The culling

“People are taking big hits,” says realtor Dan.

You betcha. Sellers. Lenders. Brokers. Desperate, failed buyers. And property agents as well – now, suddenly, part of a herd that’s being quietly culled.

In the last year close to 1,400 realtors have quit the business in the Toronto region alone. It’s the first time in eight years real estate board membership has declined. Face it. Thousands of these people are starved for income with an estimated 80% of agents selling one, two or three houses in an entire year.

Sales levels have been a shadow of those two or three years ago. Listings are starting to swamp the market. Buyers are reluctant to come off the sidelines until they think rates have bottomed (not happening for a year) or prices take a meaningful dive (not yet). It takes longer to sell a property, and way more effort to find a buyer. Costs are up for agents who now also face more regulatory hurdles.

Unless the market pivots and FOMO seeps back across society, this is shaping up to be the perfect storm for realtors – true entrepreneurs without salaries, benefits, pensions, job stability or security. It’s an eat-what-you-kill business in which most people would crash and burn. And, sadly, we hate realtors who shoulder (unfairly) a lot of the blame for prices which have soared into the absurd.

Of course, when real estate was in high gear the ranks swelled. Now it’s a shakeout. Of the 73,315 realtors left in the GTA at the end of the summer, almost sixty thousand will struggle financially to survive the year.

Real estate pain. It’s spreading. So let’s get back to what Dan underscores.

When a buyer grabs a pre-con unit from a developer there’s a deposit of 20% and the bulk is paid/financed upon closing, when the project completes. Often that is three or four years into the future. Most deals have an assignment clause, granting the buyer the right to find a new buyer by the closing date. It used to be an easy way to make bank. Plunk down the deposit. Wait three years. Sell the paper for a capital gain.

Now things have changed. The CRA says profits are income and will be taxed as such. But, worse, there are no profits. Only losses. And they’re not even deductible.

The assignment business is burgeoning at the moment as the new-condo world is rocked by 17,000 available, unsold units and another 12,000 completions taking place in the GTA alone during 2024. Inventory is swamping demand. Ditto in the resale market with thousands more units available and months of inventory heading toward the dreaded ‘seven’ mark.

Yesterday we gave you the story of Janice, trapped in a 440-foot box in East Van, feeding a 9% mortgage and watching her equity vaporize as she slipped far underwater. Sad. But not alone. Soon there will be scores more condo buyers who thought they were smart in 2021 and in 2024 are about to be crushed. Either they assign, close on units that are worth far less than they paid and cannot be rented for positive cash flow, or they renege on deals. Then they’re sued, or seek insolvency.

Meanwhile, if you’re interested in buying a unit in the Big Smoke at a discount you can check this out.

Here are a few examples. And, mamas, remember: don’t let your babies grow up to be Realtors®.

About the picture: “This patient, calm dog was hoping I was picking up the boxes ready for shipping,” writes Michael, in Victoria. “Unfortunately I was not the courier and the greeting search happily continued. Times have been financially difficult for the last few years in our industry. Our B&D. portfolio has been the only positive, still growing and reaching new heights!  Fortunately Turner Investments has been our investment courier of choice. To Garth and all of the people that make up the team, THANK YOU.”

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

Source: https://www.greaterfool.ca/2024/09/12/the-culling/