Freak out

For the past few days we have been showing you what could happen if panic sets in and people realize the bubble is starting to collapse.

There are lots of people who can - and will - move very quickly on price. And that's the one thing the real estate industry doesn't want you to do.

That point was driven home on the weekend by Peter Simpson, CEO of the Greater Vancouver Home Builders Association, who was headlined in this Vancouver Province article urging people: Don't fret or freak out, says homes veteran.

Peter Simpson wants to offer reassurance to new Lower Mainland homeowners worried about the shrinking value of their houses. Don't be dazzled or depressed by price changes. They go down, then they recover and rise over time, he says.

Clearly the industry is worried about people who are keeping close tabs on things.

Simpson believes people only hurt themselves if they become obsessed with tracking week-by-week house price changes. "They should not consider their home and its value as a pork belly future," he says. "That causes a lot of people angst. "Live in it, enjoy it and if you have to move somewhere else, sell it and move on."

If you must worry, Simpson wants you to channel you energy into helping his members develop more properties into high density housing: 

If you must worry about something, worry about the resistance from some people to letting their neighbourhoods evolve into a mix of single and multi-family housing, Simpson says. Densification is the key to providing affordable housing choices as the Vancouver region grows, he says. "We have to start building more high-density housing along arterials and even up side streets in existing neighbourhoods."

What ever you do, don't let affordable housing choices come about by letting the value of properties slide.

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Did the Greater Vancouver Home Builders’ Association just have the rug pulled out from under their media offensive?

On Wednesday we told you how Peter Simpson, president and CEO of the Greater Vancouver Home Builders’ Association, had launched a bit of a media campaign to try and apply some public pressure on Federal Finance Minister Jim Flaherty.

Simpson was hoping to play the 'economic' card and frame the recent mortgage issue as an economic threat for the government:

"The real threat to the economy is if a real-estate slowdown leads to a sharp reduction in housing starts. That’s because new-home construction stimulates the sale of appliances, carpets, and other products. For every housing start, there are 2.8 person years of employment that are create.That’s direct and indirect jobs. If it continues to fall, they’re going to have to take a good hard look at what their actions have caused — and be prepared to make some adjustments. I don’t know what those adjustments are.”

Even the headline tried to create the impression Flaherty's resolve on the issue was not that strong:

"Finance Minister Jim Flaherty may intervene in amortization period for home mortgages"

Somehow it only seems fitting that, only a day later, Bank of Canada Governor Mark Carney comes out with a strong statement on the topic of real estate and advises Canadians to "invest in 'productive capital,' not houses or condos."

How's that for a kick in the gonad's, Peter? Apparently your entire industry has been written off as the centre of massive Canadian mal-investment.

You could see the footprints of the spin machine in high gear in the Globe and Mail article:

Canada Mortgage and Housing Corp. reported that construction starts slipped in July to an annual pace of 208,500 from June's 222,100. That was largely due to a decline in multiple units, such as condominiums and apartments, in British Columbia.

"Canadian housing starts, particularly the multi-unit sector, have ebbed from extremely robust spring levels," said Robert Kavcic of BMO Nesbitt Burns.

"With stricter mortgage rules likely to cool demand in the remainder of the year, construction activity should moderate further to a more sustainable pace."

Seems Simpson's challenge to government that "if housing starts continue to fall in a declining real estate market, then government is going to have to take a good hard look at what their actions have caused", has been met and rebuffed.

The message: construction activity should reduce to a more 'sustainable' pace.

If Simpson thought he had Flaherty's ear on this topic, then Carney just played the role of Lucy to Simpson's Charlie Brown.

And just like in the Peanuts classic, you just knew what the outcome was going to be... and it still made you smile.

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Home Builders plead for Flaherty to make housing affordable. Don't worry, the process to create it is well under way.

Check out the tweet above sent out by CKNW this afternoon to promote a segment on one of Vancouver's foremost talk radio stations.

You have to marvel at how the mainstream media is completely on the 'bursting' bandwagon these days. No wonder sales are stagnating with these types of media stories. One can only imagine poor Bob Rennie positively tic-twitching up a storm at these developments.

Meanwhile the offensive to try and sway Federal Finance Minister Jim Flaherty into backing off on the recent mortgage changes has begun.

Peter Simpson, president and CEO of the Greater Vancouver Home Builders’ Association, was using the Georgia Straight newspaper today as the vehicle for his efforts.

In a piece titled "Finance Minister Jim Flaherty may intervene in amortization period for home mortgages", an attempt is made to create the impression that Flaherty is closely monitoring the situation and he will review what impact the new amortization period is having... with an eye to raising amortizations again. Simpson says:

“I hope he looks at markets where affordability is already an issue, like Vancouver."

To Simpson the dreadful real estate market is of major concern.

Builders are trying to rationalize that during the summer months, home sales traditionally slow down. But this summer's sales have been horrendous. And there is valid concern that if the monthly sales volume continues to tank after the Labour Day weekend, the situation will become dire for home builders.

And so Simpson is trying to frame the issue as an economic threat for the government.

"The real threat to the economy is if a real-estate slowdown leads to a sharp reduction in housing starts. That’s because new-home construction stimulates the sale of appliances, carpets, and other products. For every housing start, there are 2.8 person years of employment that are create.That’s direct and indirect jobs.”

Simpson is hoping to create public pressure on Flaherty and the prime minister so that they will have to assess whether to take action.

“If it continues to fall, they’re going to have to take a good hard look at what their actions have caused — and be prepared to make some adjustments. I don’t know what those adjustments are.”

What he's hoping for is that the government will go back to increasing the amortization periods for CMHC insurance.

And it just goes to show the level to which so many have become addicted to the crack cocaine of easy credit.

The problem is Flaherty and the Conservatives know all too well that they cannot turn back.

The easing that began when amortizations were originally raised from 25 to 30 then 35 and finally 40 years were an attempt to get us through a financial crisis that was supposed to be over by now.

The average recession lasts 5 years, max.

But this isn't your average recession.

And our real estate bubble wasn't created out of economic growth and the spinoffs of increased jobs and higher incomes.

Our current state of affairs were created with debt. And that debt has reached outrageous, unsustainable levels.

The latest changes to the rules governing mortgage were made when Flaherty returned from Europe and got a glimpse of how serious the world economic situation is.And no amount of petty, partisan media ploys is going to move the government on this issue.

Simpson decries the changes and pleads "affordability" are the reason government should restore the real estate liquidity punch bowl.

The good news for Simpson is that a collapsing real estate market means the wise developers (those not caught flat-footed by the storm that is coming) will be able to pick up properties at massive discounts soon.

And there is no better way of building "affordable" housing than by having initial real estate costs plummet.

See Peter? Problem solved.

But I don't think that's going to do it for Mr. Simpson. Somehow I suspect Peter is actually more concerned about asset price-protection than he is about seeing "affordability" come into play.

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