Sunday, July 8, 2007

Market Transparency

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.

9 comments:

JMK said...

BC Assessments has all this data. Perhaps you could write your MLA and suggest they compile it monthly like the VREB does? It probably is 1 day to set up the DB enquiry and 30 mintues a month to run it and compile into a table.

Anonymous said...

I was going to say, get the government to lawfuly force any house being sold (& its particulars - x bedrooms, age, new development, type, etc) & database it; then provide the public access to this information on a website.

If BC Assessment has that data, then great! But note that they (for reasons I don't quite understand) hide all the house pricing info after March 15th of each year.

Further to that, they currently do allow you to walk into the office & request they provide you with a data dump of some property, but at a small fee ($10 to $20? I forget now)... but ultimately, I think these fees (and there are various services they provide) is how they are in part funded.

So if/when approaching government suggest that this should be a free service... via freedom of information perhaps? I don't know if that would be relevant or not but in the states companies who collect info from you must provide it back to the consumer; however, you can't go around asking for other people's info.

vg said...

I am suspect of some of the MLS listings this past 6 months. Some of the areas I have tracked for the last year and a half mysteriously only have half the listings they used to have and with the major listing increase the past few months the number refuses to budge,find that very strange.

Anonymous said...

Is it just as easy for someone (with lots of time on their hands )to ask a realtor to send them the daily list of every single listing that goes on the market?

The recipient could simply keep all these "mls-prospect-find" emails, and track them all until property info shows as either sold, expired, withdrawn, or whatever.

I get daily info, but keep only the interesting-looking ones until the above happens. Can't be that hard, but I don't wanna do it all.

greg said...

There's a big protective hedge around the MLS data here in Canada.

Unlike in the US, where county records are publicly available and can be aggregated by outfits like Housingtracker, in Canada, there is nobody doing this. Why?

It would be interesting to someone pulling the stats from BC Assessment, but they are not the numbers for most recent sales, in a lot of cases - which of course is the most interesting statistic.

Someone should kick down that hedge, just like Zillow is doing in the US. It would be revealing I'm sure. At the peak of the market, I'm sure the timing of something like that would not go over well with Realtors in Canada.

Google is also starting with Google Housing, but who knows what information they will be able to aggregate. They have a way to go still.

vg said...

I'm amazed at my buddy in the States who can find out anything on anyone it seems at the click of a mouse. You can scope out your neighbours in a hurry before you sign the papers incase you think the neighborhood may be dicey. I can see having a right to privacy to a point but finding out something like the real numbers on a private industry that 90% of the public uses should be easily accessable.

hhv said...

BC Assessment is one avenue for certain. But I doubt very much if they track non-sales. If a home is listed but not sold, or if a new unit/SFD comes into the market, BC Assessment has no reason to track these right?

Ultimately, BC Assessment exists not for the consumer, but as a crown corporation that is meant to serve government primarily in the area of taxation. That being the case, there is no incentive, financial or otherwise, for BC Assessment to track this information.

If the market is being fudged, whether a purpose or as a consequence of loose self-regulation, the key information necessary to track is listings to sales ratios and final sales prices. We can't get an accurate number of total units of product and have reason to be skeptical of the actual sales prices.

Anonymous said...

I am no expert and I have said this before ...

I am getting daily sales listings (as we are currently looking for a house) of properties $500,000 to $5,000,000 (we are not spending $5,000,000) and nothing is moving over $1,000,000. Every home that sells is under asking and there are price changes galore for homes of all prices.

I am always being told that there are multiple offers and it is a hot market. I don't see it. Nothing is moving in the over $million range.

I am looking at Oak Bay, Cadboro Bay, Upland, Cordova Bay, Fairfield, Elk Lake, Prospect Lake, Broadmead.

Aleks said...

Multiple offers below asking is still multiple offers, and a high sales:list ratio could be considered a hot market. It wouldn't surprise me at all if there were people out there who think that now is a good time to get a "deal" and are offering a few percent under asking. The real bleeding hasn't started yet.