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The Places That Went Crazier On The Way Up Are The Places That Are Crashing Harder On The Way Down

A report from the Globe and Mail on Canada. “Market reports about the Greater Toronto real estate market often focus on whether buyers are on the sidelines or if sellers are biding their time as the region grinds through a generally slow period. Rarely does anyone mention the financial trouble that a lack of sales causes for the 52,000 realtors who are members of the Toronto Real Estate Board.”

“Sharon Soltanian worries about the realtors. Her independent brokerage, Soltanian Real Estate Inc., focuses mainly on the old city of North York. But, since peaking in 2016, Willowdale and the neighbouring Newtonbrook area have seen some of the sharpest declines in sales in Toronto, and she has seen agents who once had a decent living drop out of the business, go homeless, put their cars on lease-breaking websites and turn to side-hustles such as driving for Lyft or running an Airbnb.”

“‘I know for a fact, in our small brokerage, a few of our agents – and outside a lot more – they did not pay their taxes, their HST. They have huge problems with CRA because they don’t have income,’ Ms. Soltanian said. ‘Before … they had $20,000 income [a month], now they have $2,000 and they don’t know who to pay first.'”

“‘I know in the public eye, real estate agents are ruthless, heartless, all they want is to make money,’ she said. ‘The reality is, the majority of these people are educated people, immigrants. … I have Phd-from-Harvard agents. I had a dermatologist that cannot work here as a doctor. These are normal people, they become agents, it was easy a few years ago for them, but now it’s very difficult. I was talking to a few of the big brokerages in the area, and they are all saying the same thing: In this area, income is down maybe 50 to 70 per cent.'”

“Statistics from TREB help show how quickly the area fell. In 2016, the Willowdale East submarket sold more detached houses than anywhere in Toronto with 295. In 2018, only 86 houses sold in that market – a 71-per-cent drop. For realtors, that amounts to 200 fewer commissions to share, and average sale prices fell to $2.3-million from $2.6-million. Several other submarkets in the area had similar crashes: Willowdale West sales are down 52 per cent, Newtonbrook East sales are down 59 per cent.”

“‘The places that went crazier on the way up are the places that are crashing harder on the way down. Perhaps another way to look at it is that these areas became the most detached from value fundamentals,’ said Scott Ingram, a sales representative with Century 21 Regal Realty Inc.”

“In the meantime, struggling agents who are not dropping out of the business are finding ways to cut costs, leaving full service brokerages for lower-fee or discount brokerages that cost them less overhead, or trying to find ways to raise cash on the side.”

“‘Some are driving Uber because they can’t make ends meet. They are doing all sorts of alternative things to make some money,’ said Anita Soltanian, Sharon’s daughter and partner in their brokerage. She has colleagues in the industry who have put their leased luxury cars on Leasbusters.com, which indeed is packed with recent model BMW’s and Mercedes. But some who can’t get out of leases have embraced Turo, a ‘sharing economy’ app that lets 200,000 car-owners rent out their car for as little as $10 a day, like a mini-Enterprise or Budget rental.”

“And according to the younger Ms. Soltanian, it’s not just Willowdale that’s feeling the heat. ‘I know people downtown, in the condo market, they are suffering too. When the market slows you feel the ripples,’ she said.”

From CTV Vancouver. “A landmark Vancouver condo tower that won architecture awards before construction even began is nearing completion — and that’s actually bad news for investors hoping to flip their units before the building opens and get out with a tidy profit.”

“The 407 condos at Vancouver House sold out quickly when they went on sale in 2014, with many selling for several million dollars. Some units have been resold since then in a process known as assignment sales. As of Monday, 31 units in the building were listed for assignment sale, with many of those owners likely to have only made a down payment so far.”

“Construction is expected to wrap up in the next 60 to 90 days and that means anyone who hasn’t managed to resell their unit already has to settle their bill with developer, Westbank Corp. If the buyers are unable to secure financing and are forced to walk away from the deals they signed, they will forfeit their deposits.”

“But realtor Vince D’Ovidio says that’s unlikely, in part because even in this slumping market, real estate is still worth more than it was in 2014. ‘The minute they close, where they own the suite, and there’s no restrictions, they’re putting it back on the market,” said D’Ovidio when asked what investors were likely to do. ‘Take what profit is left and then move on.'”

