- the source for market opinions


July 3, 2015 | Faltering

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

“Every time I feel myself faltering,” says Nancy, “I go to your blog. Thank you for being a voice of reason in troubled times.”

Now I don’t include these nice words simply as an anecdote to all the slugs and inflated tools who are curiously drawn to this blog, but to illustrate something. Nancy’s a lawyer with years of fancy schooling, a fat salary, limitless borrowing power and a lit career. She’s smart and astute. “I work as a lawyer and I’ve watched family, friends and colleagues sink every single cent into real estate; some can afford it, others cannot. I constantly get asked when I’m going to buy a house (I’m a lawyer – of course I should own a $2M house with a $1.5M+ mortgage!) and get bullied when I tell people that I think this market is built on a house of cards. I save in any given year 50-60% of my income, invest in the market and travel the world guilt and worry-free when I’m not working.”

She gets it. But even Nancy is not immune.

“The financial literacy of even highly educated people truly shocks me. However, it’s easy to get sucked into the hysteria. I too would like a garden and a big kitchen to entertain. I didn’t think that at 33 (with the income I have), I would even have to think hard about owning a home. Yes, I could go out tomorrow and get approved for a massive mortgage but I don’t consider that truly owning. Logic and reason would dictate that I stay out of this market, build equity and wait for the inevitable. Emotion and the fear of everyone getting rich and leaving me behind would say otherwise. Luckily, I am smarter and more rational than I am emotional or inclined to fantasy.”

Could this be the perfect woman? I’m thinkin’ maybe. But there is a larger point. The times are ‘troubled’ for her and so many other people because they simply don’t know what to believe. On the Internet, for example everything has equal weight. The doomers, the Zero guy or every sleazeball flogging gold, ammo or a new book tell you daily the world’s a tinderbox ready to blow. I tell you otherwise. The government, central bank, developers, real estate boards and agents tell you houses are a perfectly good place to put all your wealth. I caution you against it.

And the media’s no help, decimated economically as it is. When markets fall, it’s on the front page. When they soar, it’s nowhere. Education? That’s a joke. Daily we turn out graduates who think TFSA is a designer drug.

Well, time for a concrete example. So let’s pick on Calgary, where men are men because they like to rope and torture calves (starting tonight).

Yesterday the local daily ran a fat headline saying the housing market is stabilizing. It even found a realtress to offer these encouraging words, “Even though overall sales activity is slower than recent years, what many people aren’t aware of is that there are several neighbourhoods where demand has been stable, including prime areas in the inner city.”

Bolstering this was an RBC report suggesting the worst may be over for Cowtown real estate. But the cynical might look at the numbers and conclude it’s all a transparent attempt to sucker buyers into a market with serious downside potential. For example, sales fell 18% in June, the average price dipped 2% and the length of time it took the 2,184 sellers to find a buyer increased by 40%. In fact, more and more homeowners are giving up – active listings tumbled 18%.

No wonder. Oil is back in the $50 range and energy sector layoffs seem to be building momentum. Alberta now has a socialist government, which has already goosed taxes on profitable corporations and higher-income earners. Oil exports have plunged, pipelines are cancelled and the ‘Alberta Advantage’ is gone. Taxes will increase further, as will spending. The Dippers plan on saddling small business with a minimum wage 36% higher than anywhere else in Canada.

Well, actions have consequences. They’re arriving already.

Here’s another view, from housing analyst Ross Kay, who says Calgary provides a “classic example of what happens when real estate markets are misrepresented to the public.” How many Calgarians, he wonders, have been told what’s really happening to their single-biggest asset.

  • Calgary is now in its 12th consecutive month of slowing sales. (this is very, very important to understand for post June 2015 through the rest of the year ).
  • In the first six months of 2014 Calgary houses sold on average for $25,000 more than the average for all of 2013
  • In the first six months of 2015 the homes they sold for $9,000 less than the average for all of 2014
  • The average home was already over $9,000 cheaper on June 30th, 2015 than it was on June 30th, 2014 and the spread is getting worse each month.
  • Calgary is on pace to record fewer than 19,000 resales in 2015 which would see people moving 50% less than they were in 2006.
  • Only 46% of all sellers have been successful so far in 2015 while in 2014 81% were successful in the same first 6 months.

See what I mean? It’s a confusing world. Everybody has an agenda, and pity the fools among us who can’t figure it out correctly.

By the way, in Toronto (where they only eat calves) there are currently 10,000 condos listed for sale – on Kijiji alone. Another 8,000 condo resales sit on MLS. If this is not telling you something, you’re not listening.

Okay, that’s it. I’m now taking bids for Nancy’s email addy.

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July 3rd, 2015

Posted In: The Greater Fool

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