warning of the dangers of the blowing housing bubble, Lereah was there to counter each argument and calm the masses.

In this March 1, 2007 article on CNN titled Mr. Real Estate: 'All systems go, pockets of pain', Lereah discounts any chance of a housing crash:

Even though the market contracted, 2006 still didn't bring the first yearly price drop since the National Association of Realtors started tracking the statistic in 1968. 

Leerah: Nope. It's amazing isn't it? People thought we'd get it because they thought the bubble was going to burst, but it never happened.

Do you think it will happen in 2007?  

Lereah: I don't because we're already seeing some parts of the real estate market picking up again. It looks like we've bottomed out. The worst was the fourth quarter of 2006.  

For the past two months now the inventory numbers actually improved for the country. Mortgage rates are still low. The Fed is going to behave. So there are a lot of good signs that the worst is over for housing.

So when it's all said and done, this contraction in housing is probably going to be the least severe contraction we've ever had, which is going to surprise a lot of people.

But many think we still have a long way to go. 

Lereah: If you look at local areas, that statement is true. California has a long way to go. I expect them to continue to experience pain all throughout this year. Southern Florida, same thing. Las Vegas is probably going to take a little longer to correct as well.

A quarter of the country is still feeling pain, and I can't guarantee that it's going to be over by the end of 2007 for some of those areas.

So they could decline into 2008 or longer? 

They could. It's hard to tell right now. The real key for some of these areas that are having problems is prices. Prices need to come down to bring buyers back to the market. And until they do, they're going to experience drops in sales. California is experiencing some serious drops in sales - 30% drops in some places.

So when we talk about real estate are you talking about local or national? 

Lereah: If you're talking about national, I think we've bottomed out, and it looks like we're going to come back very modestly throughout this year. And then in 2008, it will be back off to the races again in my opinion. But for a quarter of the country, that's not the case.

So you don't think California and Florida could bring the whole country down? 

Lereah: They'll bring themselves down. But will it bring the whole country down? No. The real key here is the economy. The difference between the contraction today and any other contraction we've ever had is that the economy is healthy.

But Robert Shiller, author of "Irrational Exuberance," says we might have gotten so far out of whack that it has to come down no matter what. 

Lereah: I know. That's Bob. That's what he says. We disagree. He thinks psychology will play a major role here, and my view is no. We haven't strayed from the fundamentals. The only part where we strayed from the fundamentals was the speculative investors coming in during 2005. And that exaggerated everything in real estate.

What surprised you about the boom?

Lereah: The share of second home buying. It was 40% of the market in 2005. I was in shock. When you have a lot of second home buying, that's volatile, whereas when people buy a primary residence, they're buying it to live in.

I never anticipated that type of market share in second home buying. That proved to be the end of the boom.

Somehow I don't find Ms. Kunin's argument all that comforting.

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There will be no US-style housing correction in Canada, or so says Royal LePage

Just 'cause we wanna refer to this down the road, we bring to you today the latest from Phil Soper, president and chief executive of the real estate company Royal LePage.

• "Canada is not set for a U.S. housing crash. Canada’s housing market will cool off in coming months, but a U.S.-style housing crash won’t happen."

Gee Phil, how comforting to know the raison d'etre of your business isn't a concern.

This comes, naturally, as many real estate observers have appeared in mainstream media predicting Canada’s housing market is set for a major correction as record low interest rates have spurred buyers to take on more debt than they can afford,

But Soper doesn't want you to be concerned.

He says prices in some markets are over blown, but "the Canadian economy is structured differently from that of the U.S., making a collapse unlikely."

Ahh, yes... Phil tells us it's 'unlikely'.

It brings to mind David Lereah, the man who was the chief economist of the US National Association of Realtors when the US Housing Bubble started to implode.

For those of you who don't know him, Lereah gained eternal notoriety when he brashly told everyone that - despite overwhelming evidence to the contrary - the US housing market was going to keep on chugging forever.

And Lereah did more than issue rosy forecasts.

Not only did he regularly trumpet the infallibility of housing as an investment in interviews and on TV... the brash Lereah even wrote a book in 2005 titled, Are You Missing the Real Estate Boom?.

Lereah says he grew concerned about the direction of the market in 2006, but that didn't stop him from re-issuing the book under the new title, "Why the Real Estate Boom Will Not Bust."

Even in January 2007, when the crash was picking up steam, he boldly stated: "It appears we have established a bottom."

Lereah is infamous for his cheer leading efforts during the height of the bubble and then later when he was denying that the industry was going bust.

