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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

February 23, 2016 | The do-over

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.

 

‘Eye-popping’, ‘white hot’ and ‘blistering’. No wonder naïve people get so excited about houses. The terms robotic reporters use when they rewrite real estate board news releases are usually over-the-top. Often wrong, too. But the 43,000 realtors in the GTA (alone) know that. This is part of the game – creating the meme that real estate is rapidly leaving the reach of common people, so they’ll abandon all hope of a correction and hurl themselves into the conflagration.

So far, it’s working.

As I showed the other day (to wails of protest), scads of affordable houses are currently sitting among the 10,000 listed for sale. If you want to buy for under a million (or even $500,000) and viewed five a day, it’d take months to get through them all. As I also proved, the average single-family, detached house today in 416, the unchallenged centre of humanity and culture, is selling for less than it did last spring.

In short, don’t believe all you read. But if you’ve been trying to sell a house, you already know this. The market ain’t smoking. Sometimes it’s barely room temperature, or like Rona Ambrose to the touch. (Trust me on this.)

This pathetic blog has long argued the real estate board’s stats are Frankenumbers, used more for marketing than reporting. How else can you explain the fact official statistics for prices and days-on-market completely ignore relistings?

As you know, sellers relist their houses when they can’t sell them. Sometimes the listing expires with no action and they change agents. Often they get tired of fruitless open houses or people looking for decorating tips, and go off the market for a few months. Most commonly, they receive nary an offer and realize they have to reduce the asking price.

Whatever. A relisting sets the clock back to zero. The real estate board doesn’t track the total time a property’s been for sale – just the days since the last reset. Nor, when it finally does sell, do the official stats measure the deal price as a percentage of the original asking, but rather of the most recent reduced one.

This is why, for example, Calgary is in the middle of a commodity-based economic crisis, and yet the average house price is (supposedly) up 1.64%. If that passes the smell test, you’ve had your proboscis in the wrong places lately.

Well, we finally have some hard numbers on this realtor ruse. For that you can thank the digital dudes at TheRedPin.com who, like so many confused people, read this site. They did an analysis of all the sales in the GTA last year (101,299), trying to ascertain how many people had to list their home multiple times (presumably at lower prices each time) in order to snare a buyer.

The answer: 17,254. In other words, about one in every six vendors couldn’t sell their property on the first try, nor at the original asking price. And this was in the middle of a boom, with record low mortgage rates and dangerously elevated levels of hormones. 2015, as it turned out, was the second-best year on record for house sales in Toronto with prices jumping almost 10% (so we’re told) and sales surging (yeah, right).

The study, says TRP, “sheds some light (and much needed data) on a common real estate practice sorely lacking insight.

“There are a slew of reasons behind why a home would get re-listed, chief among them is to shake off the stigma that it’s lingering on the market for too long. Upon finding a new listing, one of the first questions on every house hunters mind is “how long has it been on the market for?” Any number of days that falls close to 60 is likely to elicit some eyebrow raises and a handful of questions to follow about why it’s failed to receive an offer.”

As the RedPinners correctly point out, every time an agent files a re-listing the house surges onto the Hot Sheets, regains its virginal status as a steamy new entry, appears to be a fresh home entering the market and wiggles onto a zillion email alerts sent out to panting buyers. But, it’s actually fraud. Just like the summary statistics ignoring the whole slippery process.

Here’s the advice: “A general rule of thumb in real estate is that a property gets the highest amount of exposure in its first two-weeks. By re-listing a seller can often get a second shot at making a first impression. However, it’s key to note records of the prior listing will be on hand to agents, who have access to MLS.” Yeah, so always ask your guy for DOM, total time on the market, previous listings and asking prices.

By the way, the average price reduction for re-listings last year in Toronto was $24,000. Yup, that’s 3.3% –  a haircut you didn’t read about in any of the real estate board’s market reports, nor the housing-humping Globe & Mail. And, worth noting, re-listing is more epidemic when it comes to condos – where one in five fail to find a buyer without a price slash.

So there ya go. Today 14% fewer houses are for sale in Toronto than one year ago. Mortgage rates are lower. The hype is higher. Housing reporters are setting their hair on fire in sympathy. The media thumps buy-now-or-buy-never. And yet thousands of houses find no buyers. Average price stats prove bogus. Single properties get multiple listings. Affordable abodes abound. And the industry hides key data from consumers.

Is it any wonder people lump realtors in with politicians and financial advisors? Oops.

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February 23rd, 2016

Posted In: The Greater Fool

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