April 20, 2021 | ‘The Market Has Flipped’

So Chrystia the Impaler turned out to be more of a Milquetoast Mama. The budget will be quickly forgotten, especially when it comes to pricing a house. Sorry, newbie would-be buyers, but the feds want real estate to run hot. That’s now clear. They did absolutely nothing to cool this sucker off, not even lip service to their Millennial and Gen Z voter base who will shoulder real estate debt for most of their adult lives.

But stop. Hey, what’s that sound?

Silence.

Apparently realtor phones (at least in the nation’s biggest market) have ceased ringing. Look at this report from one of GreaterFool’s clandestine double agents, posing by day as a prominent GTA broker:

“Live from my office meeting,” he says. “The market has flipped. Don’t know why but it has. Tons of new listings. Showings down big time.”

“Early days, and I haven’t checked the stats, (they tend to be a bit of a lagging indicator anyhow), but I have noticed that signs have been popping up like tulips for a week now. Today, at our virtual listing tour I had the first opportunity in a week to check in with the men and women who are active agents.  Two things stood out. First, everyone reported a new listing, some more than one. This follows a period of many months in which everyone had buyers but no listings.

“Secondly, showings, which are tracked in real time on every listing agent’s phone, were down significantly. Others reported expecting multiple offers, but finding themselves with none. Staff reported that the phones were quieter than they had been. It is anecdotal at this point, and perhaps some of your blog dog realtors may or may not corroborate my experience.”

He’s not alone. Similar reports have come in from the burbs of Vancouver and some of the larger regional markets, like London and Barrie. What was a conflagration two weeks ago is now barely smouldering. Deal numbers are off, yes, but it’s the level of buyer activity – inquiries, calls and showings – that tell the real story.

What’s happening?

Lots. First, we have the damn Third Wave. This one is scary in a whole new way as the health care system starts to buckle. Now you don’t need to worry only about getting Covid, but anything that could send you to the hospital. The world is suddenly too volatile and unpredictable to merrily mortgage your soul.

Second, it’s spring. The time when people traditionally list houses. If demand drops a little while supply swells the market will respond. And it is. Bigly. Have you done a realtor.ca search for new listings in the past 14 days?

Third, travel restrictions. In BC Comrade Premier Horgan has told people not to venture out of their own health authority regions. In Ontario Doug Ford has erected barriers at the borders with Quebec and Manitoba (to keep Ontarians from fleeing). Today Nova Scotia virtually sealed its borders, including to residents who are now told not to travel unless essential. Nobody gets in, either. Even for funerals.

Fourth, there’s no value left in residential real estate. Everybody looking to buy knows they’ll be hosed, fleeced, Hovered and ripped off by greedy vendors and rapacious realtors. All purchasers – except those still riddled with FOMO – must understand they’re buying into a bubble, at the top, paying a huge premium in precarious times for dubious reasons. In short, we may have hit that wall. And no wonder. A 30% year/year price increase is absurd, irrational and historic.

We used to have a five-month supply of houses on the market, which recently slid below two before starting to edge higher again. If demand slows, things could change quickly. ‘Offer nights’ will end up being lonely affairs as agents and sellers who craved a vicious blind auction are left staring at an empty kitchen table. As new listings crop up beside places that have yet to sell, competitive pressure will build for prices to drop.

And, inevitably, as the herd gets dosed (we’re at 27% of adult Canadians) you can count on more workplaces opening, the WFH craze phasing out, and the shine coming off markets that looked like rural utopias six months ago. How did people moving to Woodstock, Hope, Marmora or St. John ever think they were going to pull this off? Pandemics suck. But they’re temporary. And, no, this one is not going to change the world.

Let’s see what happens. But for every action there’s a reaction. This one could be epic.

Garth Turner April 20th, 2021

Posted In: The Greater Fool

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