Why Realtors and the MSM are suspect

Letters to the editor are offered primarily as a means to give voice to opposing viewpoints to those of original authors of works in newspapers. It is a means for people in the know about particular issues to raise concerns about editorial stances or facts that are misrepresented in particular articles.

Letters to the editor are often used by non-governmental organizations to advance a particular political viewpoint or belief. Rarely are letters to the editor a commercial venture meant to sell a product.

I guess someone forgot to tell the editors of Kelowna's The Daily Courier. A few days ago they published a story House out of reach for average family. It centred around one oft-kicked-around-here theme:

The average annual household income of a family in Kelowna is $65,139, well below the $88,000 a year needed to support the mortgage on a home selling for $500,000 – the average price for a single-family home in the city.

It was balanced and included a number of quotes from one relatively impartial expert and one from a totally commission compensated mortgage salesperson who stated:

Despite all the barriers, Wilkinson says now is the time to buy a home, be it an average single-family home or a little condo, because prices will only go up. Once you‘re in the housing market, you‘ll see your equity grow, allowing you to accumulate a down payment that can be used to move into a bigger and better place.

Hardly accurate or impartial. Don't believe me? Ask all the Americans who "begged, borrowed and stole down payments, or took out negative amortization (zero down) or got parents to co-sign," and still lost their shirts. Even though they were told real estate had nowhere to go but up. Remember that Canada isn't the only North American country with a baby-boom generation demographic bubble. Regardless, that statement offset the earlier statement by an impartial economist that claimed an average family income could not support an average single family HOUSE (not condo or townhouse, but HOUSE). That is accurate.

This story gets better. A Realtor by the name of Damon Enns wrote a letter to the editor that was published yesterday. It's a dandy. And it's conveniently not available online, so I'll republish it here in its entirety for your reading pleasure. Enns "felt" the story was inaccurate so he needed to "clarify"--read repeat what Wilkinson said; but what Enns was really doing was getting a plug for himself and his property listings.

The Daily Courier (Kelowna), Page A11, 18-Oct-2007

Homes aren't out of reach for new buyers
By Damon Enns

This letter is in reply to the article Home out of reach in Tuesday's Daily Courier.

I want to encourage all the renters, and those who are tempted to give up on buying a home, that owning a house is not an impossibility.

In a matter of two short years, I went from being unemployed, broke, and living in the home of a benevolent family, to owning my own five-bedroom house with a two-bedroom in-law suite.

I was able to perform this "miracle" by getting a job, saving some money, buying a condo, getting married, selling the condo for a profit, using my real estate profit as a down payment, and using the combined income of my wife, myself, and two bedroom in-law suite to qualify for a loan.

I am employed by Re/Max now, and my wife and I have a heart and mission to help people fight the giant that we faced, and to get into their own home.

Many of my clients who bought homes when I first started as a realtor have already sold their "starter" homes and have moved up a level or two.

I strongly encourage everyone who dreams of owning their own home, as I did, to find out what they can afford right now, and find out how to buy it. Get on the train because it isn't stopping anytime soon. I am currently marketing an $80-million condominium project on KLO Road called Orchard Springs.

Sales start soon, but the condominium will not be completed for approximately 18 months. But what an excellent opportunity to step up into a house. CMHC has a "flex down" program, and different lending institutions and bond companies have informed me that they may even "spot" qualifying buyers their 10 per cent deposit. What an opportunity.

All a person has to do is save and/or borrow some money for the deposit, and then watch their leveraged investment grow to the point where they have the down payment for the house that they want.

Unless the hundreds of thousands of Easterners "fixin' to retire" in the Okanagan change their minds, fine condo projects like Orchard Springs (with its rich interiors, indoor pool, and beautiful landscaping) will continue to be a hot commodity.

I should mention that there were other important motivating factors for getting married besides home ownership, but the point remains the same. House ownership is not out of the reach of the average Okanagan family - there just may be a couple of extra steps to make the dream home a reality.

Damon Enns,
Kelowna

Check out my bolds. How the F&%$ did those get past the editor! The guy is getting free advertising. Now in all likelihood, he's actually paid for this advertising through his copious contributions to the classifieds and real estate sections of the Daily Courier. This guy is a gem. Almost as much as the editor of the paper is.

I have to continue with my BS-o-meter analysis. I'll cut and paste statements this guy passes off as "facts" in his "letter."

• Get on the train because it isn't stopping anytime soon.
• All a person has to do is... watch their leveraged investment grow to the point where they have the down payment for the house that they want.
• Unless the hundreds of thousands of Easterners "fixin' to retire" in the Okanagan change their minds...

Wow. I just puked a little in my mouth. This guy is why Realtors get such a bad name. And that paper's editor is why many of us don't trust the MSM anymore. They published a response letter calling them out today, also not available online. The letter writer didn't challenge Enns "facts", just the editor's misguided publishing of advertising as "expert" opinion.

