Monday, July 24, 2017

Must-Read Real Estate Headlines


I don't usually do this – post the creative content of others; there's already enough of that on Facebook, where every news feed is a "share" of an existing online article.

But over the weekend, each of the major Toronto newspapers (save for the Sun, but I did say "major") had a piece on the Toronto real estate market that was different from the usual recap or roundup, and offered some insight and commentary.

I want to show you those three articles today, and comment briefly, then add a fourth article which sums up the plight of mankind's future.  Yes, really, it does.  You won't want to miss it…


Wow, I'm really dating myself with that photo above, aren't I?

When I think "news," I still think newspapers.

But honestly, raise your hand if you still subscribe to a print copy of a major newspaper that is delivered to your door each and every morning?

I thought I would forever, but when my Globe & Mail subscription expired earlier this year, and it stopped coming, it made me realize that I don't read it anymore.  I used to read the paper religiously every day on the stairmaster at the gym.

You know how every gym you've ever been to has "that guy," and "the lady that does this or that;" a host of characters that you see on a regular basis and stand out because of an odd trait?  Well I was the insane-o who had a stack of dailies in hand and whipped through them like Rainman, scattering the discarded papers around the base of my machine, all the while, flicking sweat.

When I was done, wet newsprint formed a circle around the stairmaster like a candles surround a pentagram in a lunatic's house.

I guess that's not the only thing the lunatic and I have in common…

In any event, my 17-year relationship with the stairmaster ended two years ago, and low-and-behold, I no longer had a need for newspapers.

That, and I find the news to be incredibly depressing.  I can't read anything in Section-A; I get depressed, disheartened, angry, and frustrated.  People, and politics.  What else is new…

And while I'm fully aware that we can get the newspaper on the Internet now, it's just not the same thing.  My fingers aren't black and smudgy after reading online articles, and I miss that!

But whether in print, or online, without fail – there is always going to be a real estate article, bi-daily at the least, in all of the major newspapers.

This weekend provided us with some interesting content.

One of my favourite columnists has always been Marcus Gee, and the fact that he regularly takes Kathleen Wynne to task only makes me like him more.

Gee wrote the following column over the weekend:

"Toronto's Falling House Prices Signal A Return To Sanity"

What I like about this column is that it's a somewhat more down-to-earth look at the recent drop in real estate prices than what we're accustomed to seeing.

I've long opined that most newspaper articles about real estate (specifically those not written by a columnist) seek to draw people into the content with the most shocking headlines possible, and as a result, three metrics – price, sales, and listings, are used interchangeably to discuss "the market."

A headline might read, "Real estate reeling with a 20% drop," but that 20% could refer to month-over-month, or, year-over-year, as well as any of price, sales, or listings.

Many articles out there today are agenda-driven, and that's why you see reporters using whichever of the price, sales, or listings metric is the most sexy.  If sales are down 54% year-over-year, but only 14% month-over-month, then use the former, especially if prices are still up year-over-year.

In the above article, Mr. Gee makes zero mention of a single percentage, nor does a number – any digit, appear in the column.

While I disagree with Mr. Gee's underlying conclusion that the market won't quickly rebound, and/or that this "dip" is more pronounced, I appreciate the upside that he's bringing to light.  In fact, all three of the articles this weekend were written as though a drop in prices were a good thing.

But the part about the article that I appreciate the most was drawing attention to the effect a real estate decline would have on the government's pocket book, and the potential fallout.

Have a read:

"Governments, too, will be forced to change their ways. Toronto's, for one, has come to rely on the hundreds of millions of dollars it collects every year from a tax on land transfers.

Officials have been warning with rising urgency that the city is in for a reckoning if that windfall should dry up.

Now that it looks as though it might, city politicians will face pressure either to find other sources of revenue or to trim the city's expenses – all to the good, either way."

It's actually quite scary to think what could happen if land transfer tax were to decline significantly at both the municipal and federal levels.

