The Obfuscation

Let’s say you’re a realtor afraid the feds will squash you like a bug in the next budget. Whaddya do? Right. Fudge the numbers. And starting at noon Monday, that’s exactly what will happen. Real estate boards in Toronto, Vancouver, Calgary and Montreal are banding together with the mothership, CREA, to launch the Home Price Index. The goal: to make real estate look stable. Predictable. Safe.

Bubble? What bubble? You’re delusional, F. Go back to screwing seniors out of their pensions. We’re good here. Scoot.

As you may know, the finance minister’s expected to drop his 2012 budget next month. Besides starting to goose the age at which wrinkly people can access public pensions (as I detailed in the last post), the elfin deity is expected to address a housing market responsible for turning Canadians into voracious debt piggies. Odds are the 30-year mortgage will be toast, and he might even find the courage to ban the practice of banks giving people down payments in the guise of ‘cash back’ home loans.

Of course he has to decide whether or not CMHC will be granted more debt ceiling, now that it’s burned through its $600 billion allotment. And while at it, he might follow lenders’ reluctant lead and outlaw ‘stated income’ mortgages which allow self-employed Vancouver hairdressers to get $500,000 mortgages.

The impetus for all this is a massive run-up in real estate values of the kind announced on Friday by the realtor cartel in godless GTA, followed by The Mold House incident. As you may have heard, the average Toronto-area house (including a billion condos) now sells for $463,534, up 9% in a year. During that same year, family incomes fell 1% relative to inflation and household debt reached an all-time crescendo.

Worse, if you strip condos out, the average detached home in 416 is selling for $743,993, which is a gain of 15% in twelve months. That’s roughly equivalent to anything that happened during the American housing bubble which, sadly, ended in tears.

And it’s getting worse, at least in some areas, among people who get aroused by fungus.

The City of Toronto put three properties up for sale – run-down dumps which had formerly been used for community housing (unneeded now that poor people have been banned). They attracted 72 bids and orgiastic frenzy among a few dozen realtors. By quitting time a boarded-up semi-detached house full of mold and in need of a total gut, listed for $495,000, sold for $770,000. Here it is…

“It basically shows that there is a lack of supply on the market and, until that changes, prices are going to continue to rise,” realtor Brian Prashad told the media. (His client bid on three-storey home listed for $995,000 that went for $1.111 million, and is a total junker.) There are 11,009 houses for sale in Toronto right now, compared with just over 12,000 a year ago.

Of course, there would have been no sales and price surge without BMO’s 2.99 Special, no-money-down bank mortgages, 30-year amortizations or CMHC to wipe away lender risk. And while realtors may rejoice at the steamy market in 416 (one of the only places still delusional), it’s helped make the average house unattainable to the average family. That’s bad politics.

Enter the MLS Home Price Index. It’s clearly designed to obfuscate. Say the realtors, “HPI provides a less volatile measure of home prices and home price change compared to traditional average and median measures, which can swing dramatically in response to changes in the share of very expensive or inexpensive home sales from one time period to the next.”

In other words, it’s likely the beginning of the end of real estate boards publishing monthly average or median prices, instead referring media and the house horny to an index, designed to move in a far narrower range. The Vancouver board has used a similar fudger for some time, calling it a ‘benchmark.’ Monthly releases there no longer even give the average selling price of SFHs, for fear of scaring the crap out of everyone.

This is as regressive as it is cynical. By removing raw data further from public scrutiny, the real estate monopoly’s found a way to easily misrepresent market conditions, smooth out trend lines and stabilize a volatile and emotional commodity – just when the whole thing’s in danger of imploding.

But will the property virgins, impressionable cash-drenched foreign buyers and house-porn-loving urban masses fall for such a transparently manipulative trick?

Of course they will. This is Canada. It’s different here.

So over to F, to save us.

OMG.