The Details

Here’s a link the to filed legal document (filed yesterday): ct-2010-002_registered consent agreement_75_38_10-25-2010_4682.

The most important part is contained in item 3 under the “Obligations of CREA”:

CREA shall not adopt, maintain, or enforce any Rules that deny the ability of Members to provide Mere Postings for Sellers, or  that discriminate against Members because they offer, or wish to offer, to provide Mere Postings for Sellers, including, but not limited to, any Rule that:
(a)  prevents Members from offering a Mere Posting;
(b)  prevents Mere Postings from being listed in a Member Board’s MLS^® System;
(c)  discriminates against Mere Postings, provided that the bare  identification of a Mere Posting in a Member Board’s MLS^® System is not discriminatory;
(d)  prevents Members from cooperating with Members that offer Mere Postings;
(e)  prevents Members from:

• (i)  listing a Seller’s contact information in the  REALTOR®-only remarks section of the MLS^® System, with instructions directing interested Members to contact the Seller directly,
• (ii)  including, in the General Description section on an Approved Website, a direction to visit either the  REALTOR^®‘s or his or her brokerage’s website  (whichever site is included as the contact link in the REALTOR^®‘s contact information on the Approved  Website) for additional information about the listing  (without specifying the nature of such additional information), or
• (iii) displaying the Seller’s contact information on a  website other than an Approved Website;

(f)  prevents Members from negotiating and contracting, with  a Seller, in respect of the terms of payment for compensation to  the co-operating Members for the co-operative selling of the property, as long as the offered compensation is not zero; or
(g)  conditions use of, or access to, the MLS^® Marks or a Member Board’s MLS^® System on a Member, or a prospective Member, not offering Mere Postings.

The key points:

• Nothing has really changed, but
• REALTOR^®s now have formal approval to offer flat-fee pricing to put sellers’ listings on the http://www.realtor.ca
• REALTOR^®s now have formal approval to put the sellers’ contact information directly on their own websites

What does this mean?

Not much. Discount listing companies have been operating across Canada for years now, unable to capture more than 3-5% of the market collectively. Just because it’s now formalized doesn’t mean they’ll instantly become successful.

One noteworthy point is that propertyguys.com has almost immediately taken advantage of the situation by joining up with a broker and offering to put listings on the MLS^®. Will this have any effect on FSBOs being shown more? No. Will it eliminate the need for REALTOR^®s to professionally price listings and make competitive offers? No. All it will do is ensure that MLS^® information is more complete and more competitive, and still only accessible to REALTOR^®s.

All-in-all the MLS^® is definitely the big winner.

Here’s a chart comparing the performance of the DJIA (a good metric for stock performance) over the last few years to that in the late 1960s and early 1970s. It is remarkable to see how closely correlated the two periods are:

Dow Jones Industrial Average, Inflation Adjusted

If we assume that history will repeat itself, we’ve started an 18 month period of significant market gains, followed by a period of stabilization.

Now, take a look at housing market data over the same period – REMEMBER, housing boomed in the late 1960s and then bust big-time in the early 1970s. Ring a bell? Here’s that graph:

Housing Prices: 1975 to 2001, Inflation Adjusted

Now, and please forgive my Photoshop skills, here’s what the two graphs look like superimposed on top of each other – note that both are inflation adjusted, and are scaled to fit the time axis.

Historical DJIA and House Prices, Inflation Adjusted

Compelling? You bet it is! The fact is that, if history repeats itself (which it seldom doesn’t), ROI in real estate will vastly outperform ROI in stocks.

UPDATE: A commenter suggested that interest rates are the big difference this time and that higher rates over the next few years will buck the trend – That’s an interesting argument, but again, let’s look at the history books!

I threw some historical and modern interest rates on the graph. You can see that house prices appreciated despite massive interest rate hikes in the 1970s, the same type of interest hikes that are generally anticipated today.

Historical DJIA and House Prices and Interest Rates, Inflation Adjusted

I encourage everyone to show this posting to potential buyers and to syndicate it to your website’s blog.

One final note: All the doom and gloom news likes to focus on the negative side of the industry, but the fact is that most industries are subject to cyclical behavior and occasionally need to correct. After the correction, which we have experienced over the last two years, most industries once again offer great investment opportunities.
It reminds me of a good quote by George Bernard Shaw, a famous Irish playwright: “We learn from history that we learn nothing from history.”