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Nabbed
Tom sells cars. Brenda teaches. “Thank God for that,” he says, “with the way people in Calgary are feeling lately. My worst year.”
So they decided eight months ago to get liquid and sell their house, starting out at $849,900 – the price their realtor suggested would result in “some solid action.” But, crickets. Few showings, no offers, then nothing. Over the course of the next half-year there were two price reductions, taking it to $819,000, then $799,900. “That’s the psychological break point, the real estate guy told us,” says Tom. Two more showings, no paper.
A few weeks ago, as oil descended into the mid-thirty range, they did a big cut – to less than $750,000. “And finally,” Brenda says, “we snared one. What a bittersweet night that was.” They now have a firm deal for $729,000. After commission, plus the closing costs when they bought, it’s about what they paid in 2007. “Just so happy to get out.”
Here’s the interesting point: to Brenda and Tom it took more than 240 days to sell their property, and they ended up getting $120,000 under the asking price – or a 14% haircut. But for the Calgary Real Estate Board, this was a big win. In CREB’s official stats, the house sold in just 9 days and for 97.3% of the listing price.
How could that be?
Simple. Every time a listing expires and is replaced by a fresh one, it’s a brand new listing for a property hitting the market for the first time. Every price reduction brings a full reset. And the final selling price is expressed as a percentage of the last (lowered) value, with no relation to the original ask. So as Tom and Brenda’s two-story house south of the airport demonstrates, the official numbers give a false impression of actual market conditions. In a word, they’re fraudulent.
And here are the latest ones:
So, do houses in a city reeling from a commodity crash in a province which has suffered 80,000 lost jobs really sell in 48 days? Has the average price really declined by only 0.15%? After all, this pathetic blog recently reported on luxury homes in a tony part of the Cowtown region that went at auction for discounts of up to 60%. How can there be such a glaring discrepancy? And if this kind of realtor diddling is going on in Calgary, should we assume it’s also happening in Toronto? Vancouver?
Pierre wonders about that. He’s been renting in Calgary for a few years, but now a bad case of rug rats has him out seeking a single detached house. “My intention is to buy a place that is no more than 3.5 times my gross salary, even though we have been pre-approved for 6 times my gross salary,” he tells me. “My wife is currently a stay at home mom and will get back to the work force once the younger one’s in school full-time, but we want to be able to sustain ourselves with my salary alone. I followed your advice and found a very good realtor. Being an engineer and stats junkie, he accepted to give me access to the website used by realtors, which gives you all the data you would need to make an informed decision but for some reason in Canada we don’t have easy access to.”
Well, Pierre nabbed these observations for us.
- Daily, there are two to three times more “price decrease” or “new listings” than “sold”, even at this time of the season.
- The “days on market” statistic given on the creb.com website is underestimated by a wide margin. Most get re-listed multiple times (with price decreases generally) which resets the “Days on Market”, meaning a listing can have been in the market for 200 days and yet, if it sells, the DOM would be since the last re-list, maybe 20 days. I couldn’t find an easy way to export all the data from their website to a spreadsheet to make an exact calculation, but I would guess from what I have seen that the average DOM is probably between 90 and 120 currently (and even that may be optimistic actually).
- For the same reason as above, the average and median price decline is grossly underestimated by CREB. It’s not uncommon for older houses to sell at the same price as they were sold in 2007/2008. I know about a handful of newer houses (built since 2005) that have been sold below the price they were bought in 2012-2013.
- Yesterday, we went to visit quite a few show homes in a new community deep in the south. In all the visits, we only saw one other couple. I asked one sales person the price of the show home we were visiting, and her answer was exactly: “I can’t tell you now. A few months ago, I would have told you $540K, but in the current market, I don’t know how much this house would sell for”. Even better, a house that they used to sell for $523K (as still advertised on their website), is now priced at $485K, or 7.3% less, with an additional $10K worth of upgrades “for free”.
“With all the above,” concludes Pierre, “my assessment is that the market has already corrected by 10% in Calgary, and if current conditions remain, the market will correct much further. My realtor told me he expected another 10% down between January/February. We’ll see if this turns out to be true, but it’s certainly a buyer’s market right now.”
This raises questions posed on this pathetic blog in the past. Like, if realtors control and report all of the statistics, who’s controlling them? With no transparency on when a house was first listed, and at what price, how can we actually know current market conditions? By hiding true days-on-market stats, aren’t buyers being denied key information about the sellers? Doesn’t this obfuscation ensure we won’t know a market has changed course abruptly until well after it’s happened, trapping many? And, isn’t forcing realtor disclosure the best, cheapest way to serve consumers?
Just imagine if the prices of financial securities were handled this way. My best friends would be in jail.
Source: http://www.greaterfool.ca/2015/12/21/nabbed/
