West side resident threatens to sue city over redevelopment agenda

Denise Ryan
The Vancouver Sun

Single family homeowners feel their voices haven’t been heard as city fast-tracks zoning changes

 VANCOUVER, BC – Oct. 27, 2021 – Tyman Stewart in front of his home in Vancouver, BC, Oct. 27, 2021. Stewart is upset that rezoning being rammed through may bring about massive land assemblies and he will lose his home. (Arlen Redekop / PNG staff photo) (story by reporter) [PNG Merlin Archive] Photo by Arlen Redekop /PNG

A Vancouver homeowner said he will take legal action if the city does not slow its proposed zoning and

“They say you can’t fight City Hall, but I plan to,” said Tyman Stewart, one of a group of residents from across the city that has hired lawyer Peter Gall, an expert in civil litigation, to get the city to hit pause on its so-called Streamlining Rentals Initiative, which is slated for a public hearing on Nov. 2.

Stewart said there has been no meaningful public consultation on the proposal, which includes a number of “quick-start” options meant to ease restrictions and speed up the building of rental housing throughout the city.

The plan includes changes to C-2 zoning (commercial mixed-use areas) to allow rental housing buildings up to six storeys on busy arterial streets and up to four storeys on side streets a block from arterials.

 

Stewart said he plans to take every legal action he can to ensure the City of Vancouver meets its obligations under the Vancouver Charter that stipulates parties affected by zoning and development amendments have a fair opportunity to understand and respond to such proposals.

On Tuesday, the province announced changes aimed at increasing housing supply, including dropping requirements for local governments to hold public hearings for zoning changes as long as they are consistent with official community plans. But the Ministry of Municipal Affairs said in an email to Postmedia that, “Bill 26’s amendments do not apply to Vancouver as Vancouver already has a broader ability to delegate matters to staff.”

Stewart and other west side residents say the city has been deficient in its notification and consultation process.

“The city has not done their due diligence,” said Stewart. “Not a single person on my block had any idea about this proposed rezoning that could allow land assemblies and six-story apartments to go up next to their homes.”

“It’s not OK for this to happen in anyone’s neighbourhood. I support rental housing, but not at the expense of individual homeowners,” said Stewart, who has lived in his 1925 Craftsman home for 22 years. He shares the home with his partner and two of their three children.

Stewart said his daughter was born in the house, and he hopes to be there until he dies.

The new zoning will open the door for land assemblies, a popular method for developers to join adjacent lots for the purpose of building apartments, said Stewart.

“I don’t want my home to be wedged between two apartment blocks,” said Stewart, who added that for three years his efforts to create a rental laneway home on his property has been stymied by City Hall red tape.

“We respect the needs of the city for density and more rentals. What we want is for the city to work with us in a collaborative way so homeowners are respected as well.”

Gall said a letter will be sent to the mayor and council this week.

“There are a lot of affected people who haven’t had an adequate opportunity to understand what is being proposed, to speak to officials, to think about the changes, and it is impossible for all of this to happen by the Nov. 2 council meeting where it will be dealt with,” said Gall.

“We are requesting for the city to rethink the process. Much more is required procedurally before the city can make its ultimate decision.”

The city didn’t respond to a request for comment.

Evelyn Jacob, a member of the Upper Kitsilano Residents Association, who advocates further consultation, said she is worried about what the proposed changes will mean for her Point Grey neighbourhood and to the home she grew up in.

Her parents, Jewish-Iraqi refugees, fled Shanghai after Mao Zedong came to power in 1949 and worked in menial jobs in Vancouver for a decade until they could afford what was then a modest home at 14th and Waterloo. 

 

Evelyn Jacob is opposed to Vancouver’s proposed rezoning for apartment rentals. Photo by NICK PROCAYLO /PNG

Jacob, who bought out her sister’s interest in the home when her parents died, now carries a hefty mortgage, and manages on a modest income by deferring her property tax. Jacob also houses three UBC students in her basement suite, and shares the home with her husband and son.

 

“I don’t know where we would go if we could no longer live here,” said Jacob. “This streamlining rental plan will affect many neighbourhoods across the city. My street is not one that would be affected by the plan yet, but my fear is that this is precedent-setting and the city doesn’t want people to live in single detached homes anymore.”

Some housing activists have argued for an end to single-family homes, and not just in Vancouver. New Zealand’s government recently ordered an end to single-family zoning in its five biggest cities, drawing the attention of B.C. housing advocates and planning experts.

Jacob said, “I think we can have both: affordable rentals and single-family homes. Part of the beauty of Vancouver is its neighbourhoods.”

[email protected]

© 2022 Vancouver Sun

Is the mortgage industry set for a blockchain revolution?

Fergal McAlinden
other

An industry CEO believes NFTs and other developments will profoundly transform the mortgage space

Following the announcement of a new collaboration to allow mortgage documentation to be minted through non-fungible tokens (NFTs), a prominent executive has predicted that further revolution of the mortgage industry by blockchain technology is imminent.

