TorontoRealtyBlog

Can we have an honest discussion here?

Can we, really?

What is the “problem” with the Toronto real Estate market?

Does anybody care to admit what so many of us already know to be true – that jealousy and have-not’ism are at least partially responsible for the backlash against rising prices in the Toronto real estate market?

Over the last week, I’ve been bookmarking several newspaper articles in anticipation of writing a long-overdue blog post for which I would basically need to lock myself in my office with complete silence for a full day.

Consider today to be that day…

Last week, many of you probably read this article:

“Renfrew, Ontario House Sells For $1 Million Over The Asking Price”
CTV News
April 7, 2021

I wasn’t actually surprised by the headline.

And as much as I want to say that the following comment surprised me, it, unfortunately, did not:

“It was nice that it wasn’t some guy from Toronto, or someone who wasn’t connected with the place and dropped in on an every third Saturday.”

I remember going on a New York State golf trip with some buddies in university, and when out at dinner one night, the waitress asked us where we were from.

“Toronto,” I said.

The whole table erupted in disagreement.

“He’s from Toronto,” one of the guys said.  Then they all rattled off where they were from: Burlington, Dundas, St. Catharines, and Ottawa.

Hostilities toward Toronto, whether through sports, culture, or demographics, have always been present among various people and places across the country, and this comment from the seller of the Renfrew, Ontario house is nothing new.  But with the real estate prices in Toronto now higher than ever before, the calls for the government to “do something” about it have grown louder as well.

The disdain and disgust for those who live and own houses in Toronto have grown too, and I can’t help but think that jealousy has something to do with it.

It’s the old, “Me think thou doth protest too much,” which is true of every bearish commenter on Garth Turner’s website who “laughs” at the people buying real estate, even though that commenter secretly wishes he or she could do the same.

But the backlash against rising real estate prices isn’t just specific to Toronto.

In 2021, it’s everywhere.

So again, I ask: what is the problem?

There are all kinds of solutions out there, from raising interest rates, to tightening mortgage regulations, to instituting a capital gains tax.  But what is the problem?

As I said at the onset, before we can even begin to assess the problem, we have to wade through an incessant amount of complaining, much of which is often misplaced, misunderstood, or at times, completely off-base.

The media has exacerbated these sentiments this year to another level altogether.

I understand that news media has changed dramatically and has to compete with social media.  So it’s no surprise when the attention on the Toronto real estate market is inherently negative.

On the sidebar of that CTV story about the house in Renfrew, Ontario, you will see this:

Three videos about the housing market, all of which are exceptionally negative.

So is there a “problem” in the real estate market?  That’s a question that nobody can agree upon.

Take that first video, for example.

This story is about a couple who sold their house in Brandford, Ontario last July and who now are trying to buy a house in Hamilton, but they’ve lost TWENTY-ONE bids.

They sat down for a video interview with Ben Mulroney and this was, to me, at least, four incredibly painful minutes.

Two things that I, and the long-time readers of TRB, immediately know to be true:

1) They got caught trying to time the market and failed.
2) When you’ve lost twenty-one offers, the market isn’t the problem…

But the CTV news story didn’t address this.  Instead, Ben Mulroney gave these two a platform to complain about how “hard” it is out there.

In the tough-love world, we often hear the words “teachable moment” used, and I can’t think of a better scenario than this one.

In the video, Ben Mulroney asks, “Where are you guys right now?” to which he probably knows the answer.

The woman says, “We’re in my parents’ basement.”

The viewers are supposed to feel bad for these people.  We’re supposed to be mad at the real estate market and shake our fists in the air, asking God-only-knows to “do something” about it.

But the teachable moment is this: if you want to take risks, you might suffer consequences.

Recall my March, 2021 blog post: “The Friday Rant: Stop Talking”

In this blog, we explored Rob Carrick’s column in the Globe & Mail where a gentleman named “Greg” was crying poor because he sold his condo in mid-2019 and is now having trouble buying a home.”

This is called “timing the market,” or in this case, trying to time the market, but failing.

The sad couple in the CTV video above tried to time the market and they were unsuccessful because the market went up, and up, and up, and they never bought.

Instead, they made twenty-one offers on properties and lost.

As the video explains, the lady got so frustrated that she reached out to the local newspaper, the Hamilton Spectator.

Huh.  Okay.