You all know I don't like Kathleen Wynne, and you can agree or disagree.  But one thing is for certain: she will not be replacing lost revenue from provincial land transfer tax by making cuts to expenditures!  She'll find a new tax – probably create one out of thin air, and at the very least, it gives you and your friends a cool new drinking game to play.  "What tax will the Liberals invent next?"

In the city of Toronto, things could get really dire if LTT were to dry up.  A friend of mine who works in investment banking told me before David Miller implemented the municipal land transfer tax, "If they don't bring this tax in, Toronto could literally be on the brink of bankruptcy.  Cities rarely ever go bankrupt, but Toronto would be on the edge."

In the Toronto Star, we read an unusually positive headline, about a negative take on the real estate market.

Tess Kalinowski penned the following:

"Toronto's Market Housing Downturn May Have An Upside"

The idea is that some good must come out of a decline.

Individuals, government, society in general must learn from this.

I've always said, and I'll explain in more detail with respect to the fourth article, that people often ignore the exponential world population growth when looking at causes of decreased supply and increased demand in hot real estate markets.

In this article, we got a great line:

"In the 1950s, Canadians consumed about 300 sq. ft. of space per person. Today it is about 1,000 sq.ft."

It opened the door to a conversation about urban planning, which is where the government should be spending their time, along with analyzing fiscal policy with respect to interest rates, and mortgage regulations.

The government has acted as though a coin has only one side, and has only sought to "cool the market" by decreasing demand through policy changes, when all the while, increasing demand is the more unpopular tails side of the coin that very few people ever call.

It's well beyond "time" for the government to start focusing on supply, or lack thereof.

Garry Marr of the Financial Post, who in my opinion, has long been a real estate bear, wrote a piece on the weekend that I thought was long overdue:

"Collapse In Toronto Home Prices May Pressure Ottawa To Hold Off Tightening"

I know that columnists and journalists don't get to write their own headlines, so I won't fault Mr. Marr for the word "collapse," which I think is the very definition of hyperbole.

But the idea that the recent drop in prices must call into question further meddling, tinkering, or updating (depending on where you stand) of lending standards and regulations is one that should have been brought to the forefront weeks ago.

Kathleen Wynne was quoted as saying, "Cool, not kill" with respect to the housing market, and if that's really the case, then we first need to define "cool," percentage-wise, and then look at what has transpired already.

The market has cooled, no doubt about it.  And as the second article above shows, a lot more people are asking questions of themselves, and the market, who might not have done so earlier this year.

So are more policy changes really needed?

Should we really implement a 200 basis-point "stress test" for uninsured borrowers?

When the government implemented a similar policy in 2016 with respect to insured borrowers, the policy had zero effect on the market, and once again, those in the government tasked with cooling the market had egg on their face.

But those insured mortgages are backed by tax-payers!  I can see how they have a horse in that race.

For uninsured borrowers, does the government really need to step in and protect people from themselves?

Keep an eye on this story over the coming months, as those who thought we might see another interest rate hike in September, are now changing their tune.

Last, but certainly not least, an article that was sent to me by over a dozen blog readers and friends, some of them who sent this out of disgust, and some who sent it because they know how I feel about "kids today."

"Millennial Pens Open Letter, Says Toronto Real Estate Prices Too High"

This is probably the dumbest thing I have read in a year, and it underscores the ignorance, arrogance, entitlement, and delusion of today's youth.

I'm 36-years-old, turning 37 next month.

I was told by a very nice lady in my office, who is in her mid-60's, "Davey, every generation thinks the generation behind them is going to end the the world.  And not one of them remembers when they themselves were being blamed by the generation ahead of them."

Truer words may never have been spoken.

It's like recreational golf: you always think the group ahead of you is playing slow, and the group ahead of you is playing up your a$$.

So am I being hypocritical if I ignore all of this, and label today's young 20-somethings as those who will end the world?

