Thursday, May 1, 2008

Journalistic Integrity?


In light of the much bandied about hullabaloo going on over at VancouverCondoInfo and to a more limited extent at CondoHype, I figured I'd weigh in, but more importantly direct traffic to this issue on the other blogs.

Does the MSM, and specifically in this case, the VanSun, owe its readership the debt of integrity-based journalism, or owe its advertisers the opportunity to market themselves virally under the guise of a story?

We likely all saw, and more likely didn't finish reading, this weekend's piece titled 15 Real Estate Myths and Realities. We didn't finish reading it, because as bears, it read like advertising, or as bulls it simply reinforced what you already know and are "profiting" from. I don't think anyone, except a minor few, read it as a well written source of advice backed up by unbiased experts at arms length from industry--be it RE or media.

I don't think I need to answer my rhetorical question from above. I think that CondoHype has done a more than adequate job of doing so in his post; and that perhaps, if one sentence stands out above all else, it's this: "When it comes to real estate, the assumption is that the reader is in the market and is looking to invest."

I think the assumption is fair, well researched, and true. The reality is, more people own their own homes in BC than don't. I'd even go so far as to suggest that perhaps right now, more so than ever before in the history of BC, home ownership is likely at an all time high. Goodness knows that we citizens of the best place on earth have been given more opportunity and reasons to buy now (or be priced out forever) than ever before. I'm also willing to go out on a limb and suggest that more homeowners than renters, again defined in terms of percentages, not only subscribe to, but actually read, the Sun.

I'm not suggesting that renters are a bunch of illiterate chumps, but I am suggesting that simply by analyzing why people choose to rent (forced to economically, move around too much, etc) will point to the obvious fact that homeowners are more likely to get a paper delivered. And subscription equals delivery. Furthermore, the number of subscriptions directly correlates to advertising income. Circulation definitely factors in here; but I believe, rightly or wrongly, that subscriptions likely hold more weight with advertisers concerned about the demographics of the readership due to the information gathering capacity of knowing who's account information is available.

To me the problem doesn't lie in and of itself in media funded by advertising. The collective "we" have become very savvy in recognizing, and resisting, marketing. As a result, the collective "them" (in this case advertisers) have become more sophisticated in their marketing efforts. Remember that companies like Google and Facebook get their major revenue streams from targeted advertising based on what they know about their users. And more and more, this advertising is going "underground" or viral; like the Pepsi can on the kitchen counter of a TV show about a group of kids living in Orange County. Am I the only one who remembers when the cans were just labeled generically "beer" or "soda" in TV shows about a group of kids living in a 90210 zip code?

The Sun story was, and likely was recognized as such by most readers, inundated with viral marketing from RE industry "experts." It was a story that reinforced the common myths and masked over the increasingly visible realities of RE as an investment. And that is the true problem: the vast majority of people who own their own homes are not RE investors. The word, in my mind, should never be mixed in with anyone who owns only one property. Nor should it be misused to describe someone who owns a property that does not pay for itself AND generate a return on investment not only today, but growing into the future. Everything else is speculation and very few people like to be labeled a speculator in Canada as it seems to offend our more "moderate" and "risk-adverse" financial "sensibilities."

If people truly crunched numbers on their 2nd and 3rd RE purchases, then took five minutes to look-up what those numbers meant in the land of investments, they'd quickly learn that they are exactly like they were during the dot-com era: over exposed to "investments" whose market values were not nearly supported by their underlying economic fundamentals. Imagine if your shares of Nortel had been bought with your line of credit at their peak?

For the record, the stocks that I purchased recently using a value investment strategy are also speculative buys and not stable investments. I am counting on capital gains to make them worth the risk. The difference is, their underlying price-to-earnings ratios are vastly better than any RE in BC and therefore, in my mind, far less risky in both the short and long terms.

When someone uses an extended amortization, low-down payment mortgage product to buy a second condo to rent out at roughly 50% of what it costs to carry it, they should never be called a real estate investor (and given recent data released by ScotiaBank "someone" is roughly 60% of all mortgage holders) . They should be called a fool. And you know what they say about a fool and his money. I wonder how "soon", soon will be?

UPDATE: seems like D.Penner felt some "pressure" to provide a more balanced follow-up story.

Also see J.Chevreau's piece in the post Saturday if you're thinking about an extended amortization mortgage product.

Also see the effect that bloggers are having on the big bad MSM. I've got to say this: when someone resorts to a character smear, by accusing their "attackers" of a smear, well, isn't that kind of like the pot and kettle thing? Maybe I'm just missing the point?

