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.

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Email: village_whisperer@live.ca
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