This Post Has 56 Comments
  1. “Sharon Soltanian worries about the realtors. Her independent brokerage, Soltanian Real Estate Inc., focuses mainly on the old city of North York. But, since peaking in 2016, Willowdale and the neighbouring Newtonbrook area have seen some of the sharpest declines in sales in Toronto, and she has seen agents who once had a decent living drop out of the business, go homeless, put their cars on lease-breaking websites and turn to side-hustles such as driving for Lyft or running an Airbnb.”

    My heart goes out to these realtors. You see all you bears here with your stupid, made-up “Chicken Little” stories caused this! You scare away potential buyers and cause your fellow human being unbearable sufferings! This blog should be ashamed of yourselves!

    “‘Some are driving Uber because they can’t make ends meet. They are doing all sorts of alternative things to make some money,’ said Anita Soltanian, Sharon’s daughter and partner in their brokerage. She has colleagues in the industry who have put their leased luxury cars on Leasbusters.com, which indeed is packed with recent model BMW’s and Mercedes. But some who can’t get out of leases have embraced Turo, a ‘sharing economy’ app that lets 200,000 car-owners rent out their car for as little as $10 a day, like a mini-Enterprise or Budget rental.”

    $18,000 a month now wipe out from the economy. The restaurants, entertainment, car dealers, strip clubs, etc., will also suffer from the lies spread here.

    1. What this report shows is all these reports about “Toronto is going back up!” are hog-wash.

      1. The MSM tells us the bidding wars have slowed. That’s not quite the same as conceding that the bubble is bursting.

    2. Plastic surgeons will miss the lip, filler and boob job biz
      I live in the OC. The agents of a certain age all look alike

    3. its worse – it impacted the the real economy. Folks that could do real work (folks can debate) moved into the REIC in the Toronto area.

      I have mentioned that a cousin (in a well to do Toronto suburb) with a masters in Chemestry from a good university, left his decent paying job to sell real-estate with his MIL and wife.

      A productive knowledge worker gone from the real economy.

      So if sales slow down, he has been gone from his industry for almost 5 years – how does he catch back up

      1. “So if sales slow down, he has been gone from his industry for almost 5 years – how does he catch back up”

        Probably glad to leave the 21st century cubicle/lab where the reality these days is a lack of science funding, diversity training extolling feminism, people of color and the LGBTQ lifestyle and pragmatism replaced by ideology.

      2. “its worse – it impacted the the real economy. Folks that could do REAL WORK (folks can debate) moved into the REIC in the Toronto area.”

        Sounds like a REAL job will have a great candidate with a well educated and needed individual that will contribute more than handing out flyers and baking cookies for open houses. Your cousin will be doing a great service to his community getting back into a meaningful and productive career. The world can survive just fine without realtors.

      3. I assume none of the geniuses at the Fed who determined that pumping trillions of dollars into Housing Bubble reflation calculated the opportunity cost of all the wasted careers lost to real estate speculation.

        1. all the wasted careers

          All sorts of malinvestment. A few have gotten rich off of the schemes, the rest of us not so much. The Fed does not serve the people.

        2. @Professor Bear:

          Don’t worry, the geniuses at the Fed have a very, very complicated mathematical model that shows their policies create full employment and roughly 2% inflation. It’s impossible to explain their model to plebes, but just trust them.

          They are really, really trustworthy and like, using math and stuff.

      1. Tesla sales are eating into BMW, Mercedes, Audi, and Lexus. The German automakers have admitted as much and are pushing quickly into EVs.

        1. German automakers

          They better hurry up. Tesla sales are cratering and there’s only so many customers out there for luxurious silliness.

          1. Tesla sales will be fine. I would be worried about Ford and Fiat/Chrysler though. US auto sales have been weak these past few months. Buckle up because it’s going to be a rough ride. Gas is apparently headed to $4/gallon.

          2. “Gas is apparently headed to $4/gallon.”

            Going to hurt those driving the $50k+ pickup trucks.

