A Little Perspective on Market Fluctuations and Real Estate Forecasting

Right after some radio or news personality goes on and on about market downturns in Canada I often get asked how my career is doing in regards to the economy. In these instances, I always feel like the person asking me is expecting some horrible news in that I suddenly can't make due in life and have to sell the family cow. They are often surprised when I don't have much to say other than "everything is fine!".

Here is a little perspective for you that you may find reassuring about the market:

1.) Scare Mongering- This probably isn't news to you (Ha!) but radio and news broadcasters make more money, when more people tune in and pay attention to their programing. The best way to get people to pay attention is by scaring the crap out of them. What better way to scare folks than to make them think they will lose thousands of dollars over night someday on the value of their homes. I am not saying experts are right or wrong when they present their findings, but when they present their numbers with a title behind their head saying "Market Crash 2015" in bright red capitals, it tends to set off alarms in people's heads, and they aren't really listening to the findings after that. Another important thing to remember is that you shouldn't really give the news person any credibility until they ask the expert to come in and give the low down on what is actually happening. I can't help but notice that all too often, once the expert says what is really happening it often dispels literally everything the news person just said. You see, news people are trained to use buzz words like "market crash" to describe a slight decline real estate values, or slightly increased interest rates, giving some people very ugly, often false imagery of what is actually happening. In reality, according to Canadian Real Estate Wealth Magazine (December/January 2015 Issue) we are in for a "market cooling", not a "market crash". I know they used buzz words, but I trust their perspective a lot more than a non-expert, AKA news anchor.

2.) Context- Even when more educated sources like the Real Estate Wealth Magazine I just quoted sound off quotes about the Canadian Market, it is important to remember they are talking about the entirety of the country, not specifically about your little town, or semi-large city that you live in. Take a look at the markets in Toronto and Vancouver specifically. Vancouver is located within a very geographically unique environment. It is surround by mountains on one side, and the Georgia Straight on the other, with a large portion of its traffic coming in from the bottle-necked Lion's Gate bridge each day. There is little area left to develop in Vancouver, as it's limits pose problems for building (i.e. you can't build on water, and you'd likely run into issues of conservation practices or major expenses building into the side of a mountain). A lack of ability to develop leads to an increasing demand. This geographical dilemma has created a demand so high for real estate within the city (as living outside the city means a hairy mess of a commute each day) that the prices of the housing are inflated dramatically. Typical supply and demand economics. If you have ever looked at the price of a house in Vancouver, you would understand what I mean ("You want how much for that?"). Toronto is a another unique bubble market, as real estate within the city is in high demand, and therefore an over-inflated price as well. Why? Because the perceived value of not having a nasty commute, and living near all of the city's amenities has a price that people are willing to pay for, and as supply dwindles, the demand goes up, resulting in high prices. Back to what I was saying about context, our little city of Belleville is not really reflective of the conditions in Vancouver or Toronto. It seems that in published market analysis, the feeder towns and smaller cities are often neglected, as most real estate publications only seem to talk about capital cities. In Belleville my findings have generally been that our market has not increased OR decreased within the past few years. We sit comfortably with our real estate values remaining unscathed and relatively stable. It is important to remember what we learned in grade school about averages, and how data outliers such as Vancouver and Toronto's market bare more weight in the cumulative average calculations than we realize in the general statistical analysis of the Canadian real estate market. If the average amount of money for someone to buy a house goes up by $20,000 in one year, it doesn't mean that everyone across the nation is going to have to pay an additional $20,000 for a home. Just the same, if the average cost of a house is $250,000, that doesn't mean you can expect to pay that much or more for your house. For smaller towns, I would personally predict very little movement in values as our demands for real estate differ greatly from large cities.

3.) Expert Opinion Is the Only Opinion- Before you take what you hear on the news as true knowledge, do yourself a favour and consider who you are listening to. Is this advice coming from a news personality with no professional knowledge of what they are talking about? Here's what you can do with anything not said by a professional; look further into it and see if the facts are referenced by someone who is a professional. What is considered a professional in real estate trends? For a broad perspective, I like to read real estate magazines, and keep track of real estate moguls on Twitter. Other good information sources can be experienced, successful real estate entrepreneurs, investors, affiliated agents and brokers, persons with a university education in economics, and persons who work in the mortgage industry. Even better, is to consult a seasoned and esteemed local real estate agent that lives and operates within the community you intend to buy in, which brings me to my next point.

4.) Go Local- This is probably your best option if you are seeking advice, as local professionals within the community you intend to buy from have more in-depth knowledge of what is going on with your local market than any of the big real estate moguls, investors, and real estate authors you can read. We all know of the benefits to the local economy when you chose to work with a local person, like keeping the money spent within the city instead of elsewhere, but this isn't the reason I am suggesting it. Local realtors are the best option because they have an insider view of the market you are looking into. They know what constitutes a "good buy", where the good locations are, where there is heavy traffic flow, where the high visibility retail areas are, they know who does and does not have municipal services, they probably know and maybe even chum around with local politicians, they know where new developments will happen before the general public, and the list can go on and on. I begrudgingly see some of our local retail buildings managed and leased out by Toronto based agents and brokerages, as there seems to be this perceived knowledge that if they are from a bigger city they somehow know more than someone local. As an agent who once worked on leasing a building in Belleville with a Toronto based agent, I am here to tell you, this proved to be a large disservice to the property owners, the tenants, and to myself. The Toronto agent required more time for me to school him almost daily in our local market than was spent marketing the property.

If you are skeptical of the advice above, it only means you learned something from this post and you should be proud of it.

Happy shopping!

Tom McEvoy

Tom McEvoy

Sales Representative
CENTURY 21 Lanthorn Real Estate Ltd., Brokerage*
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