I'll leave the rest of the discussion up to you, folks. I'd especially like to hear from the 3 or 4 Realtors that I know are frequently reading this blog (you people really should stop reading from your office if you want to remain incognito). Please feel free to comment anonymously. How do you justify or defend this kind of BS? Is it a savvy marketing strategy? Is this "gorilla marketing" or "viral marketing"? Do you take sales and marketing seminars on this sh&t? Inquiring minds would like to know.

No commentary necessary

The bloom is still on the real estate rose

Despite collapsing markets elsewhere, Metro Vancouver is less vulnerable to normal economic forces

Vancouver Sun

Published: Tuesday, October 09, 2007

Vancouver's housing prices continue to defy the laws of gravity, but they won't be able to indefinitely thwart the laws of economics.

All markets -- from tulips to tech stocks -- are subject to supply and demand and the housing market is no exception. The question then is not if prices will eventually be subdued but whether that re-alignment will come abruptly, and painfully -- or gradually and gently.

While we await the inevitable, however, sales of residential real estate in British Columbia are expected to reach the second-highest level in history this year, about 5,000 transactions shy of the record 106,310 sales set in 2005. The average home price in the province will be up 12 per cent this year to $437,000. After that, if the B.C. Real Estate Association has it right, the number of sales will drop to 96,671 and the pace of price increases will subside to about eight per cent.

Of course, Metro Vancouver is in a league of its own, with an average price of $589,916 and forecasts calling for it to rise to $620,000 next year. In the City of Vancouver, prices are higher still: $787,500 for the average bungalow and $879,000 for the average two-storey home, according to realty firm Royal Lepage.

Home ownership costs would consume more than 70 per cent of the typical household's pre-tax income, based on an affordability index devised by the RBC Financial Group. Forbes magazine declared last month that Vancouver real estate was the second most over-priced in North America, after Los Angeles, and sixth most over-priced in the world. As such, analysts agree, house prices are out of sync with local incomes and are unsustainable.

Population growth, baby-boomer affluence and a robust economy are often cited as reasons for the relentless rise in real estate prices. Low interest rates and mortgages with 10 per cent down, extended amortization, and interest-only payments (not to mention subprime loans), are attracting buyers who otherwise would not qualify.

But just as the typical wage earner cannot afford the Lotus, Ferrari, Lamborghini and Mercedes-Benz SL automobiles parked in so many driveways, the ordinary household cannot spend nearly three-quarters of its pre-tax income on housing.

So who's buying? Theories abound about their identity. Some say offshore buyers from Europe and Asia are scooping up property, particularly downtown condominiums, while wealthy foreign buyers, especially from China and Iran, are buying homes to house their families, many paying in hard, cold cash. Another theory has it that drug dealers are buying property to turn their illicit gains into hard assets.

That might help explain why Vancouver real estate prices seem less vulnerable to normal economic forces, but sooner or later the gorilla in the room will makes its presence known.

Vancouver's real estate market may be influenced by unique circumstances, but it cannot remain immune from the credit crisis spilling over from the United States. Sales of new homes in the U.S. dropped by an annualized rate of 8.3 per cent in August. That was more than forecast and the largest drop since 1970, bringing the number of transactions to 795,000, the lowest level in more than seven years. The median price dropped by 7.5 per cent from a year earlier.

If the U.S. credit malaise spreads -- and the Bank of Canada's injection of nearly $5 billion to shore up money markets over the past few weeks suggests it has -- real estate prices could either plateau or plummet. So far, the market's defiance has made fools of analysts predicting an end to the boom.

I agree. Fair. Balanced. Accurate. 'Nuff said. H/T to VG.

Balanced Reporting

I'm not a reporter and I'm slightly imbalanced. I make no pretenses about my status as a doggedly bearish RE market pundit. Read this site for two minutes and you've got that figured out. But what about the MSM? Many people trust that the news is balanced and free from bias. Bias appears in editorials and letters to the editor, not in news stories, is the naive belief, right? Take this story for example, how balanced is it?

Housing prices hit record high

New levels in average and median, but signs of cooling are showing

Carla Wilson, Times Colonist

Published: Tuesday, October 02, 2007

The average price of a single-family home in Greater Victoria has once again hit a record high, reaching $584,193 in September.

The new mark mashed the previous record of $576,632 set in August.

Last month, the median price of houses -- the midway point of everything sold -- also moved up to $520,000, from $515,000 in August.

But while the average and median prices are rising, there is a buzz in the industry that the market is starting to cool.

September saw a total of 632 sales through the Multiple Listing Service, down from 846 in August, the Victoria Real Estate Board said. Even so, overall sales for the first nine months of this year are running 12 per cent above the same months in 2006.

As is usual in this market, several sales of high-priced homes went through last month. Board president Bev McIvor said there were 17 single-family home sales of over $1 million and this had a significant impact on the overall average.

She said nearly a quarter of all single-family homes sold during September for less than $425,000.

The average price for condominiums sold last month was $341,014 and the median was $288,500. And townhouses earned an average price of $402,313 last month, with a median price of $375,000.

A total of 3,381 properties were listed on the local MLS at the end of last month, down from 3,449 in September 2006.

Of the single-family houses that sold in September, the average time on the market was 43 days, down from 56 days in September 2006, board numbers show.

