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July 23rd, 2010 at 12:17 pm
@Best place on meth:
There are options beyond just expanding the money supply and increasing lending. You don’t need to lend to increase asset prices. All the fed has to do is buy assets with printed money. They will do it if they have to.
July 23rd, 2010 at 12:10 pm
@Dave:
>>>The Fed will print as much money as needed to keep prices stable or rising.<<<
Doesn't matter how much money they print if nobody wants to borrow it and spend it. And these days, nobody does.
It's the velocity of money that matters, not the quantity.
July 23rd, 2010 at 12:07 pm
@Dave: Sorry realturd but the expectation is deflation with rising interest rates. How did you get to be so stupid?
July 23rd, 2010 at 12:06 pm
@specialfx3000: Only a 12.4% yoy price increase? What a bunch of amateurs.
The money pouring into property has created a worrisome asset bubble in [Chinese] housing, which rose 12.4% year-on-year in May…
July 23rd, 2010 at 12:05 pm
@Best place on meth:
That’s no deflation. It’s a shift in products from high end to low end along with shrinking margins.
CPI was up year over year at 1%.
In any case, I thought the big boogeyman here was the expectation of massive inflation and higher interest rates. I didn’t buy that line then, nor do I now. Welcome to the new world of low inflation and low interest rates.
Deflation isn’t in the cards. The Fed will print as much money as needed to keep prices stable or rising.
July 23rd, 2010 at 12:00 pm
Inventory,
I am feeling particularly daft at the moment, but for the life of me cannot figure out what you mean by “new” unit sales.
Are you distinguishing between “new” (as in never been occupied) and existing home sales?
If that is the case, your data would seem to imply that existing home owners pricing expectations (assuming it is lower prices translating into higher sales) are being adjusted more quickly than developers.
Very interesting.
July 23rd, 2010 at 11:59 am
@Anoymous:
It’s the bond market that determines fixed rates, not the BOC.
Carney moves the variable rates.
July 23rd, 2010 at 11:59 am
I wonder if anybody has ever tried negotiating a commission with a realtor such that the money they make is proportional to the discount received off the listing price? Right now it seems odd that somebody acting on behalf of the buyer stands to gain more as the deal their client get worsens.
July 23rd, 2010 at 11:55 am
@patriotz: If you have very particular requirements and needs, and limited time, you may want to hire a buyer agent, be it for a car or a house. If a purchase is complicated, an agent will handle legal details on the buyer’s behalf.
I don’t like agents being paid % of sale price commission. I don’t like buyers agent paid by seller as a % of sale price. I don’t like agents being nothing but sales bimbos not even able of performing basic legal tasks, which they refer to a notary or lawyer, at my additional expense. The conflicts of interest, for the buyer and seller agents, are blatant, and no amount of “ethics” will correct the situation.
The change to a sane environment starts with compensation, and everything else will flow from that, ultimately resulting in changes to how we buy and sell houses. The situation we have today is ludicrous.
July 23rd, 2010 at 11:54 am
HSBC are still advertising 5 year fixed/closed mortgages for under 4%. Are the banks somehow absorbing the 0.25% hike in order to keep things moving?
July 23rd, 2010 at 11:39 am
Deflation comes to Canada:
http://www.cbc.ca/money/story/.....-fall.html
July 23rd, 2010 at 11:36 am
Re: Chinese bubble. Some here have speculated that when China’s RE bubble inevitably bursts, this will cause even more mainland Chinese buyers to prop up the Vancouver market. They apparently will need to “park their money someplace else”.
What a load of crap.
I used to live in London, and the locals who’ve lived there for decades used to tell me about the huge influx of Japanese in the mid 80s. They were buying up everything in sight the affluent North London suburbs. For a while there were whole streets of shops and services with Japanese signs catering to the new immigrants. Since the Japanese property bubble burst in the early 90s, almost all of them have sold and moved back to Japan. There is barely any sign of them today.
Many of the corrupt Chinese officials driving up prices in Van West will likely face the same fate: their investments in China will crash, and they will have no choice but to sell their properties in Vancouver too. After all you can’t “park your money somewhere else” if you can’t sell your overpriced Beijing apartments first.
