Wednesday, June 20, 2007

Bill Good Talks Real Estate

I was in the car this morning and I caught 10 minutes of the Bill Good show on CKNW and from what I could gather the entire hour between 9:00 AM and 10:00 AM was talk about housing affordability in Greater Vancouver.

Mr. Good had all the usual suspects on the show:
  1. Obligatory real estate industry "economist" - Cameron Muir from the BC Real Estate Association.
  2. Obligatory 'objective' acedemic economist - Tsur Somerville from the UBC Sauder School of Business.
  3. Obligatory 'entrepreneurial' real estate investment guru - Don Campbell, who has written books on real estate investing in Canada.
My impression from the 10 minutes I heard was about enough to make me lose my breakfast and spit up my coffee. All the usual junk about how Vancouver is such a nice place to live and that the market perfectly determines prices, downplaying the US housing market situation, Vancouver is different, residents are making it work somehow, low unemployment, Olympics, hot economy, real estate agents are wonderful, Olympics, real estate offers fantastic wealth generation opportunities, and on and on and on.

Anyone else listen to the entire show and have some different impressions. I usually find Bill Good fairly informative and balanced but his choice of guests today was far from balanced. He is also a notorious Vancouver Olympics pumper so that may have played a part in his choices.

My theory here is the Bill Good show may represent the 'magazine cover indicator' for the Vancouver market in 2007.

26 comments:

mohican said...

I am going to have to resurrect some of the myth debunking posts that VHB had to deal with some of this junk.

el bbub said...

good thing I missed it,
these things drive me up the wall.

inhale, eeexhale.
inhale, eeexhale.
repeat...

van-realestate-crash said...

Mr. Good is big on RE, he has flipped a lot of properties over the years.

I have been tempted to call his show and ask him for disclosure as is done with guests on business shows.

I don't know how many properties he currently holds or how many he has recently flipped.

But perhaps somebody could call him on it.

I didn't hear the show, but I would bet it was a cheerleading session.

uptrend said...

I listened to most of it, and it was all pumper garbage. Bill Good started out sounding like he was gonna ask the tough questions and ended up as a pumper himself.

The rest of the guests were atrocious. No acknowledgement that prices could actually go down,it's not a word in their vocabulary.

All the callers were good and expressed dismay at the affordability and were basically shot down,"people will just adapt to higher prices" the one guy says,what bull. In 1981 they adapted allright, they stopped buying.

The other part that got me was when one guy called in who was in a partnership on a house and it had turned into a horror and he was explaining what can happen and that all is not rosy in these deals and says he was off topic and ended his call ! none of the guests would even comment ! Unreal, especially since a good percentage of ads by the banks like Vancity that are playing 3 times an hour about going in on a partnership is the way to go and this guy was off topic ? What a load.

Lastly a caller mentioned RE as "over-valued", and Good says "any time someone says that they are just someone who is on the outside". It was disgusting.

Until they have someone like Shiller on there it will always be a total pump machine.

mohican said...

uptrend - I heard that comment by Good and I cussed out loud when I heard that - that was the comment that nearly made me lose my breakfast. What a complete load of crap.

CKNW's biggest advertisers are the developers and mortgage companies so they have a huge vested interest in keeping the party going. So much for journalistic integrity.

uptrend said...

mohican, thats the part that got me too, how can a reporter who is supposed to be unbiased make a comment like that ? Total crap is right.

Total shootdown of any comparison to the US market too,blamed it all on the sub prime.
Muir threw some percentages out on Florida that I think were all rehearsed( and were conservative) and said "if you had gains of 20% annually over a few years most investors would be willing to give back a few percent". Isn't Florida condos down like 50% in some places ? Well how about those who bought at the top ? in other words tough crap for them. Guess Muir will use that line when the market here tanks,better save that one for future reference.

van-realestate-crash said...

“CKNW's biggest advertisers are the developers and mortgage companies so they have a huge vested interest in keeping the party going. So much for journalistic integrity.”

Journalistic integrity? Bill Good has become a very wealthy man, peddling the message from powerful interest groups to the Oprah crowd.

It may be not much of a stretch that Bill Good profits more than the radio station by his incessant and shameless pumping on behalf of the developers.