UPDATE: From time to time I get press releases in my email. I won't publish marketing, but some are public service announcements. I won't put them up unless the readers of this blog want me to. What say you?

28 comments:

roger said...

VREB stats for April are now available here

A graphical analysis of the VREB data is in a slideshow @ VREB Stats Analysis
Use the Pause and Single Step Buttons instead of autoplay.

The VREB single family dwelling (SFD) data, published on their website, includes waterfront and acreage sales. When I receive the complete VREB report that has SFH data, without these sales(as used by CMHC), I will update the CMHC slideshow in my gallery.

Median and average sales numbers only tell part of the story. I will be interested to see what you folks think after you look at all the data in the slideshow.

Metaldwarf said...

Listings UP
Sales Down

Prices... up?

does not make sense

vg said...

Prices are down on SFH median prices in central Victoria,Oak Bay and Colwood the last 4 months. That is a cross section that tells me this market is well on it's way to a major correction,we are nearing the end of the flock being fleeced. Wait til the flurry eventually dies off as we head into June and July and more stories of higher interest rates continue to make headlines.

roger said...

HHV,

Great post and liked your closing paragraph.

When someone uses an extended amortization, low-down payment mortgage product to buy a second condo to rent out at roughly 50% of what it costs to carry it, they should never be called a real estate investor ..... They should be called a fool. And you know what they say about a fool and his money. I wonder how "soon", soon will be?

Soon for some will start this summer when the recent listers have not sold and start to panic. Did you know there were fewer SFH sales in April than in March??

BTW - the listings and price reductions keep piling on in Victoria and Saanich (E&W) as shown in these screenshots

roger said...

Interesting article in the Toronto Star on a Century 21 RE survey.
Alberta home prices sliding

Oil-rich Alberta may be the envy of Ontario – especially as economic conditions soften in Central Canada.

But there's one thing that hasn't happened here, at least so far: despite strong economic growth in the western provinces house prices have taken a dramatic fall in some Alberta neighbourhoods.

In south Edmonton, a 1,263 square foot bungalow that would have gone for $390,000 last year now sells for $337,000 or a 14 per cent drop, according to a spring, national house-price survey released yesterday by Century 21 Canada.

In Calgary, a two-storey, 1,850 square foot home that might have gone for $480,000 last year now sells for $420,000, or a 13 per cent decrease.


Are we next in BC??
One reason, of course, is that prices have gone up much faster in Western Canada, Toronto Dominion Bank deputy chief economist Craig Alexander said in an interview.

"Alberta has had such explosive price growth, it's perhaps not surprising to see something of a pullback."

PickingOnVG said...

VG,

You still don't understand RE do you? RE is not a fundamental based purchase for 95% of purchasers.

Go ask all the people in your neighbourhood how many have two homes in the area? Also ask them why they purchased their home and when did they purchase it. Most will say they purchased it to live in and "think" it is a solid investment. Youranswer to "when" is simple, when THEY afford it. Not when the average can afford it, not when neighbour joe can afford it.

Affordability differs from person to person. Some people are willing to put 70% of their income into a home, some are only willing to do 30% because they place "their" value on what is important to them.

Stop trying to put science behind emotion.

With all the number cruching, graphs, stats, etc you and Roger have worked on it would be better off using it for the stock market.

Your efforts and intillegence could have done much better over the past four years in stocks then trying to figure out RE based on fundamentals.

Yes, you can go back to your

Anonymous said...

oh wait....yes, please use your same comment about Bulls coming out to try to pump RE or Realtors disguising themselves.

I like to use the same one about you being wrong for years and years and years.

awum said...

It amazes me that after the experience in the US, anyone would be stupid enough to trot out that "look, you've been wrong for so many years" argument. What a pile of crap. First it assumes that the person has held on to the same assessment of the market for years. Second it ignores the fact that RE gains can (and are, look at the US, the UK, etc.) be erased after the fact. They were "wrong" in the US in 2007, so what, now they're right retroactively?

vg said...

"Stop trying to put science behind emotion."

picking,

Emotion drives charts and the charts tell me the "emotion" is subsiding with higher inventory,lower sales and a 4 month downtrend in the majority of areas. Even the VREB says this morning in the TC that the median should be used as the gauge to the market and that shows down in most areas.

What other "emotion" do you need to see is that the lustre is off this bubble ? A bunch of over a million dollar houses skewing the average price is not emotion,it is an aberation. Even the VREB says this.

I wonder how many of those who sold over a million are repurchasing ? I bet most are kissing the ground they got a sale.