Read the letter, it's just insane.

The girl who wrote a letter to a city is ignoring so many important things that she probably wasn't taught in school, such as basic economics, and supply and demand.

But what about a simple understanding of the world's population growth?  The world has doubled in size since 1971, and the Greater Toronto Area's population has doubled since 1982.

But her letter, and the quotes from her interview with Global News, make her sound like the lazy, clueless, dreaming, irrational, unreasonable millennial that the entire group, unfairly, gets categorized as.

"I'm still living at home and all my friends are as well and it's hard. The market isn't letting us become independent people that we thought 10 years ago we would be at this age."

You're 23-years-old.

Living at home is "hard" for you?  I suppose life in your parents' basement, paying no rent, having zero expenses, full access to groceries and things you never thought you'd pay for like toothpaste, is "hard?"

You thought you would be a certain type of person when you were 13-years-old, and now that you haven't achieved that, you think it's "hard?"

When I was 13-years-old, I thought I was going to be a multi-millionaire by the time I was 23-years-old.  I thought I was going to own a yacht, a plane, be married to a supermodel, and light cigars off burning $100 bills.  But that's because I was 13-years-old.

"Whenever I picture my life and my future, I pictured it with a house and a backyard."

No kidding, eh?

You're 23-years-old, and you've already given up the possibility that one day you'll own a house, like a very, very small percentage of the population?

Folks, come on!  Tell me I'm being unfair here!

But this girl is completely out to lunch!

The arrogance of her, probably working a 9-5 job and eating avocado toast with friends by 5:30pm at a swanky downtown pub, to think that the city owes her something.  Her life has been a fantasy up to this point, and now that she's actually out in the working world, and has to work, she's telling the rest of us how entitled she is?

It's "Toronto's" fault that she can't afford to buy a house with a backyard.

"Toronto" is a city.  It's made up of people.  People are consumers.  Consumers buy and sell.  Products and services are bought and sold.  Supply and demand create prices for products and services.

She's looking for a boogey-man, the same one her dad checked for under her bed no more than ten years ago, and she won't seem to consider that the explanation for market conditions is more simple.

"It was fun while it lasted Toronto, but it's time for us to leave.  Why does it seem to us millennials that you don't want us here?"

Oh poor you.  You poor millennial!  Toronto doesn't want you!

Who the hell gave this national coverage?

I'm living proof that any idiot can put his or her thoughts on the Internet, but to give this young lady a forum on Toronto Storeys, and then for Global News to pick it up, is just insane.

"…it's just too expensive to live here now. That first family home we always dreamed of owning in North York, or off Eglinton…"

Are you kidding?

Owning a home in North York?

You're a child.

Assuming you have a job – the adults that you work with, who have slaved for two decades longer than you – they have no chance at affording a $2.5M house in North York.  So why are you lamenting that you can't afford a house in Roncesvalles?

"Maybe it will be better for us. To own land far away from this busy city, where we focus too much on our screens and less on what the great outdoors has to offer."

Oh great, there's an even better idea.

Now she thinks she can move up north, teach kite-boarding, and make enough to support herself long term.  Although I'm pretty sure Trudeau's government will prop her up, so maybe she's onto something here…

"But you can't get rid of us for good. Our careers are still largely here in the city. Maybe soon our bosses won't be able to afford their rent either, and we will all move up north.  And then you'll have no one. You'll be forced to lower your absurd home prices. And you'll be asking us all to come back."

Wait, you just said you're moving up north to teach canoeing.  What's happening?  Wait – your bosses are moving up north, and I guess the TD Towers will too?  In fact, every single industry in Toronto will move up north?

Then "Toronto" will lower his or her prices?

If this is who is going to lead us into the future, then we're all doomed.

Anyways, those first three articles were encouraging, right?

The post Must-Read Real Estate Headlines appeared first on Toronto Real Estate Property Sales & Investments | Toronto Realty Blog by David Fleming.

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