July 23rd, 2010 at 11:20 am
Don’t be too hard on the agents, their days are numbered anyway.
Based on current sales, only 1 in 5 agents will get a paycheque this month – on average.
Let’s hope the other 80% socked some money away during the good times and didn’t blow it all on something stupid – like overpriced real estate.
July 23rd, 2010 at 11:18 am
Isn’t it possible to get sold information from the BC Gov website?
Granted, you’d probably have to pay for it.
All sales get registered with Land Titles office, no?
July 23rd, 2010 at 10:53 am
A gem of convoluted bafflegab from the BOC gov. Up is down….down is up he says. Now that inflation is ‘moderating’, he’ll raise intrest rates. I thought higher rates were designed to contain inflation. Wow…..and we pay this bozo 450 grand plus plus chauffeured limo and great digs.
http://www.thestar.com/article.....rate-hikes
July 23rd, 2010 at 10:40 am
Flat fee MLS listing available in US for less than $400;
http://www.bostonfsbo.net/mlslistingservice.htm
Hadn’t seen something for flat fee viewing of the MLS yet though.
July 23rd, 2010 at 10:39 am
@DigginOut:
How exactly does that work in the interest of the buyer? Doesn’t the guy have just as much incentive to talk you into paying more as to talk the seller into accepting less? Shouldn’t an agent who is truly working on the interest of the buyer advise the buyer not to buy at all if good value cannot be found?
Would you pay someone $500 to find a car for you to buy, payable only if a sale is made?
July 23rd, 2010 at 10:31 am
Oh no, not the real estate agent commission debate again… this is why I bailed on the Chipman blog.
July 23rd, 2010 at 10:31 am
@AACI:
No not at all, I was thinking about the public, not anyone on this forum, which is the last refuge of common sense.
I agree that the seller’s agent, while incented in the right direction, is not incented in the right proportion or amount. The fixed commission (i.e. on the first 100K or whatever) should be lower (or even zero), and the marginal commission should be higher. IOW if I was selling a house listed for $450K, I would pay the agent 10% of any amount over $400K. That’s an incentive that really means something.
pixie chick:
In other words hiring an agent (who is already being paid by the seller) gives you first opportunity to pay too much. Wow where do I sign up?
July 23rd, 2010 at 10:15 am
I have long advocated the hourly rate for realshit services ( such as they are). Knowing exactly what a realtard does for a sale is little more than the counter person at 7-11 promoting a new pizza topping I suggest no more than minimum wage through an agency that sells a package of information and paperwork. In reality the tranaction is worth no more than $200 when you consider the average 5 hrs a realwhore spends actually working on an individual listing or sale. Why should one individual vendor subsidize months in between sales> The MLS is entirely computerized and takes less than minutes to extract data. At most two or three hours are spent driving across town opening doors. Shouldn’t it be like a tax preparation service fee? Say….average $65 flat flee or up to ‘X’ amount for customized services that the individual chooses to pay for?
Frankly I’m suprised that people have not revolted against the MLS monopoly. The RE Boards act with quasi governmental arrogance and have blustered the local governments into listening to what is essentially an illegal practice…..bizarre. Write your MP’s….again….As we have seen with the police files, public opinion has forced change if it is strong and consistent.
What I would like to see is disclaimers on real estate advertising disguised as news ( as they do in the US under Consumer Prtection Laws) so that more people would be made aware of the ‘pump and dump’ reality of real estate marketing.
July 23rd, 2010 at 10:08 am
@ “A-sharp”
Fair enough, if you’re an individual that has experience with RE transactions. I’m just saying if you’ve never purchased RE, or have only done it once or twice, it’s ignorant to think that you’re as skilled/experienced/qualified as someone that has done it 20 or 30 times.
I think if you go to a flat rate commission (most people have a pretty good idea how much they’re going to spend, so it should be easy to get close), you significantly reduce the agents interests being contrary to your own.
