This Tuesday, Canadians opened their Globe and Mail and were met with the newspaper’s headline take on historian Niall Ferguson’s current world view. “There will be blood,” we read, some distant echo of last year’s Oscars stirring in our minds. He sees “howling anguish” in the Euro zone, economies being “really slammed” in Asia, and several moderate governments being toppled in civil wars.
Ferguson sees Canada’s proximity to the US as a mixed blessing. “Canada is not finding the worst,” he said, but “America’s trading partners will get hit harder than the U.S.”
It was only towards the end of the interview that Ferguson admitted, “I’m trying to stay cheerful.” He went on to list the good-news elements of the economic situation. The China-America (or “Chimerica”) relationship would stay strong. The US would suffer less than many other economies around the world. The US would not succumb to protectionism “with Larry Summers in the White House.” After accounting for the mortgage bubble, the underlying rate of growth in the US was around one percent per annum (“a reasonable growth rate for 10 years.”) With Obama’s more equitable tax system, “there might actually be no discernible downside for middle America and lower-class Americans.”
Ferguson’s cheery conclusion applies just as easily to Canada as to the US. “People just have to get over the fact that their wealth wasn’t worth what they thought it was in 2006. Whether it’s their stock market portfolio or their housing. If we simply go back to where we were, in 2005, that’s surely not the worst thing that could happen to us.”
As a Realtor, I sense that this is the kind of question people want answered. “Is my house back to where it was two (or three, or four) years ago?” If we can establish some kind of baseline in these times, then we can say to ourselves, that’s surely not the worst thing that could happen to us.
It used to be that we’d do a quick calculation… To get the number of properties that had sold in a bidding war, we’d simply go through the sales and find the results that showed a sale price in excess of the list price.
Today, we’re seeing only a handful of those over-the-top sales (yes, there have been some in Toronto this month!) At the same time, we’ve discovered a new phenomenon… the bidding war below the asking price. In the last few weeks, we’ve been presenting offers on homes, at prices that we (and our clients) thought were fair, but below the asking price. In each case, other buyers and their agents also came forward with competing offers. In the course of two or three days, these sellers were able to receive two or more competing offers, allowing them to pick and choose the most attractive bid, without the formality of a scheduled date for the presentation of offers.
These under-the-radar bidding wars have some distinguishing features: the buyers are competing not to over-bid, and are usually determined not to pay the list price; and they keep conditions in their offers (on financing, and home inspection). So it’s not so much a beauty contest to please the seller. It’s more about debating with yourself (and your partner) about how much the house is worth, and whether it offers unique qualities that won’t easily come up in another house.
This new kind of bidding war is hard to catch through the sales stats. It’s only happening in some areas of Toronto (or… is that just because I don’t see what’s happening elsewhere?!) We think it’s another variation of the 80/20 rule. In this case, 80% of the buyers are attracted to 20% of the homes (it’s probably more like 90/10 in some areas). As more owners come to accept the concept of realistic pricing, we’ll probably see some well-presented listings this spring, which will start to generate a few more “real” bidding wars, where the properties sell over the list price again.
The current market is forcing buyers to think carefully about how much a place is worth. In our view, it’s never been about the sticker price… To make a smart buying decision, you’ve got to do your homework on each property!
Ontario in the Creative Age, the report by University of Toronto professors Roger Martin and Richard Florida, was received last week by the Ontario Government. This report has received a significant amount of media coverage. The key ideas in the report will be extremely useful in enabling us to have good discussions about economic growth, and they deserve to become more familiar.
The authors set out their thesis that our economy is in an epochal transition, similar to the move from an agrarian to an industrial economy.
What we’re witnessing is a replay of the employment decline in farming, forestry, and fishing occupations in the first half of the twentieth century. Around 1900, fully 42 percent of Ontario workers were tilling the soil, cutting trees, or hunting and fishing for our food. Because of massive productivity improvements in the agricultural and resource sectors, today we are able to meet the basic consumption demands of Ontarians and untold numbers around the world with only 2 percent of our work force. (P. 7)
Their analysis of job trends is based on the concept of “routine-based” jobs versus “creativity-based” jobs. While the concept of “routine-based” is fairly easy to grasp, the definition of “creativity-based” has been more challenging to explain. In essence, however, Martin and Florida have marshaled impressive statistical evidence for two facts: first, that the need for “routine-based” work is shrinking and will continue to shrink; and, second, that the future prosperity of our society depends on our ability to encourage the accelerated growth of the “creativity-based” economy in Ontario. In other words, if we are not proactive, we will fall behind. Continue reading