So that’s what we do when we fail?

We don’t keep trying or try harder.  We bitch, moan, and then seek to elevate our bitching and moaning to somebody with a louder voice.

I know from experience that you don’t make twenty-one unsuccessful offers unless you’re doing it wrong.  These people are in their own world on price, conditions, et al, and/or they don’t have proper representation.

You, the TRB readers, know this.  Even those of you who are bearish on the market, or have issues with the industry, or hate real estate agents, are rational and honest enough to know this.  But the general public?  Do they know this?

Not a chance.

The young couple in the video said they spent their time writing letters to home-owners, and admit that in one instance, they had the highest offer but had a financing condition!  So they’re pulling on the heart-strings of the viewers, who aren’t well-versed enough in the real estate market to understand the role that conditional offers play.

“Oh my goodness,” Ben Mulroney says, in response to the idea that the owners could reject a conditional offer.

This is what I refer to as “everything in between.”

We are seeking solutions to a problem we haven’t yet addressed.

But before we identify the problem, or evaluate the solutions, we first have to wade through “everything in between.”

The banter, the misinformation, the spite, rage, jealousy, and disgust.

It’s ever-present in our real estate market, and as we saw above, it’s not just Toronto.

Having said that, Toronto is the current whipping-boy.

Here’s an article that ran in the Toronto Star last week:

“Want To Make Your Life Miserable?  Buy A House In Toronto”
Toronto Star
April 9, 2021

No fewer than eight people sent me this article, including a client of mine who has been flirting with moving to Sault Ste. Marie for years, but whom I have chained to the porch of her beautiful Toronto house as it continues to appreciate in value…

This isn’t as much of an article as it is a headline, since most people who see the headline won’t even read the article (who reads anymore when you can just ‘click’ or ‘like’?) but the headline tells the whole story.

Poo-Poo, Toronto.

Yucky!

Ick!

Why would anybody want to live in Toronto?  Or buy in Toronto?

Bunch of assholes.  Same with Vancouver.

Now, I’m going to stop short of looking up the author to see where she lives, when she bought, and what she paid, since that would be wrong.  But I’ll let you jump to conclusions, since making assumptions and often labeling them facts is all-the-rage in 2021.

Here are some of the scare tactics in the article:

You will learn, possibly to your surprise, that the deal is stacked so that you mostly pay the interest first. This means that initially you get almost nowhere. If you can prepay every now and then — I hope you insisted on that — the resultant savings will dwarf the payouts on the biggest investments you’ll ever make.

But it will mean no extras, no overseas travel, no fine dining, a scantier Christmas than your kids imagined, and an awareness of money that will cramp your life. In other words, it will mean life at a pandemic lockdown level for decades. If you are able to defer gratification — you learned your money skills from grandparents who survived the Depression — you’re good. But those skills have been discarded.

So let’s look at that first comment about how “the deal is stacked so that you mostly pay the interest first.”

Hmmm….

Buying for $1,000,000, with 20% down, and a 2% interest rate, means your first payment is $3,387.61, of which $2,060 is principal and $1,328 is interest.

I guess she’s talking about the 1980’s, when rates were at 18%?

Yeah, sure, with an 18% interest rate, the first payment is $11,731.04, of which $158 is principal and $11,573 is interest.

But why the *$ are we talking about 18% interest rates and the 1980’s?

Because it sells newspapers?

It gets clicks?

There are many funny little rooms, could be a sewing room, could be an informal child punishment centre. And a toilet at the base of the basement stairs. Not a bathroom, just a toilet. Is that a stuffed bird on the wall? Birds?

I’m no stranger to sarcasm and cynicism, but this is now making fun of what people in Toronto live in, regardless of circumstance or affordability.

How is this helpful?

The inspector you snuck in — they don’t allow inspectors — says asbestos is fine as long as you don’t disturb it.

This isn’t accurate.

You can book a home inspection, no problem.  But with pandemic protocols, there are no double-bookings allowed and thus you might not have the window necessary to book a 2-hour inspection.  What’s the alternative?  Should we ignore pandemic protocols?

All this banter, whether it’s CTV videos glorifying willfully ignorant people who can’t navigate the Brantford & Hamilton housing markets, or columnists who have made a fortune through their primary residence but like to make fun of 2021 home-buyers, simply clouds what “problems” exist in the real estate market and makes it impossible to suggest, let alone implement, any solutions.