If you know I’m going to pay you $5K if I buy, you’re going to try your hardest to find me a deal that I’ll take. Sure, you’re still just wanting me to buy, whether it’s in my best interest or not, but that’s covered by caveat emptor. Any conflict of interest wrt pricing gets reversed because the lower the price you can negotiate for me, the more likely I am to buy the property.
Seems like a pretty simple contract amendment, to solve the conflict of interest that so many here use as the case for discounting the value of services that an agent provides.
July 23rd, 2010 at 9:53 am
@Patrioz
Although there is the obvious reality that the commission structure puts the interests of the buying agent in juxtaposition with the interests of their client, my point about proportion was not a reference to this. It was in reference to the magnitude of their compensation, which is disproportionate to their service (as it should be delivered in principle.. unlikely as that is). I agree with what you are saying though.. the entire structure of real estate agency is ridiculous.
The other fellow made the valid point.. variance of 20, 50 100k per deal is of negligible interest to either agent relative to the volume of deals done. I don’t think it’s accurate to think that a buying agent is trying to pump up the price in order to maximize his commission.. the difference is usually nominal to them. Velocity of deals is their primary driver.
Not sure if your point about “common sense” was directed towards me.. I am assuming that it wasn’t.
July 23rd, 2010 at 9:29 am
@patriotz: “What is it about RE that makes people throw common sense out the window?”
I think it is the myth “RE only goes up”.
The wealth a few people have accumulated flipping properties has completely blinded vast population in their 20s and early 30s, and there is no room left for common sense. Those FTBs do not know what life without debt looks like and they do not know any better than to max out their CCs grocery and shoe shopping, they have no savings and all they have seen in the past 10 years is talk, talk, talk about RE…. It is in human nature to wish to have a home in which you will be on your own, but common sense is gone – therefore, we have waaay overpriced leaky condos in which strata councils skin you alive with their bylaws and incompetency, or million dollar houses which force you into having tenants, and depending on them for mortgage payments.
It is like invasion of body snatchers!!!
July 23rd, 2010 at 9:26 am
In the “hot” market hiring the agent while looking to buy is supposedly to your advantage – they laim to have first hand, immediate access to newest listings and in times of bidding wars having access to new offerings as they come up has its appeal.
However, when the market is slow and you can wade through all the stale MLS listings yourself in comfort of your living room (or a nearest Starbucks lounge) I cannot possibly see a reason why anybody would seek help from a “professional” when looking for a house. What is it they have that we don’t?
July 23rd, 2010 at 9:23 am
@patriotz:
If a sellers agent makes 2 1/2 % on a $1M he gets $25k. He only makes $20k if it was $800k. Two sales at $800k he makes $40k. RE agents are only interested in number of sales, the price isn’t as important, seller or buyers agent.
July 23rd, 2010 at 9:23 am
@patriotz: Would you hire a lawyer to defend you in a lawsuit if he was being paid a % of the damages awarded against you?
A quote for the ages.
July 23rd, 2010 at 9:21 am
Munir Sheikh has resigned as chief statistician for Statistics Canada. Sean Kilpatrick for The Globe and Mail
In a public rebuke of Ottawa, head of respected agency rejects assertion that voluntary survey can replace mandatory one: ‘It can not’
http://www.theglobeandmail.com.....le1647348/
Accurate statistics is important for many decision making processes. Just look at what happened to Greece when their gdp was miscalculated. We had some of the best in the world, up until now. The populist argument is that census data collection is intrusive, but one has to weigh the inconvenience against the greater benefits. The correct response would have been to fine tune the questions on the census rather than remove the mandatory data collection aspect, which is essential for accurate statistics.
July 23rd, 2010 at 9:20 am
@DigginOut: Everyone hating on agents are talking about how their interests aren’t in line with your own, and that you’re smart enough to do it yourself. But you’re dumb enough that you worry about getting sold on a shitty deal by your OWN agent? really?
we’re not worried about being sold on a bad deal. We would just as soon skip them altogether since we indirectly pay thousands of dollars to have them. We do not see the value.