"Your efforts and intillegence could have done much better over the past four years in stocks "


Yes it has helped very well thank you,and when this bubble completes it's deflation cycle I will be able to buy two houses instead of one. :)

roger said...

pickingonvg said:

Some people are willing to put 70% of their income into a home, some are only willing to do 30% because they place "their" value on what is important to them.

Stop trying to put science behind emotion.

With all the number cruching, graphs, stats, etc you and Roger have worked on it would be better off using it for the stock market.


I agree with several of your comments.

1. There certainly are a number of people who will put 70% of their income into a home for the next 25-40 years even though it is to their financial detriment and shows no financial planning ( nothing left for savings or retirement funds). There are lots of these folks in the US now underwater and posting "jingle mail".

2. For many folks buying a house is an emotional decision. However making the biggest purchase of your life, using borrowed money, without considering whether it is financially prudent can have disasterous consequences.

3. I used the same number crunching techniques in the stock market and it worked well there too. I recommend this approach. It is better than making an emotional purchase based on stock tips from friends and family.

Why do I bother to post my comments and maintain a site for graphs and charts? Because I feel that potential buyers, sellers and owners of real estate should hear viewpoints other than those with a vested interest in real estate (agents, banks, MSM, developers, mortgage brokers etc.) That is why HHV and prairieboy created these blogs so that bears and bulls could present their viewpoint. I like to use facts and statistical analysis to back up my opinion instead of "arm waving".

If you don't want to hear other viewpoints why bother to visit this blog?? There are plenty of websites that will tell you that real estate is a great deal and will keep going up.

Anonymous said...

From today's Times Colonist:

"Real Estate Remains Hot"

http://www.canada.com/victoriatimescolonist/news/business/story.html?id=04636828-f098-40ae-a0bd-874227b2e376&k=79995

S2 (too fed up to sign in)

roger said...

anon said:

oh wait....yes, please use your same comment about Bulls coming out to try to pump RE or Realtors disguising themselves.

I like to use the same one about you being wrong for years and years and years.


I only starting posting last year in the spring. In ten years when I look back at RE history if I was a year off in my prediction of the downturn that will be OK with me.

I am a real estate bear, renter and am not associated with the RE industry. What about you?

roger said...

S2,

I think Carla actually did a fairly balanced article this month.

- the average sales price was muted right away as being skewed by sales over $1M

- the median was mentioned as a better metric for assessing the market

- sales are down and inventory up was discussed

- Tony Joe comments about a balanced market offset the "Hot" headline which was probably picked by the editor, not Carla Wilson.

- Cherry Bank story about 14 of 51 units being sold in a development well into construction was not a great endorsement of the condo market.

vg said...

roger,

why are the bulls ignoring all the underlying signs you just posted and that I pointed out ? because they are scared shitless, otherwise they would be somewhere else high fiving there paper prince buddies and hoisting a few brewskies.

I know this would be the last place I would be hanging out on if I was up a double on my house.

Tony Danza said...

Realtors in the US are still blaming the media and blogs for the downturn in house prices, check out the HBB it's hilarious.

vg said...

tony,

It's not suprising they blame the blogs instead of their lack of brains. Herd mentality rules when no one taught them how to read a chart. We already have evidence when they now post attacking anyone who uses a chart,LOL. Next thing it will be anyone who questions the rising interest rates that will come later this year is using that damn science stuff and not emotion.

Just wait for this one to crash and they will be trying to hang us all in Bastion Square,lol.

Anonymous said...

What's the HBB?

Anonymous said...

HHB = thehousingbubbleblog.com

I think.

vg said...

pretty obvious now the condo market is toast which will only lead to the SFH's declining as the young and dumb begin to clue in.

Check out MLS# 241441,
11th floor,awesome views of the harbour and the city and it has to take a $40,000 hack and slash and still no takers.

If the premier places like this are supposed to be what the hot Alberta money was supposed to be falling all over themselves buying then you can stick a fork in this pig,she's done like dinner.

roger said...

HHV,

Looks like CTV will lead the MSM charge on the "boom is over in Vancouver"

They reported that More homes for sale, fewer people buying in Vancouver. You can watch the video which is also being aired on CTV Newsnet today.

The interviews with some punters at a recent sales event shows who is still buying. One was a 19 year old who put down a deposit so that he could get into the market.

Excerpts:

More homes are for sale, and fewer people are buying in Metro Vancouver, according to recently released statistics.

As the housing market changes, it's leading analysts to ask whether real estate is the slam dunk investment it used to be.

Property sales in Metro Vancouver were down five per cent in April compared to the same month in 2006. But the number of listings was up more than 25 per cent.

roger said...

Hmmm... Seems like the MSM on the mainland does have some journalistic integrity.

