When will we stop Recycled Listings?
Recycled listings consistently skew statistics, like average days on market and sales-to-new listings, to make the real estate market look hotter so that home buyers will feel rushed and offer more money for their home than the true market statistics would support.
Home prices have now reached levels where the vast majority of the homes for sale in Metro Vancouver are only affordable to the wealthiest 17% of households. It means that if we change nothing, more than 83% of the next generation will never own a home.
Why recycled listings?
We’ve all heard people blame lack of supply and speculative demand as key issues driving unaffordability. Both supply and demand are a large part of the problem but because recycled listings make the market look tighter, they contribute toward making buyers spend more and worsen the affordability crisis. This is a key contributor to the crisis and modernizing it is a key to achieving affordable homes.
Simply put, the MLSⓇ system is a poor one for managing housing inventory. It is more akin to a classifieds website than an inventory management system because it puts more emphasis on how long a listing has been posted rather than how long a property has been for sale. Why is this an issue? Can’t we just buy houses like we buy cars on Craigslist?
MLSⓇ’ inaccuracy is important because three key stakeholder groups rely on reporting from MLSⓇ to make some of the most impactful decisions in their lives and for the economy. Who are these stakeholders and what do they use MLSⓇ for?
Home buyers and sellers depend on MLSⓇ for accurate and transparent information about local markets and to assess fair prices for homes.
Municipal, provincial, and federal government and central bank policymakers use this data to inform rezoning, housing and interest rate decisions.
Industry forecasters, economists, and senior bank employees use MLSⓇ to evaluate risk in the housing market and tighten or loosen lending policy.
This isn’t a new problem. The Globe and Mail and HuffPost reported on this issue in 2018:
Recycled listings obscure a major market correction The Globe and Mail
'Recycled' Listings Mean Canada's Housing Market Data May Be Misleading HUFFPOST
How inaccurate is the data? It can’t be that bad, can it?
The chart above compares the expected Months to Sell Available Inventory to the average days on the market. This shows that while the months of inventory tripled, the average days on the market barely budged. That’s because the average days on the market reflect the average preferred duration a Realtor sets for their listings and has no relationship to how long it takes to sell a property.
The upward trend in standing inventory that began in 2017 would have alerted buyers to changing market conditions but the industry’s focus on the average days on the market completely obscured the softening of the market and led people to believe nothing had changed.
Recommendations:
Modernize MLSⓇ and listing procedures to provide more accurate information
Implement procedures and controls to restrict canceling and relisting of properties, with tightly controlled exceptions when a material change has been made to the property that would raise it’s value by more than 5%.
Modify MLSⓇ so that if a home was previously listed within 9 months of a new listing, the original list date and days on market is presented.
MLS system was not originally built with the intent to provide economic data but that’s what it is being used for today. It is time to modernize the way it handles our sensitive economic data and implement real estate practices that help ensure that listing behaviour doesn’t indirectly corrupt the quality of the data reported to the public.
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