Realtor: DO NOT PANIC about bubble.

There’s an interesting read over at BCBusinessOnline about those crazy bubble bloggers and forum bears:

The “Bears” talk cover up which I always find so intriguing. Commenting on the September stats from the Real Estate Board of Greater Vancouver, Seth M. says:  “This will only make the conspiratorially minded angrier — most of them convinced that the so-called benchmark indices produced by organized real estate are covering up a major decline.” The reality is the numbers from behind the HPI are actuals.  They aren’t fabricated to prop up a cyclic market so that realtors can hang onto their markets.

Now there may be some of you that believe the ‘cover up’ angle on the HPI, but I think you’re maybe a little crazy.  There is nothing to be gained by massaging the numbers.  My feeling on the HPI is that there seems to have been no good reason to change the methodology for calculating it.  It used to be a very decent apples to apples historical comparison, but by changing the measurement and then recalculating it they’ve killed its value as a long term gauge.

I think any problems with the HPI come down to opacity and bad math, not any smoky back room conspirators whose only goal is to keep house prices high.

But what do I know?  I’m just a crazy anonymous bubble blogger.

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Ralph Cramdown
Guest
Ralph Cramdown
Our friendly realtor ends her advice with “Have a five-year plan and don’t buy more than you can afford. Speculators — you’re on your own. The rest of us will sell at a loss and buy at a gain or whatever version of the law of supply and demand is in effect at the time.” Which is really wonderful since we’re all cash buyers and don’t have any leverage. If our starter condo goes down 15% we can just sell and use the proceeds to buy the move-up which is also down 15%, and save money! Oh wait, Billy bought with leverage! Billy, that won’t work, honey. If your condo goes down you lose all your downpayment and more, have to write a cheque just to sell the place and don’t have any downpayment to buy the new place. Class,… Read more »
jesse
Member

Such a poorly written article I’m surprised even BCB hasn’t pulled it down. The quote this Realtor cites comes from one Gary Marr. Marr may be many things but he certainly isn’t “anonymous”.

jesse
Member

Not sure where the “bad math” comment originates. The method closely matches price movements tracked by the sales pair methodology used by the Teranet HPI. Price indexes like the Case-Shiller (Teranet) HPI are known to lag market movements by a few months. I think CalculatedRisk blogged about this.

Boombust
Guest
Boombust

I noticed the ad for the Burke Mtn. house on the side bar…

Those houses have been built by the dozens in that area. Sitting empty. Over-priced, (as usual) on small lots.

Time will tell what is (SURE) to unfold. He he…

bullwhip29
Guest
bullwhip29

The sticker prices for properties that now include free cars, furniture, appliances, internet service and so forth have effectively dropped by a lot more than meets the eye. This in not reflected in the charts. CMHC agrees and will only lend based on the value of the property less the market value of all these so called freebies. Expect more of this nonsense in the coming months/years. Adjusting the MSRP downward is strictly forbidden.

Absinthe
Member
Absinthe
We don’t really need to believe in conscious conspiracy. Humans are really good at seeing what they believe, and we have a tendency to squeeze beliefs tighter and tighter the more painful and obviously incorrect they are. Being skeptical of our own reasoning is the only really rare and challenging form of skepticism! I sometimes wonder what happens to the David Lereah’s of the world, after all the cameras go home. I imagine there are a handful of paths to walk. One might be humbled, aware of mistakes, but able to forgive oneself and be comfortable with being revealed human. Or there could be depression, self flagellation. My least favorite – and one Lereah seems to have taken – is either a hero or victim stance. Either “it wasn’t my fault they made me” or “there wasn’t really a bubble:… Read more »
b5baxter
Member

So far HPI seems to be following a US style crash in lock-step.

see:
http://vancouverpeak.com/groups/data-hounds/forum/topic/crash-curve-graphs/#post-2634

VMD
Member
Singtao Chinese newspaper: Greater Vancouver realtors are now forced to quit and find new jobs 10/16/2012 “Mr Shen, a newly minted realtor since 2011 had been working for a year without reaching a single sale. He had just quit RE and is training to be an electrician.. ..when interviewed by SingTao, Mr Shen said he had a university degree in business administration. Upon seeing the hot RE market in early 2011, he paid $5000 for a realtor prep-course and obtained his realtor license. Ever since he’s working as a realtor, he’s been busy every weekend showing houses, one client even had him show >10 units. He had a total of 20 clients in the first half year, but no sale. Mr Shen said, in the current housing downturn, even seasoned realtors are having a hard time. Another realtor, Mr Sun… Read more »
fatso
Guest
fatso

i have never understood why realtors have to have expensive car in order to show properties? I mean even the prospective clients come to view the property in their own car. what is about the car?

Anonymous
Guest
Anonymous

My only problems with the HPI:

1. The recalculation ruined any historic comparisons, and they didn’t go back and recalculate previous years.

2. They posted their methodology, but they don’t post the data used to derive the HPI number each month.

But I don’t think Teranet posts their data either.

patriotz
Member

@Anonymous:
“But I don’t think Teranet posts their data either.”

They can’t because it would violate the terms of their agreement for access to the land titles.

But the point is that the data used by Teranet comes from an objective external source (sale prices), but the REBGV index also uses data (hedonics) which they generate themselves.