I WONDER WHY?

Clarke said...

You are suggesting that advertising revenues may play a role in controlling and or filtering what the news media says. That is just crazy talk. :)

patriotz said...

Lastly a caller mentioned RE as "over-valued", and Good says "any time someone says that they are just someone who is on the outside".

RE as religion. Just like Amway, Scientology, etc.

Don't question, sheeple. Debt slavery, this way.

freako said...

I don't think talk show guests have much incentive to speak their minds. We know who signs Cam's paycheques. And as I have mentioned in the past, there is little incentive for Sommerville to call it as he sees it. His faculty is closely tied to the industry. I think he is holding back.

As for Bill Good, I don't think he has much incentive to go out on a limb, or even ask the tough questions. Besides, he probably owns a home himself. Come to think of it, I used to live near him when I was a wee one (back when he was a TV guy).

BC Buds said...

Has anyone been watching Global news the last few nights? It's almost like they are trying to save the market. Tonight was about rising interest rates and how homeowners didn't have to worry as 40 year mortgages were the answer! I guess at some point this madness will end but when?

Swirlyman said...

In Japan's RE boom they had 100 year mortgages. I suppose you have to have kids (with chains around their ankles) to qualify for those.

beta said...

I've worked with journalists in the past. Mainstream journalists are generally people who can write or talk relatively well (usually an arts degree and/or a 2-yr journalism diploma) but who lack a clear understanding of the financial news they report. Writers who specialize in finance/economics are sometimes quite knowledgeable, but even a number of them fail in this regard.

When it comes to communicating financial information, journalists are often uncritical dupes of special interests; at worst, they're paid shills.

Journalists are fine for conveying traffic reports and stories about kittens stuck in trees; anything else is suspect.

Patiently Waiting said...

I don't think journalism school has done much for journalism. Most "journalists" under 40 went to journalism school and how do they compare to previous generations? Any great journalists among them?

freako said...

"Tonight was about rising interest rates and how homeowners didn't have to worry as 40 year mortgages were the answer! "

Just to put this argument out of its misery:

1. We all know that it DOES not make RE cheaper.

2. Even if we went to the extreme, interest only, it would only reduce payments by about 20%. For some perspective, at present rate of appreciation, that only takes us back to early 2006 prices.

3. The 20 percent improvement is a one time boost in affordability, which comes at no small cost.

patriotz said...

And let's not forget the US had not just interest-only but negative-am, and it did not hold up the market, because it cannot.

It just steals more demand from the future and magnifies the boom/bust.

freako said...

"And let's not forget the US had not just interest-only but negative-am, and it did not hold up the market, because it cannot."

When you introduce neg-am, you remove affordability as a physical constraint completely. The only price constraint then becomes lack of lender stupidity. Looks like that gig is up, and it is now time to pay the piper. It is definitely playing out in slowmotion. Listings seem to be peaking, so the game of chicken is in full swing. An interesting observation is that many lenders (unlike the builders) are not pricing their foreclosed properties aggressively, which is somewhat puzzling. My guess is that this could be a result of the murky picture of who the ultimate bag holders is. Perhaps not actualizing th default losses buys them time to unload the mortgage portfolio on some unsuspecting third party. If so, look out below once the picture becomes more clear.

el bbub said...

freako

"An interesting observation is that many lenders (unlike the builders) are not pricing their foreclosed properties aggressively, which is somewhat puzzling."

Developers can't really compete with lenders, just as people can't compete with developers.
For a lender loosing a couple of mils is not a major thing, since they received the biggest chunk out of this whole situation. But ordinary people will never gonna be able to compete with anyone who can afford to loose a little.

freako said...

"Developers can't really compete with lenders, just as people can't compete with developers."

I am not sure I follow. Individuals and various entities own property that they don't want. They sell into existing demand. To the market, it doesn't matter whether a seller is an owner, developer or lender, they will all fetch the same amount for the same property all else the same.

