Remember when I said that negativity sells?
Over the last decade, we’ve seen hundreds of prognosticators suggest the Toronto real estate market is primed for a collapse, but I want to show you the most insane prediction I’ve ever seen.
In this video, the female equivalent of Garth Turner predicts that…..wait for it……the Canadian real estate market will drop by as much as 90%.
Oh, and that was in 2012 – before the last 15% of gains…
Picture the following…
In 1968, a young man says to his friend, “The Leafs are going to win the Stanley Cup, real soon!”
The Leafs don’t win the Cup that year, or the next year.
In fact, the entire decade of 1970’s passes by, and the Leafs have nothing to show for it.
The 1980’s pass by, as do the 1990’s as well, and we’re into the new millennium with no Stanley Cup for the Toronto Maple Leafs.
In fact, the Leafs don’t win a Cup until, well, let’s suggest 2018.
Can that young man, who isn’t very young anymore, lean over to his friend and say, “I told you they’d win the Stanley Cup?”
This is how it’s going to play out if and when the Toronto real estate market declines.
For the last decade, every single day, somewhere, some place, there’s a real estate bear predicting the decline.
Newspaper articles are being written, magazine covers are dedicated to it, and books are being written about the “collapse.”
As I mentioned earlier in the week, some guy, who after seeing him interviewed on TV – I can say I wouldn’t trust him to roll my pennies and take them into the bank to exchange for two quarters, has written a book called, “When The Bubble Bursts.”
Hillard MacBeth, a tragic last name if you ask me, has predicted a 40-50% collapse in the price of Canadian real estate.
Now of course, of course, of course – this guy has no real vested interest in the real estate market, right? I mean, it’s not like he’s a portfolio manager for Richardson GMP in Edmonton, who makes his living by having people invest in stocks and bonds, rather than real estate…
Somebody should have told MacBeth that while Garth Turner’s book, “The Greater Fool,” may have started as a Shakespearean tragedy but ended with a financial windfall, ie. real estate bears flocking to Garth’s funds, it’s even easier to be made to look the fool in 2015.
And speaking of fools, as I promised, we’d discuss Nicole Foss, who suggested in the video above that real estate values in Canada, on average, would drop 90%.
If you started the video and then got bored (I don’t blame you…) skip ahead to 5:04.
After predicting that prices would drop by 90%, Ms. Foss goes on to explain:
“In a credit crunch, your pool of buyers ends up being people who can buy a property in cash, and who choose to use incredibly scarce cash for that purpose, at that time. That pool of buyers will be extremely small, and so you can get enormous price collapses when you simply undercut price support.”
Soooo……..what the hell kind of explanation is that?
That sounds like utter rambling to me.
It makes no sense, and doesn’t explain WHY prices are going to, apparently, collapse 90%.
I understand the concept of “buyers with cash getting deals,” but that’s in a depressed market. She didn’t explain HOW the market will become depressed (to the tune of NINETY percent…), or WHY this collapse will take place.
All she did was follow up an insane prediction with a rambling explanation.
How does she take herself seriously?
How do any of these people?
Just think about a 90% drop in prices, for a moment.
Nicole Foss says that this is “on average,” meaning of course that for every property that decreases only 85% in value, it will be offset by the property that decreases 95% in value.
So where can I find one of these properties that, say, decreases 98% in value?
Imagine a $200,000 house dropping to $4,000 in value?
It’s one thing to throw out a wild prediction like, “real estate prices will drop, on average, 90%,” but it’s another thing to really put this into perspective on a single-case basis.
Are there any $3,000,000 Moore Park homes that will drop in value to $300,000?
Any downtown, $400,000 lofts that can be picked up for $40K in a few years?
I’m sure that Ms. Foss would advise us that this “average” drop in Canada will mean Toronto specifically will ONLY decrease about 80%, so perhaps that takes some of the sting away.
But where, oh where, do people get the gall to make predictions like this? And when they’re wrong, how come there’s no accountability?
Throughout my thirty-four years on this planet, I’ve made some wild predictions about the real estate market, the economy, and a host of other things, but I’m man enough to not only admit when I’m wrong, but to show you my predictions, right here, right now.
Have a look:
So by my count – I was about one-out-of-four, with one abstention, because I was 14-years-old and “didn’t care about anything.”
I know, it’s childish.
But so too is calling for a 90% drop in real estate prices in Canada.
And how come stock gurus are allowed to “update their targets” as though their first true prediction simply disappeared?
We see this in the newspaper all the time, ie. the Globe & Mail’s “Eye on Equities.” It’ll note that XYZ Corporation is trading at $22.50/share, up 51% this year, and then Bob Smith from ABC Analysts will “raise his forecast” to $22.75, from $8.50.
What the heck is that about?
I wish I could do that!
After the New England Patriots start the season 11-0, and I had predicted they’d finish 6-10 and miss the playoffs, I can “raise my forecast” to say that they’re a great team, and the worst they’ll do is finish 11-5 on the year…
So if and when the Toronto market doesn’t correct 90%, will Nicole Foss produce a YouTube video titled, “I’m One Of The Stupidest People Alive?”
And when Hillard Macbeth’s tragedy ends, and prices don’t drop 50%, will he release a second book? Or will he just continue to imitate Garth Turner, and scare people out of real estate and into mutual funds?
I’ve seen some terrible books written on how to make money in real estate. Whether it’s flipping pre-construction condos in Toronto (I won’t name names, but one of the worst “books” I’ve ever read), or buying houses, fixing them up, and…….wait for it……..selling them for more money, there are no shortage of awful books that area bullish on real estate.
But the bearish media on real estate takes things to a whole other level.
We’ve all seen some crazy things in the past decade when it comes to bearish and negative media relating to Toronto real estate, but somebody predicting a 90% drop – that just takes things to a new low…