July 23rd, 2010 at 9:20 am
I find it interesting that the ratios. Say 7 / 3.5 % hold up even as properties get much more expensive. I have seen homes sell for over 8m with the same commission structure as a 300k condo or a 1.5M home. The agents get to divide up literally hundreds of thousands in commissions on the most high end homes and the mktg costs and skill involved are about the same.
July 23rd, 2010 at 9:14 am
@Goodnight Moon:
Great post.
I cannot wait until the data is opened up, if it is opened up.
July 23rd, 2010 at 9:13 am
@AACI:
“Disproportionate” is not the right word. It’s not a matter of proportion, its a matter of direction. The right words are “negatively incented by their commission”.
RE agents are paid a % of the sales price. Thus the incentive of the agent is to get the highest possible price. The interest of the buyer is to get the lowest possible price.
The interests of buyer and seller are opposed. Would you hire a lawyer to defend you in a lawsuit if he was being paid a % of the damages awarded against you?
How hard is this to figure out? What is it about RE that makes people throw common sense out the window?
July 23rd, 2010 at 8:45 am
http://www.businessinsider.com.....z0uQ1DvJ00
Interesting article about the China bubble… so Vancouver.
July 23rd, 2010 at 8:43 am
I agree with what has been posted here; the services rendered by a real estate agent working on the buy side are completely disproportionate to their commission. That is saying something, given that the sell side commission is completely out to lunch in the first place.
You are actually more likely to achieve a discount on the price if you enter the transaction without an agent. Although I like the idea of telling the selling agent you want a real estate commission, it’s unlikely to happen.
What I would do is tell the selling agent that the final price is to be discounted by the amount that would have been payable to the buying agent. In this manner, you can count on the selling agent to act like a typical selling agent (ie greedy and selfish, representing themselves first and foremost at all times).
Because they would continue to double end the deal, they would be much more likely to try and convince the owner to drop the price. We all follow the logic.. a double ended deal at a slightly lower price would be better for the SA than would be a single sided deal at a slightly higher price.
For those who are truly unsure of broader market conditions, there are many reputable appraisers out there who could give you an UNBIASED and comprehensive evaluation of current market conditions for a fraction of what a buy side commission is.
July 23rd, 2010 at 8:42 am
I think it’s fair to say that there are some RE agents out there that are better than there peers. Agents that are more successful, sell more units, make more money, and are just generally more skilled than the competition.
by that reasoning, there must be SOME value in an agent that is good at his/her job; for a buyer OR a seller.
If agent A is better at his job that agent B, then there’s a good chance that he’s better at it than me as well. That doesn’t justify the ridiculous commissions they get, but to completely write off that entire profession as useless seems a little ignorant. Even if it does only take a 6 week course to get certified.
As a first time buyer, I’m guessing an agent that has participated in a couple dozen RE transactions is going to have at least a little insight into the process that I do not.
I think we’re entering a market where buyers and sellers, with the help of a lawyer, could start getting creative with agent contracts. Consider as a buyer a 12 month contract for $10K, you show me at least x units within my criteria per month, manage the communications with the other agent, booking the appointments, send me the addresses and times, yada yada yada. You get a $5K bonus if I buy (so, you’re going to put as much downward pressure on price as you can, to entice me to make the purchase).
Everyone hating on agents are talking about how their interests aren’t in line with your own, and that you’re smart enough to do it yourself. But you’re dumb enough that you worry about getting sold on a shitty deal by your OWN agent? really?
July 23rd, 2010 at 8:34 am
@“A-sharp” Accountant:
Don’t forget the annual picnic invitations, and gift basket when you make your purchase/sale!
July 23rd, 2010 at 8:04 am
@Goodnight Moon: “but realtors have managed to keep charging high rates based on walling off access to the data”
They charge high rates because buyers keep paying them. Why? Yes, because they have previous sales information at their fingertips and buyers don’t know how else to get it (there are ways of course). But that premise is based entirely that buyers care what some other idiot just paid for a house. If the price you are willing to pay is based upon spot market rates, you’ve already lost.
July 23rd, 2010 at 8:00 am
Ronald Coase was an economist in the 30s who came up with the CoaseCost – the theory that the real cost of anything is in it effort to organize. The CoaseCost of real estate transaction use to be quite high because it involves an agent manually searching through listings.