Fraser Valley near record for home inventory Greater Vancouver listings also take jump

Excerpts:

The Fraser Valley hit a near-record high for total inventory of homes for sale in April and Greater Vancouver listings also took a substantial jump, according to reports from respective real estate boards, as markets continued to slow.

The rise in listings "is consistent with people believing they're at the [market] peak and are rushing to sell before market conditions change," Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C., said in an interview.

Somerville added that the normal model of an economic cycle heading into a downturn sees sales drop while new-listing activity plateaus.

Robyn Adamache, a senior analyst with Canada Mortgage and Housing Corp., said some sellers appear to be motivated by a bit of the same concern that is keeping some buyers on the sideline.

They're watching the U.S. housing-market decline and worrying it might be repeated here, "and we'd better get our house on the market now."


And now for the spin with the usual YOY comparison
The average Fraser Valley single-family home price of $547,590 in April is down from the previous month, but still up 4.7 from the same month a year ago. The Fraser Valley board area runs from North Delta to Mission, including Surrey.

vg said...

roger,
The facts are undeniable now. The pumpers hang on to YOY charts that are history,short term charts indicate new trends and the 2008, 4 month median is down. You can't keep putting lipstick on this pig forever.


"They're watching the U.S. housing-market decline and worrying it might be repeated here, "and we'd better get our house on the market now."


Why would these people want to sell ? I thought the mantra is "we are in for the long haul" ? Looks like that theory is out the window,greed rules the day.

Then again maybe it was that "emotion" thing the pickingonvg dude was babbling, except he didn't factor it in on the sell side of the picture. ;)

hhv said...

I still can't figure out what crack these "experts" are smoking?

They say that RE will return 8-9% this year. We see that YOY is 4.7%. We see that listings are rising and sales are dropping and were starting to trend MOM average prices dropping.

So how, when these are the PRIME selling months and typically when we see the biggest gains MOM can they give us the 8-9% YOY BS?

My expectation, especially for the Fraser Valley, is that these months of "busy" activity will soften the average prices decrease. Wait till the summer's over and get used to seeing 5% drops per month till xmas.

Once that market implodes, Vancouver, Victoria and up island won't be far behind.

roger said...

VG said:

roger,
The facts are undeniable now. The pumpers hang on to YOY charts that are history,short term charts indicate new trends and the 2008, 4 month median is down. You can't keep putting lipstick on this pig forever.


The RE pumpers do like clinging to that YOY statistic. I wonder if the stockbrokers were doing that with Nortel back in the fall of 2000. "Yes I know we are down from the peak, down this month and this quarter but the stock is up from a year ago!!"

Here is a graph of rolling YOY for Victoria SFD. Last year at this time it was climbing every month. This year it is dropping every month and by late summer I predict it will be a negative number.

So the RE bulls will soon need something to reassure them and here is a statistical solution. It is called NOTYA which stands for Now over Two Years Ago. The NOTYA for Victoria SFD is currently 22.9% and it will be a while before it goes negative. That's an impressive number and should help the RE bulls keep pumping for the balance of 2008.

vg said...

Was out in Gordon Head/East Saanich area yesterday and we were blown away how many for sale signs were up. So many corners in close proximity to each other with 3-4 different RE signs up on the same spot,almost reminded us of the news shots from the US with only a couple of sold signs. We drive out that way often and have never seen it that bad.

vg said...

Inflation worries will drive interest rates higher: Rubin


Globe and Mail Update

May 5, 2008 at 9:24 AM EDT

Unrelenting upward pressure on food and energy prices will force the Bank of Canada to reverse course and start raising interest rates to combat inflation over the next year, a high-profile Bay Street economist says.

“While the Bank of Canada may still deliver another rate cut, reflation will compel it to raise interest rates by at least 100 [basis points] next year,” Jeff Rubin, chief economist and chief strategist at CIBC World Markets in Toronto said in a monthly report on portfolio strategy.

The central bank has cut its key overnight lending rate to 3 per cent, down by 1.5 percentage points since last fall.

What is more, Mr. Rubin said he now expects U.S. federal Reserve Board chairman Ben Bernanke, to stop their rate-cutting drive when the key U.S. rate hits 1.5 per cent, rather than 1.25 per cent as CIBC previously forecast.


http://www.reportonbusiness.com/servlet/story/RTGAM.20080505.wrates0505/BNStory/Business/home

condohype said...

Glad you liked my post, HHV. I've often found that the best way to understand what somebody is saying is to think about the audience they're trying to say it to. The Sun writes about real estate the way many real estate investors talk about it over dinner. Namely, in positive terms more concerned with sentiment and feeling than rigorous analysis.

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