I have this vivid memory of Camp Kawabi, 1987, when my counselor was reading us a scary story.
He had the creepy voice down pat, and he was shining a flashlight up at his face for effect.
Everything was going to plan.
But then he accidentally read the instructions that were printed alongside the story, something to the effect of, “Now, get up and jump with arms out and scare the kids,” and the punchline fell flat, story over.
The other counselor said, “You dumbass, did you really just read the instructions?”
All the kids laughed. I don’t think most of them knew what they were laughing at, other than the word “dumbass,” but it was apparent to me that our counselor wasn’t very good at acting out a scary story, let alone reading.
For a scary story to work, many components must be satisfied.
But if you simply read the title, something like, “Midnight At The Murder House,” you will merely assume the story is scary, will you not?
This past week, there were a lot of scary stories about real estate, and if you only read the headline, you’d believe them all to be true.
I’m running the risk of coming off as a conspiracy theorist or a believer in “fake news,” I’d be remiss if I didn’t roll through the real estate headlines this week and tell you what’s really going on.
I have two measures to evaluate the real estate market: one is my gut, and the other are market statistics. Whether you trust some biased real estate agent blogger to tell you what’s really going on in the market, or whether you need to see statistics, both will explain, today, how the real estate headlines are not adding up.
Case in point:
(crack knuckles, begin to type…)
There are so many things wrong with this, I don’t know where to begin. And for the record, I did take a breath and calm myself before starting to write this because to point out just how wrong and how misleading this headline is will be of the utmost importance moving forward.
Not even close.
But what’s more, is the sub-heading reads:
“The number of properties changing hands in Toronto declined 20% in April”
Hold on a minute. What are they talking about here?
They go from prices to sales.
“Toronto home prices post sharpest drop…” to “The number of homes changing hands…”
Does this add up?
Is this a mistake?
Did they mean to talk about sales in the headline, and accidentally said prices?
If that’s the case, then this is amateur hour at one of the newspapers I hold in the highest regard, and it’s exceptionally misleading for those who only read headlines and don’t actually read the articles, which is about 80% of society.
Now maybe, just maybe, they actually meant what they said: that Toronto home prices posted their sharpest drop since the start of the pandemic.”
Let’s examine that.
First and foremost, they’re not talking year-over-year, because the average home price in April of 2020 was depressed by the pandemic, and sat at a mere $820,226, compared to $1,090,992 this past month. While the media usually provides year-over-year data in their headlines, they often pick and choose to prove their point, hence the month-over-month stat they seem to be using here.
Month over month, the average home price “sharply dropped” from $1,097,565 to $1,090,992. That’s a “sharp drop” of 0.6%.
Is that really the “sharpest drop since the start of the pandemic?”
Nope. Not even close.
The average home price dropped 1.3% from $968,318 In October to $955,615 in November.
However, the average home price also dropped 2.5% from $955,615 in November to $932,222 in December.
So how in the world does this Financial Post headline make any sense?
Oh, silly me! Maybe they meant “Toronto” as in the 416, and not the GTA?
Except that the average home price actually went up last month: from $1,083,322 in March to $1,088,021 in April. So that theory doesn’t hold any water.
There is absolutely, positively, no way to explain this Financial Post headline. It’s total bullshit and I have no idea where they got their figures, or why they’re obviously seeking to tell readers a scary story about the market.
How about this headline:
Sales and prices “cool.”
Headlines like this had their conclusions drawn before the stories were ever written.
You decide what to write, then you find evidence to include that makes the story look factual.
Back in 2017 when the market dropped in April, I had reporters calling me every day asking, “Do you have any buyers that purchased a house in February or March, and now are having trouble selling their home? Anybody ‘stuck’ in between?” When I told the reporters that I hadn’t experienced anything like that, they simply hung up, and called other agents until they found one who said “yes.”
Many of the quotes in this month’s newspaper are from real estate agents or buyers who can say, “Yeah, I felt it cool last month,” but there’s a higher proportion of people out there saying, “No, it didn’t.”
I lost a bid for a house on Monarch Park Avenue this week amid twelve offers, which sold $450,000 over list. Has the market cooled? Has competition waned?
Here’s a headline that is 100% accurate, but is misleading for another reason:
This statistic is true.
Sales dropped 13% in April, from 15,652 in March to 13,663 this past month. That’s a decline of 12.7%.
So what’s my issue with this headline?
Oh man, this one is a doozie!
A decline of 12.7%, month-over-month, may or may not represent a “cooling,” but for the purpose of this exercise, let’s say that it did.
What is NOT noted in the headline is that we’re using the 15,652 sales in March as the baseline for this “cooling” argument.
And what do those 15,652 sales in March represent?
The most sales in any single month in the history of Toronto real estate.
The market has “cooled” because sales failed to break the all-time record!
The paltry 13,663 sales recorded in April can’t hold a candle to the all-time record.
But wait, what do those 13,663 sales in April represent.
The second-most sales in any single month in the history of Toronto real estate.
The very definition of LMFAO.
April saw the second-most sales in any single month, and “the market is showing signs of cooling.”