        2. The “Coffee is for closers” moment has arrived at Tesla:

          Tesla fired dozens of salespeople after its disappointing Q1 delivery report
          Mark Matousek
          Apr. 8, 2019, 4:24 PM
          Elon Musk Tesla CEO Elon Musk. Kyle Grillot/Reuters
          – Tesla fired “several dozen” sales employees on April 4.
          – The cuts affected employees in Chicago; Brooklyn, New York; and Tampa, Florida.
          – A Tesla representative confirmed the firings to Business Insider and said the affected stores remain open.
          – Tesla announced a shift in its retail strategy in February that the company said would lead to layoffs.

          Tesla dismissed “several dozen” sales employees on April 4, Bloomberg’s Dana Hull first reported. The cuts affected employees in Chicago; Brooklyn, New York; and Tampa, Florida.

          A Tesla representative confirmed the firings to Business Insider and said the affected stores remain open.

          The electric-car maker said in February that it would close many of its stores and convert the remaining stores into galleries and information centers as it shifts to an online-only sales model. Tesla CEO Elon Musk said the move would lead to layoffs during a conference call that followed the announcement.

          Tesla partially reversed the store closures in March, saying it would “keep significantly more stores open than previously announced.” Musk later said in a March email to employees that the best-performing stores would remain open, while those that did not generate sufficient revenue would be closed, adding that Tesla would use a similar strategy to evaluate salespeople.

          The April 4 cuts came the day after Tesla announced first-quarter delivery numbers that represented a 31% decrease from the prior quarter and fell below analyst estimates, but were a 110% increase from the first quarter of 2018.

          Since late 2018, Tesla has made significant changes to the incentive plans for its salespeople. The company has undergone multiple rounds of layoffs over the past year.

          ‘I will nuke you’: Elon Musk was accused of shoving and threatening a former Tesla employee — but the company’s board says there was no physical altercation

          1. I hope Tesla will repurpose these employees into service center employees for those who are willing. I researched and purchased my vehicle completely online. Sales people will still be necessary, but more of an Apple store type sales model and less of the pushy, manipulative, car dealership sales model. Tesla’s ability to cut out the dealer is a huge plus in my book, although there will be some short term pain for those employees whose job will be rendered redundant.

          2. I hope Tesla will repurpose these employees into service center employees for those who are willing.

            Sales people are generally unsuitable for repurposing. At least from what I’ve seen in tech. I have sales guy friends and to me they are the type that would rather just go sell something else somewhere else than work a standard job with no hope of a big score. If these people would actually be happy and competent at a normal job then it may explain why they sucked at sales.

  2. (S)he has seen agents who once had a decent living drop out of the business, go homeless, put their cars on lease-breaking websites and turn to side-hustles such as driving for Lyft or running an Airbnb.”

    Karma’s a biatch, no? It’s only fitting that these UHS who manipulated FBs into buying insanely overprices shacks will now be sharing in the same financial misfortune as the underwater FBs they so callously profited from.

  3. “agents who once had a decent living drop out of the business, go homeless, put their cars on lease-breaking websites and turn to side-hustles such as driving for Lyft or running an Airbnb.”

    Wow Ben found quite an article here. It’s like the hbb preeicted these realtors true calling. Next round of news will be the garbage can fire, squirrel roasting, and passing of the moon shine.

    1. 52000 realtors in Toronto? Toronto population of 2.5 million comes out to about 1 in every 50 people being a realtor? WTF?

    2. Great article
      I heard similar stories concerning the Chicago suburb uhs’ from my Dad When the last bubble popped.

    3. from Garth Turner’s blog:
      so who were the agents making $20K / month.

      ————
      So, fifty-three thousand agents in the GTA. Last month just over 7,000 sales happened. For the first quarter of 2019 the tally stood at 16,222 – down a little from a disastrous 2018. In fact last year as a whole saw a 16% tumble from 2017 – which was 18.3% lower than 2017. Yikes.

      Here are some stats underlining Matt’s depression: last year in the country’s biggest (by far) housing market 37.7% of all realtors sold nothing. Zip. Another 47.6% did between one and six deals – subsistence income, since commission is typically split four ways – the listing agent and his broker, plus the buyer’s agent and hers. So, 85% of agents starved, or worse. The number of achievers – handling 36 or more deals in those 52 weeks, was 0.63%. Talk about income inequality!