What is different is the psychology. A builder has a clearer picture than an owner, and can therefore price more realistically. One would expect a lender to behave similarly, but anecdotal evidence suggest otherwise. In any case, deep pockets absolutely NOTHING to do with pricing.

el bbub said...

freako

I am not sure I follow. Individuals and various entities own property that they don't want. They sell into existing demand. To the market, it doesn't matter whether a seller is an owner, developer or lender, they will all fetch the same amount for the same property all else the same.

I mean who is able to give a better bargain? Those who loose the least and they are usually those who gained the most. So there is a chain: Lender, Developer, flipper, and regular folks at the very bottom of the chain.

In a perfect world it would be priced the same, but in our situation we have fear of risk mismanagement. Flippers who escaped on time are fine, those who didn't are no flippers but regular folks who thought they were. Developers are auctioning property for 50% less then what regular people bought it for a couple of months ago (that's according to the recent story someone posted).
But lenders have the least to loose, cause their worst scenario is getting the property back(with interest), which in the long term will cycle back up. So, I suspect that's why they are not so aggressive.

I think it all depends on how they assess the risk..

freako said...

" mean who is able to give a better bargain? "

Sunk cost, it is totally irrelevant. The price is what the market will bear. It doesn't matter one iota what the seller can or cannnot afford.

"But lenders have the least to loose, cause their worst scenario is getting the property back(with interest), which in the long term will cycle back up. "

I beg to differ. Lenders are absolutely not in the landlord business. The smart thing to do right now would be to price aggressively to move the property in this slow moving trainwreck.

I really don't think your "let's hold until the market turns again" scenario is remotely realistic. The losses incurred are very significant, and these properties will bleed carrying cost for some time. As I suggested, it could be an attempt to keep losses of the books for the time being, or maybe it is just incompetence resulting from being overloaded with foreclosures. In any case, prices are on borrowed time, because once lenders decide that the only alternative is to price aggressively the downward slide will accelerate.

el bbub said...

freako
"What is different is the psychology. A builder has a clearer picture than an owner, and can therefore price more realistically. One would expect a lender to behave similarly, but anecdotal evidence suggest otherwise. In any case, deep pockets absolutely NOTHING to do with pricing."

I don't know how, but I totally misunderstood this part.
You're right.

"The price is what the market will bear."

True dat!

"I beg to differ. Lenders are absolutely not in the landlord business...I really don't think your "let's hold until the market turns again" scenario is remotely realistic..."

But may it possible for their families and friends to get good deals on positive cash flow foreclosures and holding them as rental properties?

patriotz said...

But may it possible for their families and friends

I think you're a bit unclear on the concept here. We're not talking about the town in "It's a Wonderful Life".

The "lender" is probably an MBS holder, who could be some entity in China, a hedge fund, a mutual fund, a pension fund, or any combination thereof.

Or the mortgage might still be held by the original lender, most likely a publicly traded financial institution.

The party in charge of the actual foreclosure and sale is the mortgage servicer, who most definitely cannot unload the property to friends or family at a bargain price. We're talking serious fiduciary duties here.

el bbub said...

patriotz

heh. I actually just watched that movie a couple of days ago. Found it listed on Forbes' among 10 best Business Movies ever made.

"We're talking serious fiduciary duties here."

I understand, but I'm just trying to question this concept I guess. So., if there is no deal. why do people buy foreclosures?

patriotz said...

So., if there is no deal. why do people buy foreclosures?

Same reason they buy from any other seller. They pay the market price.

You may be hearing a lot of talk from south of the border that foreclosures are depressing prices. That's not true really, any motivated seller (i.e. has to sell) will depress the market price, whether it's a foreclosure is beside the point.

el bbub said...

patriotz

I take foreclosures as a sign of people being in distress.

We can look at wage graphs, immigration graphs. blablabla...

But the more foreclosures we get the more pressure there is on people who actually live here and buy the realtor's rant.

too bad we can't really tell how many places are vacant and how many are not...

Also, what would be interesting is to know how many people do sales without realtors. Sale by Owner kind of thing. I'm pretty sure by now many people can't afford to hire a realtor when they sell. I know my parents couldn't brake even if they hired a regular agent so they went with 1%. and they did sell a place.

What i think would be useful to know is Craigslist Real Estate Sales by owner postings. Just cause MLS doesn't track these kinds of things.

Any ideas?