- the source for market opinions


March 3, 2021 | The Return

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.

Yesterday we dissed the CMHC boss who made a bad call. The housing market did not go down because of Covid. It went up. More than up. It went ballistic. Look at the February stats. Insanely unsustainable. But crusty Evan may be vindicated still. This movie ain’t over.

This week RBC’s housing economist made a point in saying “the market is far from risk-free.” No, the threat is not a melt-down, but a further melting-up.

“Super-strong demand is quickly depleting inventories across the country. Competition between buyers is extremely fierce in many markets (including smaller ones), and a ‘fear of missing out’ is taking hold. Such dynamics often lead to self-reinforcing price trends. The market then becomes highly vulnerable to a correction or crash when some event (e.g. bad economic news, a rise in interest rates or some policy announcement) causes bullish sentiment to turn bearish.”

The biggest publicized event is an uptick in mortgage rates. As the vaccines spread, the economy reopens, consumer spending ignites and inflation rekindles, rates will surely continue to plump. Everybody in the lending business knows that. It’s baked in.

But something else is afoot. It could be just as consequential. It involves pants.

How much of the real estate pandemic phenom was caused by five million people leaving their employers and working from home? Lots. Tons. In fact, WFH is the key driver of why suburban properties have inflated wildly in value, attracting flippers and speckers, and why satellite cities – often far beyond the realm of commuting – have been indelibly altered by urban refugees.

None of this is good for anyone other than owners with the smarts to recognize it as an historic selling opportunity. Remote working made millions feel they could stray beyond city limits, relocate in areas where getting a detached house on a big lot was still possible and find a work-life balance. In the process they imported urban real estate valuations, priced out the natives and depended on non-local income streams to finance their new lives.

Sound familiar? Yup, just like those ‘satellite families’ from offshore that citizens in Vancouver think destroyed their city. Interesting.

But it won’t last. Despite the bleatings, moaning and protestations of those on this site who never want to go back to work and be judged, well, suck it up. Once the herd is dosed (about six months from now) many won’t have the option. Employers are completely within their rights to call you back to a safe workplace, and most will be doing so. Maybe the schedule will be a hybrid one for a while – two or three days at the ant farm – but even that’ll be a challenge if you just moved 200 km away and now have pigs to slop.

First, the facts.

The vax has changed everything. Expect new virus infections and especially hospitalizations and deaths to plummet over the coming months. All Canadian governments are promising that every willing adult will have been jabbed by September. All Americans will be done (says Biden) by the end of May. Soon you’ll stop seeing Covid dominate every newsfeed. Then we can concentrate on the usual important stuff, like Kim Kardashian’s butt or how Prince Harry was gelded.

A new Nik Nanos survey finds 64% of DT office workers are okay to go back into the towers with another 21% feeling neutral about it. That’s a far cry from the 15% who were ready to return six months ago. The Toronto Board of Trade piles on, saying, “It’s the fatigue of this non-stop virtual world, of not being as productive as you can be if you can just get into a meeting face to face and work things through.”

Of course. WFH isn’t really work. Not really home. It’s a blurring of the lines between ‘work’ and ‘not work’ so most people end up doing everything in a fog of compromise. Zoom meetings suck. Emails fly around at all hours. Kids, chores, spouses, pets get in the way. Brain space is fractured. Stress builds. Lots of Covid psych surveys show people who thought WFH would give them more peace, time and balance find it’s turned their lives into a cocktail of competing demands. The lanes are gone. It’s a mess.

From the employer’s point of view, WFH is a gathering disaster. Not for all bosses, of course, since some sectors (like IT) can work perfectly with nobody sitting in a cubicle. But in most workplaces people need to interact, collaborate, assist each other, work collectively and accomplish goals in concert.

New employees need to be mentored, indoctrinated, trained, guided and immersed in a workplace culture. Those wanting careers instead of just jobs need to be seen, heard, experienced, noticed and evaluated. Zoom can’t do that. The virus didn’t change human nature. Nor how we judge each other.

The CEO of Goldman Sachs (34,000 employees) says WFH, “is not ideal for us and it’s not a new normal. It’s an aberration that we are going to correct as quickly as possible.” The boss of JPMorgan says WFH is killing spontaneous creativity. “There are a lot of people who have been hired into our companies who have never been into our company. How do you build a culture and character? How are you going to learn properly?”

And here’s the result of a survey of several thousand WFH folks in over 40 countries:

The vast majority of us are struggling with general and workplace well-being as the pandemic continues to rage. These struggles are affecting our mental health and involve some of the key predictors of burnout, including an unsustainable workload, the absence of a supportive community, and the feeling that you don’t have control over your life and work. Overwhelmingly, respondents reported mental health declines, challenges with meeting basic needs, and feelings of loneliness and isolation. They also noted increased job demands and growing disengagement at work.

People need people. For most, work is not an isolated set of chores. You fit into a structure, a company, an office, a workplace, a hierarchy, a group of colleagues. While the virus made the last year of remote employment a necessity, it’s also damaged productivity along with messing up heads. It’s unsocial. It will not last.

The implications?

Expect more listings in the sticks. Way fewer buyers. Thus, declining prices and seller angst. The condo revival will continue. Investors already swooped in and grabbed the bargains (when we told you they existed). Inventory will be a lot higher in two months. Rates will swell, too. But the real impact will be in a year, when we look back and understand how a virus not only killed and infected, but tricked.

The biggest losers? All those pandemic pups. They thought you’d be home forever. But the cat’s relieved.

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March 3rd, 2021

Posted In: The Greater Fool

One Comment

  • 762x39 says:

    ” All Americans will be done” Garth as delusional as ever.
    Americans are not as enamored with dictatorial rule as the Canadians are. Take your vaccine and shove it Garth !!

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