On a regular basis I get upset with the Canadian Real Estate Association and to a lesser extent the local real estate boards. I find their whistling in the dark irritating. We are in the process of a major adjustment of the real estate market and we could use some good guidance and information. I find their dissembling and prevarications and smoke screens offensive. I wrote about one of their smoke screens and how ridiculous it was to Blame the HST for the Housing Slump.
What can we expect from CREA in the Future?
Well we can look south to the USA for the answer to that question. How is the National Association of Realtors dealing with their horrible market? I read this great article about it this morning, Attention RE Agents:NAR spin is Counterproductive.
The bottom line is that every single analysis that falls short of what actually happens destroys credibility. This has happened like 6 times already this year. At the very least CREA should do a best case scenario and a worst case scenario analysis to provide some balance. What we get in reality is a lalaland interpretation of the real estate market. Excuses and smoke screens are offered up. It’s the HST. It’s the summer. It’s the weather.
Then in the New York Times, Widespread Fear Freezes the Housing Market again from the USA. Here they discuss the problem that people want/have to rent but investors can’t qualify for mortgages. (Pg 2)
Why Is This Relevant?
My entire lifetime I have noticed a trend, every time the USA goes into a recession so do we. We’ve been sitting up here relatively unaffected by the disintegration of the American economy for a few years now. It can’t go on forever, they are our major trading partner.
We also started following their housing crash in spring of 2008, but this was somehow miraculously averted. To be honest, our government did everything they could to keep our economy going and everyone expected a US recovery much sooner. Our housing market has been trending upwards steadily for the last 20 years. So we should all stop pretending that things are OK.
Sheep led to Slaughter
It’s really unfortunate but CREA and their members need to keep selling houses, that’s what they do. Basically everything they do and say is oriented in that direction. Every person they can convince to buy a house is one more commission for them. The absolute destruction that real people who believe in them will experience is irrelevant to them. If there’s one thing you can count on is that people will always act in their own self interests. The only thing you can do is not be a sheep yourself and don’t be distracted by their excuses and smokescreens.
It’s really unfortunate that so many people will believe the media and the press and CREA. Their financial future will be destroyed. People who believe in the sanctity of real estate appreciation will pay for their error. All the first time buyers that bought this spring will be hurting especially if they over extended themselves by “investing” in their “dream home”
Then there’s an interesting article about David Lereah, positive spin was paid for and certainly brings into focus that some people will say whatever they are paid to say. So they can’t be trusted. The article is called Former NAR Economist David Lereah is a Jackass and in a few years we can look forward to similar articles about CREA economists.
Plus Canadian Mortgages Are Different
If we do have a prolonged housing drop in prices, Canadians may well find themselves in a precarious situation, forget sub-prime mortgages. We have out own problems with mortgages, namely that our mortgages have terms where we have to renew and people in the USA don’t. Basically if you bought a house that’s affordable and you can make the payments your mortgage is guaranteed for the whole time of the mortgage in the USA, it doesn’t matter that your house is worth less than you paid for it. Not so in Canada where we have to renew every five years or even less. In the past, banks just go ahead and refinance with no real problems but what if a lot of houses are worth 20-30% less then they were purchased for? What if interest rates go up? Sounds like a perfect storm of our very own.
What If you Want To Buy?
Buy something extremely affordable. Now is not the time to buy a dream home. Find out how much you would pay in rent and buy something that is equivalent or lower than that. Forget location, forget investment, think – roof over my head. Put as much money down as you can. Frugality is the name of the game. If you have two incomes find something affordable on one income. Buy something you can pay off in 5 -10 years. Don’t be a sheep.
Believe it or not I’m not a real estate bear, real estate has intrinsic value that cannot be duplicated by a bunch of shares and a rental house. I work in the rental and housing industry and believe me I’m grateful I don’t have to rent. I was a tenant before I became a property manager. I am very aware of the shortcomings of renting. Landlords selling, not fixing the place and not doing proper pest control. You’ll have to be smart and possibly consider adding value in other ways like I covered in my initial post for Million Dollar Journey on How to Make Money in Real Estate.
I have to tell you all that I sincerely hope I am wrong. Really wrong. I own a house myself and I know countless investors and homeowners. I don’t want the Canadian housing market to follow the trend set by our southern cousins. I want some good news, but not at the expense of swallowing CREA’s lies and hiding my head in the sand.
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