We’re at a point right now where the CoaseCost has dropped dramatically thanks to the Internet, but realtors have managed to keep charging high rates based on walling off access to the data.
This wall is leaking like a seive right now and I think many Realtors are about to be blindsided by the collapse of this wall. Many will be shocked when the value of their labor is rebalanced to it’s actual value.
July 23rd, 2010 at 7:51 am
@“A-sharp” Accountant: “the part that actually has value is a fairly quick and simple task.”
Well then they get more clients. A lawyer doesn’t make $10K per client but has many more clients. And yes that means fewer Realtors on the buy side.
On the sell side, as I think you have agreed with in the past, there is good reason to have a commission structure.
July 23rd, 2010 at 7:44 am
@Inventory:
June sales were down 30% year over year.
July sales will be down closer to 50% year over year.
I may have to call up some of my favorite real estate agents just so they get to hear the phone ring.
July 23rd, 2010 at 7:43 am
@jesse:
There are some agents with speciaized knowledge…but on a general level, it seems to me like the value they provide is access to the MLS data.
that is the core of the value they provide. The main problem with this, is that many people do not see the $10,000 value in a database search. Because of this, realtors have added a lot of things into the package that do not actually provide value.
Do I need someone to drive me around?
Am I not really truly capable of negotiating my own sale?
From my perspective…someone who has and will continue to justify every hour charged on a cost/benefit basis…I cannot help but wonder how the hourly rate model would allow realtors to make much money, since the part that actually has value is a fairly quick and simple task.
July 23rd, 2010 at 7:43 am
@patriotz: “Would anyone hire a car salesman on an hourly or fixed rate to help them buy a car?”
If their ONLY remuneration comes from giving me good advice regardless of what I buy, and they have a reputation to consider, then yes. Maybe it’s a bad comparison, but I have a family friend who is a mechanic. I went used car shopping with him and he gave me unbiased advice on which cars to consider buying and how much to pay.
While I would never trust anyone in Vancouver to give me advice on how much to pay for a piece of real estate (due to what I consider to be an inherent and surprising general misunderstanding of how it is valued), I would still accept and pay for seasoned advice on building quality and contract negotiation and terms.
July 23rd, 2010 at 7:24 am
Spot The Speculator #6
“I plan to live there, renovate everything I can, then sell in a year. I have a close friend who has been doing this for a living.”
http://wp.me/pcq1o-177
July 23rd, 2010 at 7:21 am
@jesse:
Why would I (as a buyer) hire someone whose training and career experience are oriented solely toward making a sale and collecting a commission? Would anyone hire a car salesman on an hourly or fixed rate to help them buy a car?
July 23rd, 2010 at 6:59 am
@patriotz: Why not just pay a Realtor an hourly or fixed rate like a lawyer or home inspector? Or is that too out of the box?
July 23rd, 2010 at 6:25 am
“For consumers looking to enter the real estate market, Kinch has some good news. “We should see a summer slowdown that is typical of any summer market. Prices should see a mild correction of 2-3%.”"
“Peter Kinch is the author of The Canadian Real Estate Action Plan: Proven Investment Strategies to Kick-Start and Build Your Portfolio (Wiley; June 2010) and the founder of The Peter Kinch Mortgage Team and the PK-Approved Dominion Lending Centres network of brokers across Canada.”
I think Peter, is trying to tell us that we better hurry and buy.
Peter of course is an objective professional observer, and if he calls for “a mild correction of 2-3%.”, you can be sure there has never been a better time to buy.
July 23rd, 2010 at 6:16 am
@jesse:
You’re being too kind.
Substitute “car salesman” for “Agent” and you’ll see how ridiculous this is.
As you pointed out, RE agents’ ONLY incentive and ONLY professional skill is getting a sale. The very idea of a buyer hiring a RE agent is absurd. If a buyer wants someone to negotiate in his interest, he should hire someone whose profession is to represent clients’ interests in an uncompromised manner. Such as a lawyer, which a buyer needs anyway.
