The Empire Strikes Back

The first two weeks of 2012 have given us a plethora of bearish items on Real Estate.

From the nation's largest bank, who tells us it is so concerned about a significant real estate correction that it has stress-tested itself for a 25% collapse... to the uber-R/E optomist Ozzie Jurock who exhorts to his followers:

• "if you are a seller - list now! If you are a buyer, take your time, the market will not run away from you."

The damage all this negative press must be doing to that all important metric known as 'buyer confidence' must be immense.

Let's face it... who wants to catch a falling knife?

So it should come as no surprise that we would see some push back in the media from those most affected by all this negative hype.

And - almost as if on cue - along comes real estate giant Royal LePage to counter these damaging developments to it's business.

Headlining "More Gains in Home Prices Expected", LePage's CEO Phil Soper is quick to dismiss all this negative talk which might lead some to hesitate from buying (and subsequently hurt his company's commissions).

"Widespread calls for a major real estate correction in 2012 simply can't be justified," Soper said in a statement. "The industry has significant momentum entering the year, and buoyed by the stimulative effect of very low interest rates, we expect the market to continue to expand — albeit at a slower pace."

Soper is adamant that Canada's housing market will continue to be strong this year, with rising property values expected in ALL major markets and his company is forecasting prices to rise 2.8% nationwide by the end of 2012.

And bucking the consensus of virtually everyone else, Soper insists that even the pricey housing markets of Vancouver and Toronto will see continued price appreciation this year.

I suspect Royal LePage et-al will now strike back with a massive - and none too subtle - media campaign to influence that all-so-important 'buyer confidence' in a desperate attempt to negate the negative outlook currently being propagated.

Let's see how long before the major papers are 'influenced' into running those cutsie little profiles of prospective buyers who see this as an 'awesome' opportunity and time to buy.

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Email: village_whisperer@live.ca
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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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Email: village_whisperer@live.ca
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Hark how the bells, sweet silver bells, all seem to say... throw cares away?

Another day and another flurry of Canadian housing bubble stories in the mainstream media.

Among the treatsies yesterday was this Globe and Mail offering titled 'Housing Market Has Big Cracks' which tells us, "it is probably a real estate bubble that will eventually burst - two years after the rest of the world... Too many appear to be blindly following Americans down a path of excessive debt, enticed by low rates."

Oh my!

Even worse are the statistics that follow.

"The ratio of mortgage debt to household incomes in Canada recently hit a record 70%, up from 65% a year ago. And 40% of home buyers are opting for short-term, variable-rate mortgages, which will eventually ratchet up, leaving some owners in deep financial trouble."

Meanwhile the Montreal Gazette notes that we have gone 'From Great Depression to Bubble of a Bubble' in a span of only 12 months.

You don't say.

And with all these mainstream media musings, we should expect to see the regular cast of R/E apologists moving to crank it into overdrive to counter all this 'negative talk', shouldn't we?

Enter stage left...

First up: Canadian Real Estate Association economist Gregory Klump.

He pooh-pooh's the chatter and reminds us that "consumer confidence has been increasing."

Really? What about record levels of unemployment?

Balderdash says he.

In the United States they may view 10% unemployment as starting down the road to economic apocolypse, but our buddy Klump sees the glass as half full.

“If we have 10% unemployment, that means 90% of people are employed,” Klump said. “People are re-entering the market – they have the confidence to take advantage of bargain-basement prices. There's been a release of pent-up demand, and that has a long time to play out. Prices have gone as low as they are going to go.”

There you go!

Next comes the discrediting of the naysayers.

Towards the end of the Gazette article referenced above comes this little tidbit:

"One senior real estate industry veteran, who asked not to be identified, wonders whether economists are now calling for a crash to grab themselves headlines. 'They are all piling on the bubble story now,' he said."

Spotlight hogs, one and all.

The best of the week comes from our old friend Phil Soper, president and chief executive of Royal LePage Realty.

They conducted a survey of 1,225 Royal LePage real estate agents and brokers across Canada.

[No pesky, headline-grabbing, negative economists in that group]

Tell us Phil... what did your survey of folks with a vested interest in real estate 'consumer confidence' reveal for us?

Well... real estate agents/brokers tell us "20% of agents and brokers said they are not hearing any concerns from buyers."

[Gee. 20% of buyers believe they are doing the right thing. Does that mean 80% of agents and brokers are hearing buyer's say they are making the mistake of their lives? I digress, back to Phil...]

"Buyers remain nervous about the economy but few believe house prices will drop again."

[Hmmm... no jobs, no money, and 80% of buyers believe they are screwing up royally but they conclude real estate prices will keep going up. With that sort of irrational logic at play, I now understand why there are so many people buying]

"Canadian real estate markets are enjoying a strong recovery as 2009 draws to a close and appear poised for healthy growth in 2010. Our survey shows that consumer confidence is edging towards normal levels.

[Now... just to keep things straight... that's the same survey that says only 20% of buyers have no concerns about the economy?]

"Canadians clearly believe that the worst of the recession is behind them and that the real estate market is on the path to sustainable recovery."