Four years after that fiasco, as concerns spread that the Canadian Bubble is unsustainable and on the crest of imploding, the head of one of Canada's largest Real Estate companies tells us a collapse is 'unlikely'. 

Wouldn't care to publish a book telling us that, would you Phil?

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"Blue Horseshoe Loves Anacott Steel"

There are days I like to pick up three or four newspapers and put my feet up in the backyard and simply read.

Today was one of those days. And it is amazing to see the similarity in news articles sometimes.

You can understand it for a major event, but it never ceases to amaze me when I see it for something like real estate.

Don't get me wrong, I understand what is happening. About 10 years ago I got a major lesson in 'public communications' when I took on a cause I cared about. I found it fascinating to watch the intimate behind-the-scenes moves that a major government bureaucracy undertook as it artfully managed both the press and their political masters.

And I was a quick study. The reality is that most reporters are lazy. Once you recognize this, and you tailor your information to spoon feed those journalists you develop a successful relationship with, PR truly becomes a game.

Almost weekly a comment was made here, a phone call there, and suddenly what I said today would appear in tomorrow's newspapers written by someone else.

It is truly an artform.

And that's what public relations has become... an artform.

The problem comes when you tread that very fine line between artful public relations and machiavellian manipulation.

Yesterday I posted an article on David Lereah. For those who do not know, David Lehreah was the chief economist for the US National Association of Realtors. David was the consumate machiavellian PR hack who did more than issue rosy forecasts. He regularly trumpeted the infallibility of housing as an investment. In countless interviews, on TV and in even in his fateful 2005 book, "Are You Missing the Real Estate Boom?", Lereah tirelessly pumped the housing market.

Lereah was so successful at prodding wary consumers into committing to making housing purchases that Time Magazine named him as one of the '25 People to Blame for the Financial Crisis'.

A dubious distinction to be sure.

But as one of the 'blog dogs' posted in response to yesterday's post... this is old news.

What makes him relevent, tho, is his forthright acknowledgement as a corporate shill on the part of the Real Estate Industy. Under the guise as a 'market economist', Lereah pumped the Industy as any other high pressure salesman would in many other fields.

Understand... he promoted a product (real estate), as a salesman, hidden under the guise of a fancy title (chief economist). And in doing so he dangerously treaded that fine line between promotion and deception.

It's important you understand this.

Because what is happening in Real Estate in British Columbia and Canada now is no different from what was going on in the United States in 2007.

A mere year after the US real estate market had begun a spectacular downward slide, Lereah pulled out all the stops as he manipulated the national media to promote the idea that "it appears we have established a bottom" to the real estate crash. And this was done in a desperate attempt to restore 'consumer confidence' and halt the downward slide.

A great many Americans dived into the housing market as they blindly followed the advice of Lereah and the National Association of Realtors... and in doing so, those Americans committed a catastrophic financial mistake.

Picking up the Globe and Mail newspaper today, I read headlines trumpeting a "Phoenix-like rise' in the real estate market. The Industry is giddy and proclaiming that "in Canada, buyers are back, sales are surging, and prices are edging up."

"Canada appears to have skirted the clutches of a lengthy, painful downturn. We can quibble about how stong and early the recovery will be, but the worst is over", says Michael Gregory, a senior economist at BMO Nesbitt Burns.

It isn't.

Faithful readers know I have written about this phenonmenon often.

In a desperate attempt to prevent a repeat of the US experience, the Canadian government has thrown massive fiscal stimulus and ultralow interest rates at the Canadian economy in a desperate attempt to supercharge real estate and forestall the collapse of values... a domino that would devestate the Canadian economy.

And lo-and-behold, a year after the start of the collapse in Canada, Canadian economists are making the exact same claims as the famous David Lereah was just over one year into their collapse.

You will recall it started back in February when Canadian R/E Industry shills started putting out stories on how first time buyers were diving into the market to take advantage of historic low interest rates - and how their peers were being 'left behind'.

Phone calls were make and virtually the same, identical stories were appearing in newspapers in Vancouver, Calary, Edmonton, Winnipeg, Toronto and Montreal, but tailored to profile individual couples in each market.

Each newspaper came out with these stories on almost the same day.

It has been a highly organized and coordinated campaign specifically targeted to manipulate 'consumer confidence' and it is being done with a level of skill that would have made Gordon Gekko (from the movie Wall Street) proud.

I can almost hear the phone call now... "Blue Horseshoe loves Vancouver Real Estate."

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Confessions of a shill...

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