When I’m meeting people for the first time or seeing friends I haven’t chatted with in awhile, they seem to always have one comment for me when the topic of real estate surfaces. This year it seems inevitable that I hear the statement, “…you must LOVE this market!”. Oh?
Their reasoning is very simple. They hear all the news about crazy sale prices and know crazy sales prices lead to higher commissions. This reasoning assumes that more money means greater happiness, but we’ll save that whopper of an argument for another day.
Contrary to popular opinion though, most agents in Toronto don’t enjoy this market (or at least the ones I’ve talked to or whom I’ve seen express their thoughts online). Despite commissions being higher, there are fewer homes being sold and besides, our earnings are just a small piece of the overall job. And many facets of our job are extremely difficult or problematic in this current housing climate. I’ve chosen to address three of the main reasons, although this small list is by no means exhaustive.
1. Influx of New Agents
It seems everybody and their mother are considering real estate careers. According to a recent Toronto Star article, there are approximately 48,000 agents in Toronto. That’s an increase of 50% from 2012 numbers when there were around 32,000 agents.
It’s not hard to guess why this might be happening. Higher sale prices and commissions coupled with moderate/quick educational requirements have created visions of grandeur for some. Some, like the gentlemen in the Toronto Star article, see it as a get rich quick industry. Boy, are they ever in for a rude awakening! But I digress.
Good agents aren’t upset by this influx of new agents for competition reasons, as they’re unlikely to lose much business to newcomers. However, they do fear people getting into the business for the wrong reasons or on a part time basis. And clearly the people who fall in those categories have just increased dramatically. Remember, working with other experienced, full-time professionals means things are likely to go more smoothly and produce a better result.
2. Lack of Inventory
Sure, prices are high, but you can’t make deals on homes that aren’t for sale. Given the stress and costs associated with moving, many people are opting to stay put in their current homes. They know that although they’ll likely get a great price for their home, they’ll also probably have to pay a premium for the new home they purchase for themselves. You have to live somewhere!
I can’t help but think of the ‘Virtual Lemonade Stand’ game I played as a kid which first introduced me to the concept of supply and demand. The weather outside is picture perfect and there are tons of parched patrons outside looking for a nice tall glass of lemonade to cool off. You feel like you’re in great position to make money as the owner of a lemonade stand. There’s just one problem…there’s a huge lemon shortage and you struggle to find enough lemons to satisfy only a fraction of your patrons. You can’t make lemonade without lemons in the same way that you can’t earn commissions without properties being listed and sold.
3. Frustrated/Fatigued Buyers
Even if you haven’t been in the market yourself, you’d have to have been living under a rock these past few years to not have heard about the difficulties buyers face when trying to buy a home in this heated market. Even most buyers who have been successful likely experienced several failed bids getting to that point.
There’s lots of time, energy, resources and frustration that go into the buying process, and we share all of that with our clients. Their disappointments feel like our disappointments (well, to me and the good agents anyways). If you’ve ever been through a lengthy multiple offer night as a buyer and come out on the short end, you know just how hard it can be.
To add insult to injury, buyers now have new Government regulations to deal with. Some of us are fairly confident that these new measures won’t have much effect on the Toronto market, including my colleague and Broker of Record at Advocate Realty, Michael Meltzer who just published a blog entitled, “Gov’t Action and Market Reaction: What Will the Market Do”. However, there have been reports of buyers taking a pause on their home search to try and see where the dust will settle as a result of these new government measures. Just one more thing to worry about!
There are other reasons for agents not to be fond of this market: negative image portrayed by media coverage, overzealous sellers, seemingly underhanded tactics, and worse. Please don’t assume we’re all greedy, money-sucking individuals who want to keep feeding this crazy market. It’s simply not true. Most yearn for a more realistic market where the balance of power isn’t so magnified. Good agents want the best possible outcomes for their clients. We want you to find the right home for you and your family at the best possible price.