Déjà vu again

It’s called ‘recency bias’ which means thinking what’s happening now will happen in the future. Perhaps forever. For sure next year.

Here’s the nerdy definition: “a cognitive, memory-based phenomenon where individuals overemphasize recent events, data, or experiences over historical, long-term information.”

Yup. This makes folks come to weird conclusions, seeing the present or immediate past as a predictor of what is about to happen.

So, Nvidia stock will inflate forever. Gold and Bitcoins will rise without end. The slump in real estate markets is intractable. And the value of condos will go to zero.

This kind of thinking leads to the obvious. Buy high. Sell low. We lust for stuff rising in value (because it will continue) and dump the woofs (since they’re doomed). The logic behind a buy-and-snooze portfolio of diverse and balanced ETFs is precisely to avoid this bias and its often-fatal results. Alas, we are human. We err. We succumb. This is why stock brokers and realtors love us.

Case in point. New homes.

The other day this pathetic blog brought you the sad tale of builder bust in the GTA. As in B.C., sales of new homes and condo units have tanked. Prices have moderated somewhat, and inventory has exploded. In Torontopolis alone there are more than 21,000 new, available, unloved and unsold units, more than fifteen thousand of them condos. If nary a new place was built, this would satisfy current demand until the autumn of 2028.

The real estate industrial complex tells us that when builders stop building because buyers stop buying (recency bias) there will be a massive shortage in the future. After all, it takes half a decade or more to throw up a single condo slab. No building in 2026 means no new units in 2031.

If future supply does not meet future demand, prices pop. And when the value of things goes up, people want more, remember? This is what got us into a massive housing pickle back in the immediate post-Covid years of wall-to-wall FOMO.

Will recency bias deliver us there again?

You bet, say the real estate czars in our lefty province. BC’s housing market, they forecast, is on track to repeat the boom-and-bust cycle that helped propel prices to today’s stupid heights. The report says if you think houses are unaffordable now, just wait and see what high levels of unsold new inventory, bankrupted builders and crashing pre-sales do in a few years.

It’s a pattern that played out between 2009 (the credit crisis which people thought would last forever) and 2019 (when property demand had surged before the pandemic hit). Over that time, prices rose 47%. Ouch.

So, is it happening again? Will it? Could it?

Like the GTA, the LM has thousands of unsold new units, mostly condos. Developers are dealing with project cancellations, bankruptcies, layoffs and a total drought in financing as sales offices empty of customers. So prices are declining now, but the stage is being set for a vastly different outcome. When demand returns, and it will, so will the FOMO.

Meanwhile, skilled trades drift away. Material prices rise. Land costs remain. And even with the feds and provinces cutting red tape and development fees, the inevitable happens. So the BC guys say they see a 27% increase in prices by 2032. Yes, in six years.

Of course, the kiddos refute this. Because average resale values have shed a quarter in the last three years, they think all properties will be down by half three years hence.

It’s possible. But unlikely. That would be a cognitive, memory-based phenomenon where individuals overemphasize recent events, data, or experiences over historical, long-term information.

Again.

About the picture; “Thanks for your wisdom and common sense during these crazy times,” writes Salk in B.C.  “We are long time readers of your blog and look forward to our daily read.  Here is a photo of River, Tova & Quincy during a hike at Cobble Hill in the beautiful Cowichan Valley on Vancouver Island.”

To be in touch or send a picture of your beast, email to ‘Garth@garth.ca’.

Source: https://www.greaterfool.ca/2026/01/27/deja-vu-again-4/