When I buy, I intend to go straight to the seller’s agent and tell him that if he wants to sell to me, he will have to give me the buyer’s agent’s split of the commission – because I’m my own agent.
July 23rd, 2010 at 5:36 am
From the 10 worst homebuyer mistakes:
Agents, even with “ethical rules,” only get paid if someone buys. If that’s not a fundamental conflict of interest I don’t know what is.
July 23rd, 2010 at 2:38 am
Recovery short lived as market slumps again
By Graeme Powell
Updated Tue Jun 1, 2010 1:53pm AEST (Australia Eastern Standard Time)
“The Perth housing market has slumped again just 12 months after showing some signs of recovery in the wake of the global financial crisis.
People who have been trying to sell their homes have reported that not one person has turned up at the home open……
…..Mr Airey says any signs of life being shown by housing markets across Australia have been stopped stone dead by the rate rises.”
http://www.abc.net.au/news/sto.....915162.htm
So just like potassium nitrate could cause impotence, rising interest rares will deflate Mr. Peter’s housing hard-on.
July 23rd, 2010 at 2:33 am
June Unit sales
1995 = 1997
1996 = 2424
1997 = 2315
1998 = 1775
1999 = 2446
2000 = 2033
2001 = 2914
2002 = 2768
2003 = 3643
2004 = 3642
2005 = 4485
2006 = 4064
2007 = 4336
2008 = 2478
2009 = 4319
2010 = 3046
July = UNITS = %Sales to listings
1995 = 1978 = 42%
1996 = 2100 = 39%
1997 = 2303 = 46%
1998 = 1816 = 44%
1999 = 2181 = 58%
2000 = 1710 = 48%
2001 = 2737 = 73%
2002 = 2759 = 67%
2003 = 4140 = 88%
2004 = 3114 = 62%
2005 = 3825 = 88%
2006 = 2802 = 61%
2007 = 3955 = 76%
2008 = 2215 = 34%
2009 = 4197 = 80%
2010 = 1637 = 49% *** July 22
July
“NEW” unit sales
YEAR= UNITS = %Sales to listings
1995 = 296 = 37%
1996 = 442 = 45%
1997 = 350 = 38%
1998 = 311 = 61%
1999 = 298 = 76%
2000 = 205 = 52%
2001 = 288 = 87%
2002 = 221 = 69%
2003 = 488 = 110%
2004 = 343 = 79%
2005 = 724 = 134%
2006 = 445 = 80%
2007 = 503 = 70%
2008 = 215 = 36%
2009 = 441 = 74%
2010 = 96 = 25% *** July 22
July 23rd, 2010 at 2:27 am
“The expected increase of the overnight lending rate by the Bank of Canada on July 20th 2010 will have little effect on the housing market, says Peter Kunt, one of Canada’s top mortgage brokers.”
Ah Peter, I just love these kinds of statements that show that not only do you pricks miss the spirit of the BoC’s intent to cool consumer spending but at the same time publicly defy the Bank and challenge them to do even more until the your arrogance is smashed and your back is broken.
These were the same kinds of statements that provoked the Bank of Australia to continue to raise rates over and over with the express purpose to kill housing speculation and in an effort to drop homes prices even in the face of strong protests from rich homeowners.
Read:
“Australia’s central bank underlined its determination to reduce monetary stimulus on Tuesday when it lifted its benchmark interest rate from 4 to 4.25 per cent, its fifth such rise since October.”
“Ready for a fall
June 7, 2010 – 12:53PM
Rates are on hold but the housing fire could already be out.”
“The renowned value investor and founder of global investment management company GMO, Jeremy Grantham, says both the British and Australian housing markets should decline by about 40 per cent. If they don’t, he says, it will be the first time in history that a bubble has not behaved in such a way.”
All those quotes are from:
Australia Raises Interest Rate To 4.25%
http://www.housepricecrash.co......pic=144506
So Mr Kunt, please keep these comments a coming because the your precious housing market is like the big zit on your shoulders……and the BoC has one of the pins that will pop it.
Buh Bye Peter