      (By way of comparison, Metro Chicago has 9.5 million people – 50% larger than Toronto – and supports just 13,500 realtors, or 74% fewer than in the GTA. We are insanely house-horny.)

  4. This was an old (but upper middle class) neighbourhood that was built up in the ’60 and ’70s. The fact that houses were selling for > $2M is crazy. In the 90’s old Hong Kong money moved in (ahead of the British turnover to China). So it turns out that this international money shuffle has been going on for decades. Previously it was legit — and now money laundering in Vancover and Toronto

    “Statistics from TREB help show how quickly the area fell. In 2016, the Willowdale East submarket sold more detached houses than anywhere in Toronto with 295. In 2018, only 86 houses sold in that market – a 71-per-cent drop. For realtors, that amounts to 200 fewer commissions to share, and average sale prices fell to $2.3-million from $2.6-million. Several other submarkets in the area had similar crashes: Willowdale West sales are down 52 per cent, Newtonbrook East sales are down 59 per cent.”

    1. Yeah, poor Diana just can’t bring herself to talk about the 800 pound gorilla in the room, and instead looks for any other plausible explanation for homes not selling.

    2. Luckily rates are dipping again and likely to dip some more as the grip of Brexit panic takes hold.

      ECB leaves monetary policy unchanged
      By William L. Watts
      Published: Apr 10, 2019 7:47 a.m. ET

      The European Central Bank, as expected, made no changes Thursday to interest rates or other monetary policy measures. The ECB left its main lending rate at 0% and the deposit rate, which it pays on deposits parked overnight at the central bank, at negative 0.4%. The ECB also repeated that it plans to keep rates at their current level at least through the end of this year. It also repeated that it intends to continue reinvesting, in full, the principal payments from maturing securities purchased under its asset-buying program for an “extended period” beyond when it does begin raising interest rates. The ECB ended its bond-buying program in December. ECB President Mario Draghi is slated to hold a news conference in Frankfurt at 2:30 p.m. local time, or 8:30 a.m. Eastern.

    1. Nobody is stopping you from gambling in stocks, houses or Bitcoin if you don’t like the low rates on your fixed income investments.

  5. “A landmark Vancouver condo tower that won architecture awards before construction even began … .”
    ________________________________/

    You can tell from the very first sentence that this isn’t going to end well. Artistic awards were bestowed on something that didn’t yet physically exist, too funny. It reminds me of that Todd Snider song “Talkin’ Seattle Grunge Rock Blues,” where a grunge band became famous for not playing:

    Well we blew ’em away at the Grammy’s show
    By refusing to play and refusing to go
    And then just when we thought fame would last forever
    Along come this band that wasn’t even together
    Now that’s alternative
    Now that’s alternative to alternative
    I feel stupid
    And contagious

    1. ” Artistic awards were bestowed on something that didn’t yet physically exist”

      Off-topic, but this immediately reminded me of Obama’s Nobel Peace Prize.

      1. I thought the same. That reflected the hopes and aspirations of those judging the award, which turned out to be foolish.

  6. The Wall Street Journal
    Speculators flipping homes are making bigger and steadier profits in a sign that the risky business is drawing more sophisticated traders. Photo Illustration by Emil Lendof/The Wall Street Journal; Photos: iStock
    Real Estate
    House Flipping Is Back to Pre-Crisis Levels. Here’s Why It’s Less of a Concern.
    Flippers today have much larger profit margins than those at the peak of the previous housing cycle
    By Laura Kusisto
    Updated April 9, 2019 2:06 p.m. ET

    House flipping is back to nearly the same level it was around the 2006 peak of the housing boom, when it became a symbol of the rampant speculation that soared before the bubble burst.

    But a new analysis from CoreLogic Inc. suggests most of the current flips are less risky than those more than a decade ago, making today’s flippers less likely to cause market volatility if prices decline in the next few years.