[Wow... that's quite the leap]

"The most obvious sign that market conditions are improving is found in the significantly higher unit sales volumes. That said, we have seen some significant recent increases in home prices, which is unusual at this time of year. Paradoxically, the recession is contributing to the unexpected rise in year-end house prices. On one hand, Canada's low interest policy has stimulated demand. On the other, many Canadians who might otherwise feel comfortable putting their homes on the market don't yet have the confidence in the state of the economy's recovery to list their homes, which is contributing to the current supply shortage."

Sooo... the nervousness of the shepple had created an artificial shortage of housing which has duped a certain percentage into engaging in bidding wars for the reduced supply which has, in turn, created a sense of recovery?

Thanks for clearing that up for us, Phil.

The bottom line is that Phil has chatted with his coworkers and their enthusiasm conclusively proves we "are on the path to sustainable recovery".

Marvelous. Let's summarize Sopel's holiday message to Canadians, what is he telling us?

That realtors and brokers all seem to say... "throw cares away!"

How festive of them. I'll retire to bedlam.

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Email: village_whisperer@live.ca
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Not just bears... but... Angry Bears!

In the last post we hilighted Ozzie Jurock's take on the coming year: 2009.

Deried by Lower Mainland Bears as pollyanish, it really is not surprising. Ozzie is, after all, a salesman. And as as the past president of Royal LePage (Res.) in charge of over 7000 salespeople... Ozzie is simply unable to disasociate himself from what comes naturally; being a sales force motivator.

And while his message is as simple as it is timeless: take lemons and make lemonaide. The eternal mantra of all salesmen has taken on a very dark side these past few years.

Within the R/E Bear community there is more than just a backlash to the salesman's mantra.

There are bears... but then there are the Angry Bears.

Angry Bears are furious with what has happened within the Real Estate Community and this mantra of positism. And that anger is palpatable.

So why are some Bears so angry?

'Positism' is fine for your frontline salesman. But some Bears feel that there is certain level of the Industry... and of government and media... who have abrogated their duty and responsibility to society.

Dangerous conditions developed over the last eight years with nary of word of warning from those who should have been guarding the best interests of Vancouverites (and Canadians). It is this abrogation of responsibility that infuriates so many Angry Bears.

One of the leading Canadian Angry Bears is former Member of Parliament Garth Turner. Garth has been beating the real estate warning drum for some time on his website http://www.greaterfool.ca/

A recent post best sumarizes this anger. In 'the gospel of Phil', Garth profiles Phil Soper, President & CEO Royal LePage Real Estate Services Ltd.

Garth notes that exactly one year ago, when the US housing market was in distress, and warning signs were popping up everywhere that serious Real Estate problems were on the horizon for Canadians, the intrepid Phil Sopher was issuing his assessment of the coming storm.

Did Sopher warn young Canadian couples across the Dominion to take heed and caution?

Did he caution them against moving into houses with no downpayment, caution against buying Vancouver condos that were the price of whole blocks in other Canadian cities, caution them against assuming 40-year mortgages that several times the average family income to buy a house?

Did he caution them to tread carefully before committing to such a precarious financial position with an unprecedented modern storm brewing south of the 49th parallel?

Nope.

As Garth notes, twelve months ago the guy in charge of the real estate mega-marketer Royal LePage issued a 2008 forecast which said:

“After experiencing an exceptional year characterized by strong average house price appreciation and record breaking unit sales, the momentum from 2007 is anticipated to carry over and position Canada’s real estate market for steady, yet moderate growth in 2008, according to the Royal LePage 2008 Market Survey Forecast released today.

“Canada’s housing market in 2008 should continue to thrive on a balanced diet of strong economic fundamentals, including high levels of employment, resilient consumer confidence, modest levels of inflation and the relatively low cost of borrowing money,” said Phil Soper, president and chief executive of Royal LePage Real Estate Services. “Canada is currently enjoying one of the longest housing market expansions in history; however, as we move into 2008 it is anticipated that slowly eroding affordability will cause demand to ease, allowing the market to move toward balanced conditions, with lower levels of price appreciation, and fewer homes trading hands.”

The Angry Bears are furious that those Canadians looking for “expert” opinion were spoon-fed 'positism' masquerading as expert, guiding advice. How many Canadians were duped by the rhetoric exhorting them to 'get into the market' before they would be left behind?

How many read reports like Phil's and then went and bought a home? How many are now trapped with zero-down, 40-year mortgages? How many became, as Garth says, "the last sucker into a market which should have been condemned"?

Garth Turner goes on to note, "Of course in the intervening months, real estate sales have collapsed by up to 70% in some cities, and prices have fallen precipitously in the country’s largest markets. Listings have ballooned, multiple offers are a memory, houses are sitting without offers month after month and the economy has deteriorated in a way that has the prime minister musing about a possible depression. Our major trading partner and the world’s biggest economy is in tatters even after trillions have been spent, interest rates are on the way to zero and Chinese leaders are freaked out about layoffs and deflation.

So, what does Phil Soper say now? That he’s sorry? That he regrets pumping the market when he was supposed to be a leader?"

The answer, of course, is no.

In this year's report Soper - like Ozzie Jurock - continues the mantra of positism and dismisses impending economic turmoil as two looming bad financial quarters, and then it’s back to eternally rising housing prices by the beginning of April.

In a nutshell this is what so infuriates so many of the Bears. They decry this abrogation of reponsibility by the Real Estate Pollyana's to safeguard the best interests of Canadians... all in the name of protecting a massive Real Estate Ponzi game.

And that's why they are so Angry.