Realtors….they’ve got your back!

I had to chuckle when I saw this today.  It’s an advertisement taken out by US realtors in a newspaper in December 2006.

First of all, I love how it is a good time to buy OR sell a home.  Great logic there.

Let’s review what home prices have done since the ad, in real terms…

Look eerily familiar to the crap CREA’s peddling today?

“With interest rates soon expected to rise, Canada is widely believed to be entering a typical demand-driven downturn due to recent prices increases and rising interest rates,” said Chief Economist Gregory Klump. “A downward trend in national sales activity combined with an increase in listings will result in a more balanced market.”

Perhaps someone can explain to an idiot like me just what a ‘demand-driven downturn’ is.

“In keeping with the return of a balanced housing market and typical demand-driven housing market cycle dynamics, prices will remain stable,” he said. “Canada’s solid mortgage market trends, conservative lending practices, and prudent borrowing by homebuyers means that Canada will avoid the massive realignment in housing supply and demand being experienced in the United States.”

Ah yes.  Always the impartial voice.

While we’re at it, let’s check out the real estate related headlines from today:

TD overhauls mortgage program as housing market slows

Basically the competition for a dwindling population of new home buyers is heating up.  TD is basically trying to find ways to entice new homebuyers to take out their mortgage with them, and then to keep it with them when their term comes up for renewal.

“The bank is encouraging employees to approve customers at 125 per cent of a home’s actual value under certain circumstances, so the homeowner can easily borrow more money if their property increases in value.”

Nothing to get too excited about here.  They are essentially structuring the mortgage as a line of credit which can be tapped IF the home appreciates in value, which it won’t for quite a while.

Here’s the part I liked:

“The bank’s move comes as the housing market cools and fewer Canadians apply for mortgages.”

Nothing better than cold, hard acceptance.  With less and less new money flowing in to support home values, it’s hard to see how they will maintain their lofty valuations.

I also chuckled at this little anecdote from an article over at the Star

When buyer’s remorse extends to your home

“Herring agrees that hype and excitement can play a role. She said, “I felt ambivalent toward it at first. I wasn’t sure I wanted one yet, but society was telling me I needed to get one. During the actual searching process, I became more excited because it was fun going to houses and looking at them. My realtor made it fun.”

I wonder how long that mentality will last.  Here in Canada, over 90% of our population believes that real estate is a good investment.  Compare that to the US where half the population believes that housing is a wealth trap.  I absolutely believe that consumer attitudes are one of the great contrarian indicators.  When the Canadian public rejects the fallacy of the perpetually rising house price and instead turns decidedly bearish on long-term prospects in housing, a bottom will be near.  We’re still quite a ways from that.

But that’s not what your realtor will tell you!

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5 Responses to Realtors….they’ve got your back!

  1. Bruce says:

    There are a few realtors that will give advice on holding off on real estate at the moment in favour of better fundamentals and lower valuations. Mind you that percentage could be around 1 out of 100 and tend to be more on the commercial or investment focused end. On the other hand many focus with charm and persistence on the young couples that are jumping on the Canadian dream band wagon or drinking the real estate never drops cool aid. It’s sad as many new home buyers don’t realize they would be better off renting and then buying after the drop. Imagine if it was easy to short sell real estate like stocks…..

  2. Good point Bruce. There certainly are honest realtors out there. The post is not meant as an attack on all realtors in general, but rather to highlight the ridiculous practices of their associations.

  3. keller says:

    this is so not Canadian (fair market),
    it was housing which created jobs and demand when canada needed them the most
    and it will be again the canadian govt which will bail out home owners. All posters here can now go back to their trailer homes

    • “it was housing which created jobs and demand”

      Demand for what? And how sustainable are those jobs when housing starts were well above net household formation?

      “the canadian govt which will bail out home owners”

      Correction: The government will bail out the banks via CMHC. Big difference.

  4. Pingback: CREA capitulates…sort of | Financial Insights

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