    Some 10.6% of homes sold in the U.S. in the fourth quarter of 2018 were flips, defined as having been owned for less than two years, according to CoreLogic. That is near the level of the first quarter of 2006, when 11.3% of homes sold were flips, and the highest fourth-quarter level in the two decades since CoreLogic started tracking the data.

    The study, however, shows that flippers today have much larger profit margins than flippers at the peak of the previous housing cycle. By one measure, the trades are more than twice as profitable as the flips made in 2006. That offers current flippers more of a cushion if home prices begin to flatten or fall.

    Flipping has evolved from the days when cocktail waitresses and cabdrivers lined up to purchase lots in new subdivisions in places like Las Vegas and Phoenix. They hoped to profit from runaway price appreciation, but many became trapped when prices declined.

    This time, the market is dominated by professionals who are purchasing older homes that likely need work, appealing to buyers’ desire for a move-in ready home rather than one needing months of renovations. At 39 years old, the median age of a home flipped is the oldest it has been since CoreLogic has been tracking. Flipped homes today are about a decade older than they were in 2006.

    1. “At 39 years old, the median age of a home flipped is the oldest it has been since CoreLogic has been tracking. Flipped homes today are about a decade older than they were in 2006.”

      And these will hold their values once the correction currently underway plays out because…?

      1. Didn’t read the article, but my personal feeling is that if the flipper is putting in sweat equity, then that is less like speculation and more of a value-add. It’s a different value proposition from just buying something and expecting it to go up for no reason. Planning, working, contracting, etc. Those seem like legitimate activities that can make a structure more valuable. Of course, lots of flipping might just be putting lipstick on a pig and might not ultimately add value.

    2. That’s all fine, well and good, but the fact remains that home prices are appreciating faster annually than worker incomes, and sooner or later the flippers are going to run out of customers who can afford the homes. Prices will hit a ceiling, at which point flipping is no longer proftable.

    3. I say BULLLLLLL SHHHHH***TTT. Prices aren’t dropping. They are just slowing down a bit. It’s called a SHIFT or return to normalcy. In REIC it’s also called “Underappreciation of Price Growth”. This means you wasted your money in a saving account (earning 0.1%) where as you could have become rich like me! My flipping business is BOOMING. I’m so busy right now that I even have time to comment on this useless blog. Just to make fun of Y’ALL.

      1. “This means you wasted your money in a saving account (earning 0.1%) ”

        +420

        Up until now i have only been earning .005% on my “high yield savings” account. What an idiot i have been! If I would have found this fountain of knowledge earlier, I could have “invested” my money in some RE, diversified in BTC and great opportunity stock IPO’s like Lyft (dont look at current red numbers, it ALWAYS goes back up). We learn from our mistakes right! 2008 was fake news not a mistake, this time its definitely different, those who look for bubbles find bubbles, those who bury there heads in the sand are winners! free money is the new normal, if you dont own a home, buy one (its like those “everyone qualifies” commercials) if you do own, pull out some of that free money the bank has for you! if your maxed out on credit just get more! too many people think of the consequences of acquiring all this “free” money, when they should be living like there is no tomorrow.

    4. I’ve noticed the flip bait portions getting skimpier out here in San Diego. The meat and potatoes 3/2 flips have been gobbled up and the flippers are at the early bird special going after 1000 sq ft 2/2s and smaller.

      Another interesting bubble nugget. Recreational boating sales on seven year tear. Nothing spells bubble like “check out my new boat”.

      https://www.businesswire.com/news/home/20190110005188/en/U.S.-Recreational-Boating-Industry-Sees-Seventh-Consecutive

      From May/2018, recreational boat sales at a ten year high:
      https://www.nmma.org/statistics/article/21974

    5. The only explanation they can come up with for flipper profits is the new breed of professional flipper, not like the flippers from before. The unspeakable alternative and far simpler explanation is that it’s just bigger bubble.

  7. “The reality is, the majority of these people are educated people, immigrants. … I have Phd-from-Harvard agents. I had a dermatologist that cannot work here as a doctor. These are normal people, they become agents,”

    So it was 28 Realtors who took the Hollywood head-fake and moved to Canada.

    https://www.youtube.com/watch?v=NG3M6NosG6E

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