For what it’s worth, I don’t fault the authors for this. I learned during my years writing for The Grid that the editors pick the headlines, and boy-oh-boy did I have some battles with them over what they chose! Imagine writing a full column, with a particular thesis or angle, and having an editor swoop in and write a headline that is the complete opposite of what you intended. But I digress…
This showed up in my news feed on Thursday:
It’s all the rage these days.
Love to hate.
Raise your hand if you had ever heard the phrase “blind bidding” before, say, two months ago? Sorry, put your hand down. That was rhetorical.
Real estate buzz-words come and go, as do the people, places, or practices that we blame. The term “bidding war” came into effect as far back as I can remember, say 2005 or 2006, and back then, 9 offers on a $399,900 listing, resulting in a sale price of $431,500, was deemed a “bidding war.”
Today, “blind bidding” is to blame for everything that’s wrong in real estate, even though this is the way that multiple offers have always been reviewed, since it’s illegal to disclose the terms and conditions of a competing offer.
We touched on this lots this week and last, so that’s not the bee in my bonnet today.
My bone of contention is the caption above that says “blind bidding wars have become so out of control that she’s been priced out of the market.”
That’s the cause?
Here’s the article headline:
Ah, she’s stuck renting!
Listing prices “mean nothing.”
“Blind bidding” is to blame.
First and foremost, listing prices don’t mean anything, but anybody remotely versed in the real estate market knows that. So again, this is either an uneducated and/or willingly ignorant buyer, or it’s sour grapes.
But more importantly, we’re told that “blind bidding” is to blame.
I have a few questions…
What is her income?
What is her credit score?
What is her downpayment?
How is her ability to save money?
How are her consumer spending habits?
How do her wants and needs intersect with reality?
Is she looking at properties she can actually afford?
How many bids has she made and lost?
What are her bid prices based on?
Is she making conditional offers in competition?
Does she provide a certified bank draft with her offers?
How experienced is her agent?
And that’s just off the top of my head!
As you can imagine, none of these questions, or their answers, are analyzed in the CBC article above. We are led to believe that “blind bidding” is the cause of her current plight. In fact, the article quotes a professor of real estate management to hammer home this point.
I empathize with the woman featured in this article, I do.
But the article mentions “last year she sold her home at a price she figured would allow her to purchase a new one.”
We have discussed this before, no?
This is called “trying to time the market,” and she failed to so. She sold, didn’t buy, and as the article explains, she’s been looking and bidding for five months.
The article also mentions that she sold her home with “some of it going toward mortgage penalties.”
Okay, so she made a choice to sell her house and not buy a new one, thereby being able to transport the mortgage to the new property, and in turn, being forced to pay a mortgage discharge fee. This took money out of her pocket and gave her less money for her down payment.
Why in the world is this woman’s plight the fault of “blind bidding?”
This woman tried to time the market, sold and paid mortgage break fees, decided to rent, and now has found the market has gone up, as it’s prone to do.
But the headline says that “blind bidding” is at fault.
What gives here?
Maybe, just maybe, it’s that the CBC wants to tell a scary story rather than write an article about the intersection of financial literacy, risk tolerance, and consumer choices?
Do you know what would be a much, much scarier story?
A story about a consumer who made a decision, found out it was the wrong one, and then suffered.
That is a scary story! And it’s what can happen in a market that results from the interaction of buyers and sellers, free to make choices as they see fit.
I had the opportunity to purchase a 1963 Parkhurst PSA-9 graded Gordie Howe card for $975 in the spring of 2020. I offered the guy $900 and he said ‘no.” I figured I would wait him out, but he sold the card offline to another buyer. Another one didn’t come up for sale or auction until this past February. Do you know what I paid for it?
I made a decision in 2020. My decision not to buy that card for $975 was partially based on my own budget and liquidity but also based on my valuation of that card, the inventory (there are 45 cards graded a ‘9’ which is a lot for this set), and my feeling that the seller would budge on his price.
The book value of that card was $1,100 at the time. I was trying to squeeze blood from a stone, and it was stupid. All this over $75? What was I thinking?
I was punished dearly two months ago when I had to pay $1,700, but the situation I found myself in was my doing, and my doing only. I made the decision not to purchase this card one year prior. I didn’t blame the market for going up, nor did I blame other collectors for pushing up the price of that card. I blamed myself for trying to get cute over seventy-five bucks.
Why do we continue seeing article after article about down-on-their-luck individuals, punished by the unfairness of the market, who in reality, are merely suffering from the consequences of their own choices?
To provide “blind bidding” as an excuse for every person who can’t afford what they want to buy is merely failing to hold individuals accountable for their own actions.
Then again, if you read the comments section on these articles, there’s worse advice out there:
When the market drops 80%, I just might pick up a property or two…
I know that last rant was harsh, but how else can I convey my message?
I don’t want to single out any one person, but rather speak about the market in general and the realities therein. The problem is, these very individuals continue to publicize their collective plight and the media is sitting right there, ready to tell their scary stories.
Wow, it’s been a really tough week for misinformation in the media.
I just went back and looked at the Financial Post headline one more time to try and make sense of it, and try as I might, I was unsuccessful.
For anybody interested, you can read TRREB’s Market Watch every month and draw your own conclusions, thereby not needing to rely on single-headlines conveying messages with varying levels of accuracy.
Here’s the link: TRREB Market Watch: April, 2021
Have a great weekend, everybody!Back To Top Back To Comments