G
Guest
G

@fatso:

It’s like why women get fake boobs, because it makes them feel more confident

Realtors want to drive expensive cars because it makes them feel they are successful.

jesse
Member
@Anonymous: ” They posted their methodology, but they don’t post the data used to derive the HPI number each month” The real issue, in my view, is opening up all previous sales data as has occurred in the US. Right now only a select group of people have it — and by “select” I mean anyone who is a friend, family member, or an active client of a Realtor or others who have direct access to the MLS database — and that in effect produces a discrepancy in knowledge between market participants. The data are available to everyone else only for a fee, either through the LTO or through commencing a business relationship with a Realtor. It’s akin to me having to pay a stockbroker for a quote for a stock but I get it for free if I open… Read more »
Anonymous
Guest
Anonymous

@VMD: This guys must be a Hongkonger not a pure Chinese from mainland.Pure Chinese from mailand have no problem finding rich Chinese customers from mainland because RE in this village is so cheap that a corner store owner can afford.He must be a Cantonese RE agent who lacks connection and language skill in Chinese.He should learn to be a real Chinese.

Proud and extremely rich Chinese home owners
Guest
Proud and extremely rich Chinese home owners

@VMD: @VMD:

This Contonese made a shit load of money last yr! What he is complaining of? One sale=20000x2x12=480000 at least.

vanpire
Guest
vanpire

@Absinthe:
“I sometimes wonder what happens to the David Lereah’s of the world, after all the cameras go home”

If this was some centuries ago, he’d be hung, burnt at stake or thrown to the lions by people who’s lives he ruined, but we live in a “better” society now where the biggest criminals who have committed most unspeakable crimes are usually deemed insane and therefore not responsible for their evil deeds at all. People who’s lives their ruined pay for the expense of keeping them alive in safety and comfort.
Luckily, there are still places in this world where criminals do actually get punished for their crimes, but we do not approve of such methods here, no way. We are way to civilised for this.
Go figure.

Go figure…

Can't wait
Guest
Can't wait
I can’t wait until this bubble bursts and all the delusional idiots in this city are crying on GlobalTV as their wannabe Sex In The City lifestyle crumbles before their eyes. Hey jackasses, fine dinning isn’t sitting on used school chairs in a room with a 3 degree slant, with bare bulbs for lighting, and a bar made out of 2X6 wood, eating sliced pork products served on a piece of wood isn’t fine dining. And it isn’t even interesting. Dick heads across the continent are doing the exact same thing imagining that they are sophisticated urbanites with fine tastes. There’s an ass hole in Ames Iowa doing that right now. This city needs a nice big dose of reality. Then maybe the flaky transplants will begin their delayed 20 year migration back to Ontario. Fucking climate change must be… Read more »
patriotz
Member

@vanpire:
“If this was some centuries ago, he’d be hung, burnt at stake or thrown to the lions by people who’s lives he ruined”

Doubt it. For example, the South Sea Bubble bears a pretty strong resemblance in its outcomes to the current RE bubble:

http://en.wikipedia.org/wiki/South_Sea_Company#Officers_of_the_South_Sea_Company

Prior to that era, financial scams were pretty much the domain of the Crown, the gentry, and the Church, who were a law unto themselves.

mac
Member
mac

Village Whisperer,

I know you sometimes read this blog: I can’t seem to post on your site any longer. Don’t know why.

shriller
Guest
shriller
Two things popped out at me from this thread. (1) It would be interesting to see the hedonic series underlying the HPI methodology. I would even be satisfied with some (salient) summary statistics. How much of the HPI movement is due to actual transactions data. (2) Mr. Shen, the BComm former realtor and soon to be electrician, appears to have skipped his finance classes. He might have learned about diversification. Why would he invest in becoming an electrician when the reason he was shifting occupations was because of low demand for housing-related skills? Does he think that there is going to be a boom in renovations and HELOCs to finance them? It reminds of a realtor I dealt with years ago. He saved for retirement by acquiring housing stock. Now this might make sense if he felt he had insider… Read more »
ArthurFonzarelli
Guest
ArthurFonzarelli

Rob Carrick at the Globe and Mail continuing his relatively bearish analysis of the RE market in Canada today – this time touting the benefits of… wait for it… RENTING!

http://www.theglobeandmail.com/globe-investor/personal-finance/mortgages/downsizing-to-condoland-why-its-best-to-rent-not-own/article4619669/

We rent a 3-bedroom 1,200 sqft townhouse in a well managed East Van co-op for $1,200 per month. What do you suppose the monthly carrying costs on that sucker would be if we were to buy it? Based on similar units in my hood, my math says it’s just over double…

painted turtle
Guest
painted turtle
In the market segment I am following, listings are quite active, and prices very sticky. Prices changes of -10k every month on a 900k house! What a joke… On the anecdotal side, I recently met with a HAM family. Husband is in China, making tons of money. Mom and 2 kids lives in a 4 million dollar house. She does a great job at being a tiger mom (kids wake up at 5:30 to play the piano for 2 hours, no play date allowed.) I was really impressed by how hard working those children are, but also a but worried by their behaviour when mom was out of sight. What does mom do for a past time? Arts and crafts, and …RE speculation. She almost got burnt in Richmond in January, but managed to get out on time: good intuition!… Read more »
TNT
Guest
TNT

I think the HPI problems due to opacity and bad math…….

Are you high?
Or naive?
This has been going on for years.

Like in Vegas the odds are in favor of the house.
And if you don’t beleive that i know of some swamp land in Richmond FOR SALE.

JR
Guest
JR

@VMD: “Mr Shen, a newly minted realtor since 2011 had been working for a year without reaching a single sale. He had just quit RE and is training to be an electrician..”

People declare there isn’t a bubble, that BC and Canada are different and don’t have US problems, yet strangely the same thing is happen play by play, I have been watching this unfold since 2007. I had a lot of friends and family who all of the sudden decided they wanted to be realtors and house flippers in 2005-5 in the US. You can guess how the professional change worked out. It is honestly very strange to watch this whole thing happen again in a matter of years.

Inventory
Guest
Inventory

TIME to PANIC!

Only ONE detached house sold today at Vancouver West and it was on the
market for 173 days.

New Listing 8
Price Changes 4
Sold Listings 1

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