Daniel Clover, of Genesis Group Real Estate Inc., said days-on-the-market statistics are showing that if homes are priced correctly, they get sold.

Clover has been talking to fellow real estate agents and the sense is that while the market is still active, it is beginning to settle. "We have got fewer people showing up at open houses, we've got fewer sales going through, price reductions are becoming more prevalent ... The buzz phrase right now is, 'If it isn't priced right, it won't sell.'"

Greater Victoria is a "price-sensitive" market, Clover said. "There is a change going on out there. Buyers are not jumping at the first home they see."

When prices come down, the drop is often larger than normally seen in the past few years in order to catch the attention of buyers, Clover said. He believes that homes are staying on the market longer than a year ago, referring to all residential properties, not just those sold.

Even so, the market remains healthy because there is a demand for Victoria properties, Clover said. Disaster is not looming and the economic indicators back that up, he said. "We have not overbuilt to excess," Clover added.

This is a good time for buyers because they are in a position to negotiate, he said.

Local MLS sales last month included 335 single-family houses, 150 condos, 77 townhouses, and 21 manufactured homes, the real estate board said. Total residential sales value was just over $279 million.

Saanich East saw the largest number of single-family sales, with 62 sales at average price of $616,027. Langford followed with 35 single-family sales, with an average price of $490,379. Langford topped the number of townhouse sales with a total of 28 and an average price of $326,021.

Victoria beat other areas in condo sales with 69 and an average price of $322,914. Saanich East and Langford tied for second place with 15 sales each.

Normally anything I steal from websites I italicize so that you aren't confused that I wrote it. I don't do that here because I italicize bull terms and bold bear terms. Here's the count: Bulls: 11 Bears: 10. I point out the one statement that can be construed either way, some think 17 sales over a mill is great for the market, some think it inappropriately skews the average. So I counted as 1 each. That said, the MSM has picked up the cooling story. Even given it a tag in the sub-headline. Times are changing. This is almost balanced.

I ran with a Realtor I know tonight. I was asked, "still looking?" I responded with, "um, not seriously, but still blogging about the market. Kinda funny right now. You still renting?" The response to my question: "You'd have to be crazy to be buying right now." That came from the horses mouth.

Considering that since last Friday the BoC has dumped a billion dollars a day to prevent having to drop the interest rate, I'd say that the storm is brewing. If the BoC does the right thing and checks inflation now with a rate hike or at minimum no rate changes, and no more dumping cash into the market, we may be saved from long term pain. If they don't, I'm thinking the similarities to 1981 are too striking to believe that a different outcome is a given.

The winds of change: Y2ThisTimeIt'sDifferent

To say that there have been a lot of warning stories in the MSM this week would not, I repeat, NOT be an understatement. Here's an interesting one, thanks to Roger.

Of course, the highlights:

Tighter lending conditions around Canada's small but expanding subprime mortgage market could splash some cold water on Canada's housing sector in the months ahead.

Many of the mortgages... offered were to segments of the population, such as the self-employed and immigrants, that have been key drivers lately in the real estate market.

"If banks start holding back credit because they get nervous and ... credit-worthy borrowers can't access loans to make purchases, that could slow the economy,"

several subprime lenders are battening the hatches. Xceed raised its mortgage rates by 100 basis points in the past three weeks and Money Connect has also raised its mortgage rates. Money Connect CEO Maurice Forget said they've also withdrawn one type of product from the market aimed at self-employed people.

What could possibly be driving these mortgage lenders to change their products up here in Canada? After all, CMHC guarantees these types of loans against losses, don't they? That's what we hear up here whenever someone tells us we won't be like the US. You can read here for a little insight into the underlying trouble that will in fact spread northward, just as hit has hammered RE markets in Europe.

Meanwhile, there was more fallout from credit market turmoil. Investors hammered shares of Xceed Mortgage Corp. after the alternative mortgage lender suspended its dividend and warned that market upheaval could hurt its profitability for the rest of this year.

"At this time, we have no way of knowing how long the current market conditions will last," said Xceed chief executive Ivan Wahl. "For the duration of this period, it is going to be a difficult and challenging time for our industry, Xceed, and our investors."

On Aug. 13, Coventree disclosed it was having trouble rolling over its commercial paper while some lenders balked at its call for emergency funds.

Up here in Canada, where subprime lending is roughly an "expanding" 5% of the mortgage business, where it is expected that subprime should have no impact on the market whatsoever, it has suddenly become in vogue to blame subprime lending for the looming RE correction. But when you get someone saying that it is in fact subprime lending that has been a key driver in current market conditions, you kind of have to scratch your head a little.

What really got me though was that they're predicting that because of ABCPs now being worth less than the paper they occupy, credit-worthy borrowers won't get mortgages. I guess I'd better buy now before I'm kept out of the loans forever, then right :) ?

Think about how big a correction will be coming if subprime borrowers can't get mortgages and credit-worthy borrowers can't too. Only people with cash can buy. If this is true, and this happens, whoa is the homeowner who has to sell.

A little fun poll: