Frog and Scorpion

It is difficult to get a man to understand something when his salary depends upon his not understanding it" - Upton Sinclair

And yet, people expect realtors to give a ‘fair’, ‘balanced’ or unbiased perspective on the current market situation. It just can’t happen. It’s not unlike the old fable of Frog and Scorpion. No matter what the ‘realtor’ says, his or her motive is only one- to make the sale. And you can’t blame them. To not sell would mean to go out and look for another calling. So beware of the advice you get from those whose only interest is to sell more houses for commission.

On the market front, things are going almost as per the expectations. Demand and supply effect is now showing up in the statistical metrics for prices. Prices have resumed their fall once again, at least in Calgary and in Edmonton condos. Even though almost anyone on street could attest that prices through out 2008 have been lower than in last few months of 2007.

After all, what would you expect with inventory close to all time highs, anemic sales volumes, rising inflation and banks about to unleash a wave of interest rate hikes?

For those who are planning to buy, there's just one advice- WAIT. Renting is still a lot cheaper than buying and prices are expected to decline to get them in line with the historical trends. Read through the posts and comments on this blog and other places as well to make a well informed decision. Remember, mainstream media will mostly rehash the press releases of the realtors without an iota of original research or analysis.

My apologies for the less than frequent posting, but I’ve been busy with a new project and taking time off to enjoy the weather.

On Realtors

Realtors are commissioned sales people who make their living by selling their services and ‘advice’ to home buyers and sellers. The higher the price of the goods they sell and the higher the volume, the higher their commission. Is there anything complicated in this that people do not understand? If the market volume falls and/or market prices fall who loses the most? You guessed it right. It is Realtors and pretty much everyone else in the real estate value chain. So why do people have any expectation that Realtors or the associations that represent them will put anything but a positive spin on everything. The case of David Lerah and the US real estate associations is all too well known. Do people really believe that CREB, EREB or any of the Realtors talk about on this blog really wish for lower prices or lower sales volumes? No.

They really want higher prices and even higher sales volume. And if I were making my living by providing these services, I’d probably be doing the same thing as well.
Just contrast how things have changed for the real estate business between 2004 and 2007. Sales volumes doubled. Which means double commission. Average sales prices doubled which also means double commission. So obviously, any thoughts of falling sales prices and/or falling sales volume must be an anathema since it clearly hurts their bottom line.

The problem here is that the real estate agencies control the data and since they are the custodians of the data, they can spin the numbers whatever they want, including changing the criteria or representation as they deem fit. We have to keep on referring to Bob’s site or Sheldon’s site because these are the only places where the data is available. If CREB/EREB were to make this data (or forced to make) this data publicly available, life will be a lot easier for everyone.

So here’s what I’d suggest again- look at the numbers from whatever sources you can, and don’t get too much into the commentary and interpretations of those whose occupation is to sell used houses. And don’t count too much on the advice you get here either-Be intelligent and smart, use your critical thinking. For example, if inventory keeps on climbing, prices have to fall, it’s just a matter of time.

Don’t expect a Realtor to say that you should hold off making purchases until a certain time. How will they make a living if they were to pass on such advice? After all, they have mortgages too! :)

I’ve nothing against any Realtor or real estate agencies. They are merely doing their jobs-if it involves pumping the market, creating an urgency to buy, introducing ‘fears of being priced out forever’ or anything else that will increase their commission-they will do it.

The onus is with the layperson to see what’s the best for them and act accordingly.

Finally, have faith in Mr Market. If the propaganda or positive spins could keep prices high, the situation in the US would have been far different.

UPDATE: Came across this nice article on the 'realtor ads' down in the land where real estate always used to go up. So clearly, these guys are the most 'optimistic bunch' with their tactics almost borderline chutzpah.

Wolf guarding the sheep....

And real estate boards guarding the statistics of their own industry. An interesting practice of repricing sold homes is exposed by an excellent globe and mail article.
(I found the link to this article in comments section of another blog. The article is a bit dated-from last year-but just as relevant).
If it's happening in Toronto, it is most certainly happening in rest of Canada as well.

While those who question the credibility of the real estate boards' numbers are labelled as paranoid, such an article in MSM really illustrates the inherent problems of this arrangement.
If consumers are given 'cooked up' numbers, how can they make wise investment, especially when they are bombarded by the non stop 'priced out forever', 'good time to buy', 'immigration increases', 'blah', 'blah' pitches.

What can be done to have at least accurate reporting of numbers:

• Force opening up of MLS database to a few unbiased individuals/organizations
• Let an independent organization keep track of stats-something like statscan.
• Local city councils should publish such numbers.
  

What do you think is the best way to get accurate and 'uncooked' numbers from real estate industry?