March 26, 2021 | ‘We are Watching’

For the past nine months he’s been chronicling the bizarre housing in his neck of the woods on IG. “It’s crazy,” he says. “Each day I posted listings that were either insanely overpriced, missing photos, photos that were poor quality, houses that were messes, interesting features like stripper poles, etc.” Apparently that’s an appealing feature in Kitchener-Waterloo.

Now, for context, K-W is a citystate of about 250,000 people 110km west of the Big Smoke, down the Killer 401. On a good day that’s a 90-minute drive. Once Covid leaves you could double that most mornings.

Last month gives a nice snapshot of what the slimy little pathogen has done to a cute city with a cutting-edge university and robust hi-tech sector. It ain’t pretty. FOMO everywhere. February sales were 67% higher than January and prices have swollen 35% in a year. The average property is closing on $780,000 and in the last few weeks a detached passed the $900,000 mark. First time.

One year ago that average detached home cost $673,825. A year before that, $597,965.

“We continued to see dramatic increases in the average price in February due to the persistent and fierce competition for homes in our region combined with short supply,” says the real estate board. “Buyers are very frustrated competing in this hyperactive market. The low inventory and mortgage rates are resulting in multiple offers, higher prices and creating a fear they are missing out on the chance to become homeowners in this unprecedented market.”

So the realtors have adopted the industry Frankenumber, called the MLS® HPI, which seeks to smooth out price trends and thereby mask current conditions – like buyer insanity and social destruction.

Well, back to our Instagram guy, chronicling all this.

“I would often post the sold prices of the houses I posted. Each week I also created a summary chart of the number of houses sold, how many went over/underasking and by house much. I had nearly 1500 followers, including many realtors when I received a copyright strike on March 23 from Instagram. It said that the Canadian Real Estate Association filed a claim and my account has been suspended for up to 30 days. The person who filed the complaint was the CREA’s legal counsel

“People want to talk about what’s going on,” says the face behind LOL Listings, “and yet the CREA is like some mafia of controlling information. It’s garbage. Just thought I would vent to you as this has been a topic on your blog for quite some time.”

Why would CREA move to shut this guy down – a little local social-media fishy with a scant fifteen hundred followers? Well, it could be because current conditions are extreme, dangerous, spiraling out of control and the housing guys know they’re short strokes away from being squished by a government hammer. It’s also an industry skewed to serving sellers, not buyers.

Look at the blind auctions. They’re all over K-W now, as in Langlely, Barrie, Kelowna, Ottawa, Halifax and every little habitation within two hours of urbanity. In Toronto properties are going for up to $700,000 more than asking. All thanks to this tactic. Realtors pick a price out of a hat, set a date for reviewing offers, then let buyers guess how much money it will take to succeed. There’s no visibility. No reporting. The seller can capriciously select any bid, or send several back for sweetening. Each potential buyer has no idea what others are offering. No context. The result can be an absurd overvaluation, setting the bar for every other house on the street.

Like this place.

The condo townhouse in Langley was priced at $820,000 – a healthy premium over the last comparable sale of $770,000. In days there were 110 showings, then 20 offers – in a blind auction. The ‘winner’ paid $1.4 million – or $500,000 above asking.

By the way, Langley has a pop of about 25,000, sits an hour south of Vancouver, with the average household income a little under $60,000. The realtor handling the sale said it was a feeding frenzy among seniors. “Nobody wants to go to a care facility.”

So this week a Toronto semi also received 20 offers, and sold for $575,000 above the ask. The last guy standing parted with $1.675 million for half a house. “It was wild as we saw the offers were rolling in,” the smiling realtor Anushki Bodhinayake told CTV News. “We knew it was a great house. We knew it was in a great neighbourhood. We didn’t really think it would get this much attention.”

Well, feeling pooched yet? This has the potential to destroy the livability of every major community, create two classes of citizens, cement a wealth divide, disenfranchise an entire cohort, create structural household debt, make shelter unaffordable and hobble the economy as billions a week flow into vaporous housing equity. In short, it’s an epic policy failure. It’s time those who have greased the wheels – realtors, central bankers, political leaders and our federal housing agency – stand accountable.

On Thursday CMHC said the Toronto, Hamilton, Halifax and Ottawa markets are dangerous and prices increase unsustainable. Realtors don’t believe it. March stats, they say, will prove so. They’re right.

“We are of course watching housing markets across the country very, very closely and carefully,” says Finance Minister Freeland. “We are very aware, also, of the challenges that many Canadians face — particularly young Canadians — in buying a home,” she said. “So it’s something that we’re looking at carefully.”

What does that mean? Measures to dampen demand, quell FOMO, make houses harder to buy and finance, leading blind auction players to realize their immense gamble?

Or will the feds try to ‘help’ newbie buyers with more incentives – throwing gas on the conflagration?

It’s your moment, Chrystia. Don’t blow it.

Garth Turner March 26th, 2021

Posted In: The Greater Fool

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One Comment

• Avery Roberts says:

  March 27, 2021 at 10:29 pm

  It’s easy to bid 1.4 million when you’re buying it with “printed” money courtesy the nice lady at the bank.

  Reply