Transparency. It's a loaded word. How much of it exists in the land of All Things Real Estate Related?
After the DOT COM crash of 2002 and the subsequent ridiculous mess that was WorldCom and Enron, regulators in the US got serious about transparency and shareholder accountability. This is a good thing. Up here in the Great White North, we took things a bit less seriously, but made changes none the less. I might remind you that Canadians were involved at the heart of both Enron and WorldCom collapses; both as shareholders and executives. Our political system up here has resulted in 13 securities regulators all effectively working against each other under the auspicious umbrella of the Ontario Securities and Exchange Commission. This may change with Canada's New Government TM now finally taking a look at it. But what of real estate?
Real Estate is another self-regulated industry. Banks have effective control over mortgages and who gets one. But, especially in the past several decades, new lenders have emerged, many targeted towards the much more lucrative developer mortgage lending products. That industry is also self-regulated. What does all this mean? I'm not sure, but I'd wager that things really aren't all that transparent in this country when it comes to real estate buying, selling and investing in real estate-backed securities.
So where am I going with all this? Well, if (hypothetically :) ) 1981 happens all over again--you know, people lose their homes because they can't make their payments because interest rates went up--who is going to protect the consumer? Say you follow MSM coverage of the real estate market, you talk to a few Realtors, you check the MLS statistics and go read the CREA website, one could be considered fairly well "educated" about the state of the market, right? But what if those numbers suffer from similar "accounting irregularities" like those found in the files of Enron and WorldCom? What then?
We know for fact that Realtors have the ability to manipulate sales information. We know that it happens, but we don't know the true extent of it. Some may argue it's a limited problem, others may argue it is so common that it has become an accepted method of doing business. Either way, manipulation of true statistics is fraudulent. Is reducing our capacity to count stats also a form of reduced transparency? Now before you go getting your knickers in a knot, I am not suggesting that MLS is attempting to cut bloggers out of the picture. But is it not convenient that the new system of listings makes it very difficult, if not impossible, to track numbers that may already be manipulated before they are released?
My argument is this: the numbers MLS reports through CREA and local RE Boards are not really complete. They can't be. They ignore new product sales and listings that aren't sold through MLS. Yet because they represent the majority--to what extent we can't be completely sure--of listings and sales in any given RE market, they are the accepted authority in the MSM on the state of the RE markets around the nation. How the heck do we get around this? I'd really like to see some pro-active discussion about how this time the consumer can beat out the market to force a review of the way that our self-regulated RE industry reports its numbers.