Canada's Housing Bubble

Dec 12, 2010 Ben Rabidoux financialinsights.wordpress.com

Let’s start this post by highlighting a few articles from the past couple weeks that have appeared in major daily newspapers around the country.  Note the author and/or main source:

Who Says You Can’t Afford a New Home?

Author:  Stephen Dupuis- president and CEO of the Building Industry and Land Development Association (BILD)

Note:  Article removed from Toronto Sun website.  Retrieved via google cache.  Click to enlarge.

No Bubble, No Trouble

Author:  Stephen Dupuis- president and CEO of the Building Industry and Land Development Association (BILD)

Average Canadian Home Prices To Rise 3 Percent in 2011

Author:  Canadian Press.    Main source:  Re/Max Canada

It’s Best To Invest

Hat tip to Alberta Real Estate Watch for this one.  This one is particularly blatant in its attempt to mislead.

Author:  Erica Lepan- Mortgage Professional with The Mortgage Group

See the pattern?  All ‘authors’ or sources benefit directly from real estate transactions and increased real estate prices.  So what’s the deal with the shoddy journalism?

We’ve examined this before, but it’s worth revisiting.

Newspaper advertising is a $1.2 billion industry in Canada.  It generates 34% of the total operating revenues of all newspapers in Canada.  In a fascinating piece carried in the McMaster Journal of Communication, the inherent biases of a profit-oriented media are explored.  I’d encourage you to at least read pages 9 to 10 of this article, as this section deals with the advertising conflict of interest I mentioned above.

Here are a few snippets to consider:

“Building relationships with advertisers limits what news a medium will include.  Anything that can be viewed as contrary to business priorities or will interrupt the “buying mood” of consumers often dissuades the advertisers that fund newspapers.”

“It would not be financially reasonable for newspaper owners to publish editorials that offend their advertisers or deter consumption.  This results in the censorship of news content, whereby journalists are less likely to pursue (certain) stories”

“Since publishers like CanWest Global are more dependent on advertising revenues than they are on subscription payments, selling advertising space becomes the top priority of  the company”

In other words, keep the BS detector cranked up.  As sales continue to weaken and prices inevitably follow, there will no doubt be more pressure on the media to continue to present the real estate market in a favourable light.

-Ben