Fall Real Estate Roundtable

In a riotous ‘reply all’ e-mail exchange, our experts reassess the market, six months on

POST CITY: In the last six months, the GTA real estate market has improved dramatically. But is the rebound a genuine recover or just a hiccup? If it is a real turnaround, does this suggest that Brad Lamb was correct when he said, “The worst is behind us”? Or when Harry said that “the turnaround — or, the adjustment, let me put it that way — will happen within six months”?

To refresh your memories: Sherry said that housing market conditions were going to get worse. Garth said we hadn’t bottomed (despite having just bought a house) and that the stock market would rebound well before the real economy. Elise insisted it was still a good time to get in the game. Over to you, the experts….

SHERRY COOPER: Yep, I was wrong. I thought the recession would extend the housing correction, but instead, it produced record-low mortgage rates that homebuyers went gaga over.

As for the outlook in Toronto, if rates stay low for the rest of the year and the economy continues to improve, the housing market should trend upwards, albeit at a slower pace due to less pent-up demand.

HARRY STINSON: As I [predicted] at the original panel, we are back to a normal market; people are buying and selling homes because they need a property that suits their current requirements. And frankly, as Garth noted and exemplified, people will always be looking for a good deal, and the perception is that there are a few more of those now.

BRAD J. LAMB: I will take the credit for being 100 per cent correct. I had indicated at the time that the worst was over and that we were seeing the start of the Toronto market rebound, that December was a de facto bottom and buyers should jump in immediately or miss the best buying opportunity of the last 10 years. Elise and Harry were certainly of similar thought. Let’s be kind and say that the others were badly misreading the signs or unable to. As for the future, the recession is over and real estate has recovered — end of story.

“So, was I wrong? Duh. Of course I was wrong. I sucked. I actually attributed common sense and rational thought to the people of Toronto.” – GARTH TURNER

STINSON: Notwithstanding who “called the game correctly” (100 or 50 or 10 per cent), the only real way of “ending” the recession is not simply through the guidance of bankers, experts and politicians, but through categorical strong statements (like Brad’s). He’s right (albeit minimally humble), and he is even more right to say so bluntly, instead of the usual convoluted economic “analysis.” However, I am not losing a lot of sleep about missing a once-in-a-lifetime buying opportunity. These things seem to come along every few years.

GARTH TURNER: So, was I wrong? Duh. Of course I was wrong. I sucked. I actually attributed common sense and rational thought to the people of Toronto. It occurred to me they’d realize we were in the throes of a global recession.

I assumed they’d know low interest rates had only one direction in which to travel, and they’d remember the way things felt the last time Ottawa plunged itself into unrepayable debt, leading to inflation, double-digit mortgages and a fat new sales tax.

But I was wrong, according to my panelist colleagues. The people have been smitten again, lured into a new episode of Flip This House by the drug of three per cent mortgages and the certain knowledge that this is a smart move, since house prices will rise forever.

STINSON: For clarity, I take it that you disagree?

TURNER: Lambs to the slaughter, dude. (With apologies to Brad.)

POST CITY: Elise, what’s been happening in the carriage trade?

ELISE KALLES: February was 100 per cent better than January. March was 67 per cent better than February. April was 50 per cent better than March. May was 42 per cent better than April. June was 17 per cent better than May. May and June were the best single months in our 52-year history. Consumer confidence is up. Interest rates are at generational lows. People are getting back into the real estate market. This is not pent-up demand; it is a change in attitude positively directed at real estate.

POST CITY: Do others agree? Is this a change in attitude or simply a matter of savvy buyers striking while the market was low? TURNER: It’s a change in attitude, for sure, from cautious wisdom to delusional herding. Were it not for cheap money, there would be no bull housing market, and cheap money will not last. Therefore those taking on debt to buy assets at their (so far) highest price need to be mindful of what comes next. Sadly, few seem to be. There is no reason to buy real estate in a recession other than to vulch on depressed properties; therefore, this is nothing but pure speculative behaviour on the part of people who are anything but savvy. I still maintain, this will not end well.

LAMB: Garth, it’s time you put away the dark sunglasses. All recessions come to an end. This one has ended. Now comes a recovery. It may be a mild, slow recovery; it may be a wild, crazy burst forward — or anything in between. People are buying because they feel confident. Some of these people were fence- sitting, most were not. Inventory levels of new and resale housing are getting dangerously low. Prices are set to soar if we don’t see a real change in supply soon.

TURNER:
Saying a recession will end does not end it. That is the dumbest comment on this thread (with respect). We have a country with a $50 billion deficit guaranteeing increasing rates and rising taxes. Unemployment is the highest in two decades, household indebtedness is 138 per cent of disposal income, and recent buyers will be cratered if mortgage rates return to the 20-year norm of eight per cent within the next five years. This is not over. Every major developed country has gone through a housing correction, and ours is actually yet to come…. Yer part of the problem, sailor.

LAMB: Garth, if you wish to talk about dumb comments, we can pursue this all day. My inclination is to not lower this to a personal attack. I don’t agree with you. I believe that economic doomsday prognosticators serve little purpose. They are rarely correct, and when they are, it is less than once every century.

TURNER: If we abandon attempts at economic forecasting to guide investors, we might as well just use hormones. That’s why we’re the “experts” for this media exercise, instead of industry pumpers. God knows this town already has enough.

LAMB: Doomsday prognosticating is not economic forecasting — it is scaremongering.

TURNER: Doomsday prognosticating is hardly the definition of discussing with consumers the inevitability of higher interest rates, the HST’s impact on new housing, demographics, the tax implications of federal deficit spending or the fact we have uncharacteristically hit a new asset valuation in the middle of a recession.

As for economic forecasting, I have yet to hear any from you, Elise or Brad. Just testosterone (sorry Elise!).

HARRY STINSON: Too bad this isn’t a talk-show panel….. It has a good cast and a subject that people are interested in. Garth, this is your field — try and get us a gig.

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