How Our Biases Impact Our Real Estate Thinking

Connect with me and my agents at Realosophy Realty to discuss your personal real estate situations here:
www.movesmartl...
Today, I respond to the question of why experts initially missed that Canada's record high population growth was fuelling our housing affordability problem into a crisis and also discuss how we often have 'blind spots' when we are thinking about the real estate market in general or when making our own personal decisions.
Connect With Me:
X-Twitter: @JohnPasalis
Email: [e-mail]
#torontorealestate

[@davidhughes6048]

3.9 Million homes in 7 years. One house every 60 seconds, 24 hours a day, every day. Should be doable. 😂 Thanks for the endearing personal story.

[@TheWhiteAfghan]

The bias here is:when you work in the real estate industry.You're always looking for more supply to sell to make a profit

[@dutchgirl7603]

Not necessarily. Selling 2 homes at 300k as compared to one home at 600k. Gross profit is the same but your expenses are twice the cost. Therefore a tight supply keeping prices high is more profitable for the agent.

[@Hoser584]

Didn't they all make enough in the last few years? They are also owners of multiple places they rent out.

[@TheWhiteAfghan]

Is it really a lack of supply when every real estate agent and brampton resident owns seven homes. The 0% money didn't have anything to do with it..

[@kevinn1158]

When you have a real estate leader telling everybody, every year, that the prices are going up, cough cough CREA, we have a serious problem. Meaning, we have an industry that has insiders involved in the buying of investment properties and protecting their own investments driving prices up. We have gov'ts who rely on prices rising.... the land transfer taxes help drive the inflation and the gov't is addicted to the income. And the same gov'ts refuse to be open about development requirements... (who the hell buys a property for millions not knowing what they can build?). NIMBYs have ruled smaller developments. These are the issues. Add in the HELOC leveraging and ultra low int rates and boooooom. It's never been just a supply issue. This ramp up of property prices has been happening since 2002. Just track home prices against wages. It's just like trading stocks. Once a momentum has been created, it builds on itself. Everybody benefits from the price continually going up and they forget that PE or wages ie fundamentals matter. The disparity between wage and home prices has never ever been this wide. If you rode the wave up, nobody said anything. But wages ultimately should determine price and it hasn't.

[@vladimirvorobyov]

John, you are totally right. People shouldn't overthink the housing problem. They have to ask the government what & why the government is doing for this

[@Mark-ei8fy]

Very well said. Its refreshing to hear a well spoken and intelligent conversion tackling the hard, sensitive subjects.

[@littlepinner05]

I sort of agree, but I think high immigration is a symptom, not the cause of the crisis. The primary cause is the psychology of Canadians that housing only goes up, combined with economic factors that supported this narrative (i.e. lower and lower rates, globalization keeping inflation low, high government spending, money laundering into Canada, higher debt levels, etc.). The 'prosperity' caused by ever increasing house prices led more people to want to move to Canada (i.e. immigration), and more dependence on the sector for economic growth. We had jobs for the immigrants due to our debt-fueled economy backed by government spending and growing real estate prices. As long as prices were going up, defaults remained low and the economy seemed to be doing well. People kept investing more and more in housing because it was continually going up and rates were low - why wouldn't they! However, behind the scenes, debt levels were growing higher and higher, productivity was falling and government spending was becoming less and less effective. Then inflation led to rates going up, which finally started to break the psychology. However, it won't be until we see a severe recession that the psychology will truly shift meaningfully. If that happens, I doubt we will hear about housing supply or immigration for a long time (the same way 2 years ago, the 'labour shortage' was a huge issue that no one really talks about anymore). Hopefully, we will then diversify our economy away from housing and into more productive sectors.

[@petercahill8607]

There are a whole host of factors that caused the huge run up in prices, with immigration numbers being but one of them. Loved the story about your father.

[@zdimic]

I know it's an old video, but maybe you see the comment. Immigration leads to increased rent demands, not housing. There is 3-10 years of delay on the housing front. I would know, I was an immigrant. Huge majority of immigrants are in the fight of their life to find a rental, find a job, buy cuttlery, pots and pans, cheap pieces of furniture, build some savings, before they even have a presence of mind and courage to think they can buy a home. And my experience was from '97-'00, when prices were 'a bit softer'...

[@GiseleCline]

John - excellent commentary!

[@TobinElavathil]

I can't really fault the analysis here, housing demand exceeds housing supply in perpetuity because of high immigration, and housing starts not rising to meet the demand. I would have two questions and one suggestion for John. 1. Since the housing supply didn't meet the demand over the last decade, we have a structural mismatch in the marketplace for shelter. If we lower the immigration levels will demand for housing ever reduce below the supply created? 2. If not what do we do? Suggestion: It might be interesting to understand what Canada might look like if immigration only matched housing starts? If it had in the past, and project it into the future. What challenges might we be facing if that was the policy in the current time frame, and projected forward. The problems we know, versus the problems that could have been.

[@mr.d4295]

Poor government policy is a BIG problem with this housing market (slow permeating, high taxes, to much immigration, WAY to low rates) but we are also in a MASSIVE speculative bubble.

[@user-dy3hz9yf8h]

I am an American in NYC. The 8 million people (illegals) that have come into the US the last 3 yrs have had very little impact on housing market. Why? Because they are all economic migrants/refugees that come here with their shirts on their backs. Canada however lets in relatively wealthy immigrants/university students from eastern Europe and India that come into country with university degrees and/or 200k in assets! Can we see the difference there? The US migrants are in no position to drive up RE prices. The Canadian immigrants are in that position! The media never mentions this!

[@VitaliyMonastyrev]

It's a matter of definition. I think most of experts who say "lack of supply" are talking about the fact that in the moment we have not enough houses, it is not about why and how we got there.

[@joeman01]

Politicians divide and overcomplicate simple issues - we have to many immigrants!

[@moniku4866]

Who is taking the corporations and wealthy from buying 10, 20, 50 housing units. Homes are available they are owned by one set of people.

[@Carolinapetroska]

There's tons of supply in Toronto and the Gta now. Inventory is piling up and nobody is buying.....The Canadian real estate is no longer interesting nor productive so buyers are scarce, moving to better countries.

[@Matt-YT]

Housing is both a demand and supply issue

[@EricAlHarb]

CAP! You’re x tweet history is full of the lack of supply

[@speedyfeint]

FJT

[@1mikesass]

Immigrant investors have much larger housing assets than established Canadians. So not only are immigrants the issue with demand, they also magnify the concentration issues