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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

January 30, 2018 | The Unloved

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

Over the next few days and weeks expect lots of ink on what a mess real estate’s turned into. Once the media gets tired of manshaming, it’ll be houseshaming time. Bad sales numbers, falling prices, moisters moaning they paid too much last spring and wrinklies trapped in properties they were too dumb to sell in prime time.

But nowhere will the heartache be felt as acutely as within the bosom of the 50,010 men and women in the GTA who carry around business cards saying “realtor.”

Yeah, I know realtors are as popular on this pathetic blog as politicians, cat-owners, Adele, MERs or financial advisors, but you might be shocked at just how tough their lives have become. New data provided to an industry real estate publication suggests it’s a short trip from a leased Audi to cardboard under a bridge for many of these commission-only dudes.

Yes, 92,394 properties changed hands in the Big Smoke last year and prices soared to the highest-ever level amid a feeding frenzy that consumed the first half of the year. But, sheesh, 2017 turned out to be an unmitigated disaster for agents. So far, it seems 2018 may be even worse. (By the way, the real estate board does not publish this data. They hate it. Do not want you to know.)

Of the 50,010 realtors, turns out 34.6% sold nothing. Zero. Nada. They weren’t involved in the sell side or the buy side of a single transaction. That’s 17,313 agents taking home no income.

Another 8,344 realtors, or 17%, sold a single property, and earned enough to live for a month or two. So more than half of all agents – 51.3% – sold one or less houses, with an income massively below the poverty line.

How many sales does it take to make a decent living?

– REM online

Former realtor and blogger David Fleming suggests four transactions. After fees, commission-splits with the brokerage and marketing costs he figures that would result in a pre-tax income of $44,000. Last year there were 2,738 agents who achieved that.

“So now the big reveal,” writes Fleming, “how many agents are doing MORE than four transactions per year? It’s 24.8 per cent. One in four agents licensed by the Toronto Real Estate Board is netting more than $44,000 per year. Or if you’re an aspiring Realtor, you can say, “I have a one-in-four chance of making more than $44,000 per year; do I like those odds?”

By the way, 90% of realtors did less than ten deals in the year. Ouch.

Of course, this all seems certain to grow worse.

The five-year mortgage rate at all of the big banks has climbed above 3.3% – or a full point higher than deals done at this time a year ago. The stress test imposed by the bank regulator is just a few weeks old, and its impact uncertain. But it’s expected to carve 10% to 20% off the borrowing power of most buyers, knocking at least 50,000 of them clean out of the market (according to the Bank of Canada).

– Bloomberg

The bottom line from both those developments: fewer qualified buyers, with less to spend. That’s exactly why the pricey detached portion of the market has plopped while condos have been hot – in the GTA as well as the Van market. But while buyers may be hard to find, so are quality listings. Little blue dots on the realtor.ca site have been few and far between for hoods that are traditionally in demand. Seems buyers are on the sidelines itching for prices to crash, while owners hide behind the curtains waiting for the market to strengthen – hungry for last April’s bidding wars.

Meanwhile, it’s the worst of both worlds if you’re a commissioned realtor, eating what you kill. The number of properties to flog is pathetic while many buyers are denied financing or stand back, waiting to vultch. As sales slag, cash flow dries. Thus, 2018 could be the year in which droves of people decide there’s a more promising future driving for Uber or throwing frozen Timbits into the grease.

Mama, don’t let your babies grow up to be realtors.

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January 30th, 2018

Posted In: The Greater Fool

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