Then when it comes to potential solutions, once again, we’re seeing anti-Vancouver and anti-Toronto bias.

Are we going to see a new capital gains tax on a primary residence?  Yes, for sure.  At some point, at some level, especially as Justin Trudeau will be in office for at least a decade.

Have you heard rumblings about the tax being on properties of a certain value, or above a certain threshold?  Yes, absolutely.

So while it wouldn’t be “fair” to implement country-wide policy to single out residents of two particular cities, you could implement a tax on real estate above $2,000,000, and that would essentially avoid taxing people (ahem – voters) in an overwhelming majority of the country, while simultaneously taxing residents of Toronto and Vancouver.

This is a topic we will spend a lot more time discussing on Friday, not to worry.

For now, it’s the “everything in between” that’s got me riled up.

We have no idea what the problem is.

Some think that the problem with the Toronto real estate market is rising prices, but I think it’s envy.  I think that with social media overtaking our lives, we’re constantly inundated with photos of houses, often with two people standing in front of them (and a ‘SOLD’ sign), and we’re quick to judge and/or hate those people, that house, and the entire process of buying and selling real estate.

It’s gotten way, way too personal.

Just ask Karen Scutt.

Who is Karen Scutt?

I dunno.  I’d never heard of her until I read this article:

“Calls Grow To End “Blind Bidding” To Cool Red-Hot Housing Markets Across Canada”
CTV News
April 6, 2021

Again, we’ll address the idea of “ending” blind bidding on Friday, since I don’t know who‘s job, if anybody’s, it is to end this.

But in this article, “Karen Scutt” laments that her bid of $100,000 over the $1,800,000 asking price lost to a bid of $400,000 over the asking price.

Imagine that?

A much higher bid was accepted?

No freakin’ way!

I guess in Karen’s world, “fair” is defined as her getting what she wants?

“They’re pricing the houses so much under what they want that even if the listing is in your range, you’re already resolved that you’re not going to get it,” she told CTV News.

Congrats, Karen.  You seem to understand now.  So use that knowledge to adapt to the market, rather than complain about it.

If houses that are being listed around $1,800,000 are all selling for $2,300,000, and Karen has a budget of $1.9M, then all things being equal, why isn’t Karen looking at $1.6M listings?

Oh, I see, because she likes houses she can’t afford.

A client of mine who moved out west emailed me last week.  He’s coming back to Toronto and is looking at houses in the $1.5M range.

“Everything I’ve seen that I really like seems to sell more in the $2 Million range,” he told me.

But you know what he and I aren’t going to do?

We’re not going to walk into houses we can’t afford, make offers that won’t be accepted, and then call the Hamilton Spectator to complain.

The general public has yet to come to a very important consensus: not everybody can have everything they want.

We’ve accepted this in many other areas of life, especially in commerce.

How come nobody stands out front of the Porsche dealership, hating on the guy who just paid $90,000 for his Cayenne, and then jumps in their Hyundai and drives to CBC News to whine about it?

Why only real estate?

Is it because “housing” is a physiological need?  Shelter, clothing, and food?

Okay.

So then why is nobody complaining that Kiara Von Snobbalot spent $4,000 on a Louis Vuitton handbag, and the rest of you have to make do with that shitty Michael Kors consolation prize?

I don’t see anybody standing outside Jacobs & Co. lambasting those who enter and exit, suggesting that the government take steps to ensure that ALL may enjoy wagyu.

So why real estate?

Why is the Toronto real estate market a “problem?”

Is it really because society has a genuine concern about Tom, Dick, and Harry’s ability to service their mortgage if rates “skyrocket” to 3.49%?  Or is it because you’re envious of Dick?

On Friday, I want to leave behind the banter and everything in between and actually discuss the problem(s) in our market, and potential solutions.  As far as solutions go, before you all go thinking ahead, I want you to remember that there are two ways to come up with solutions: one is addressing the demand-side, which has been done to death but the other………wait for it……………is to address the supply-side.

Wow!

What a novel idea!

Does that mean we don’t have to tax our way out of every problem?  That raising billions of dollars in tax revenue to “cool the market” isn’t the only answer?

Egad!

See you Friday, folks.  Crack those knuckles now, because I want to hear from you…

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