Shawn Allen (pictured), CEO of Matrix Mortgage Global, told Canadian Mortgage Professional that NFTs – units of data stored on digital ledgers – had the potential to transform the document submission and collection process, allowing immediate verification and decentralizing each transaction.

Matrix recently launched a partnership with EZ365, a subsidiary of Wee-Cig International Corporation, that sees both companies commit to developing a system to render key documentation including mortgage deeds, appraisals, inspection reports and identification into NFTs.

“Right now, we have a very centralized infrastructure. There’s so many stakeholders in a mortgage transaction – if it’s a purchase you’ve got a buyer’s lawyer, a seller’s lawyer, potentially an appraiser, a home inspector and all these different players that are looking for and relying upon the same data,” Allen said.

“It’s very cumbersome to transmit that data across all the different people privy to the information required to get the deal done without any form of consensus. There’s a lot of opportunity for fraud to peek its way through – whether on the broker or lender side, at the CMHC [Canada Mortgage and Housing Corporation] side or the insurer’s side.”

Through NFTs, Allen said that each party in the mortgage process could rely on information that was unique, with its non-fungible status meaning that it could theoretically be verified immediately across multiple platforms.

Read more: Matrix Mortgage Global, EZ NFT announce new tech partnership

That development, he emphasized, could drastically speed up the mortgage process and make things more straightforward for all parties.

“Right now, we don’t have that consensus; everyone has to do the work independently all the time,” he said. “What I’m proposing is to be that starting point for verifying documentation, whether it’s ID, mortgage deed or appraiser report.”

At present, blockchain technology has seen little uptake – and is arguably little-understood – in the mortgage industry. However, Allen said that it also had the potential to add an extra layer of security to the mortgage process because of the fact that data can be distributed but not edited using that method.

“It’s way more secure, because the reliance on the blockchain for that security is sound,” he said. “You cannot change that data – you’ll find out if there’s an issue. And you’ll find out a whole lot sooner than if you were to do anything in the current situation.

“This would mitigate against title fraud, for sure. It’ll drive the cost down on [that] because it’ll pretty much be non-existent.”

While mortgage professionals could be set to hear a lot more about blockchain technology down the line, it seems that the use of cryptocurrency to conduct transactions in the industry could be some way off.

That’s usually attributed to its unpredictability and relatively niche status, although Allen envisages future developments in lending and credit reporting that will see cryptocurrency emerge as more of a mainstream option in the industry.

Read more:Alternative lender to begin accepting cryptocurrency for services rendered

“I’m not talking about bitcoin or Ethereum or any crypto that goes up and down and is very volatile – I’m talking about staking stablecoins,” he said. “Those are cryptocurrency or coins that are tapped or tied to a dollar.

“They don’t fluctuate as much in theory as would bitcoins, Ethereum, alt coins or anything like that.”

While Allen said that those products are depreciating assets when inflation is factored in, he noted that they’re considered a much more stable and safe investment than other forms of cryptocurrency because of the fact that they’re connected to dollar assets.

The potential of blockchain to transform the industry would also have implications beyond Canada’s borders, with Allen saying that it could foster greater interconnectivity between networks and companies in different countries.

“It makes the global real estate community that much smaller, because it allows for digitization of the whole process [and] for foreign investors to come in and have a consistent feel to transacting in real estate – whether in Canada, the US, or overseas,” he said.

“There are a lot of countries that would definitely benefit from this technology, because a lot of them are still using paper to document their deeds. Imagine if we digitized that and then had access to that across a global platform – the uptake could be tremendous.”

Copyright © 1996-2021 Key Media, Inc.

Bank of Canada announces latest overnight rate target

Ephraim Vecina
other

The central bank will be moving into a new phase following the end of its QE program

The Bank of Canada has announced that its target for the overnight rate will remain at the effective lower bound of 0.25%, with the bank rate at 0.5% and the deposit rate at 0.25%.

However, while the central bank will maintain its “extraordinary forward guidance” on the path for the overnight rate, the institution will be ending its quantitative easing (QE) program and moving into the reinvestment phase. During this phase, the BoC will be purchasing Government of Canada bonds “solely to replace maturing bonds,” it said.

“The global economic recovery from the COVID-19 pandemic is progressing. Vaccines are proving highly effective against the virus, although their availability and distribution globally remain uneven and COVID variants pose risks to health and economic activity,” the BoC said.

“In the face of strong global demand for goods, pandemic-related disruptions to production and transportation are constraining growth.”

The Bank also announced a slight revision of its forecast for the timescale on hiking rates, projecting that its inflation target would be sustainably achieved by sometime in the middle quarters of 2022. In its previous statement at the beginning of September, the Bank had said it expected interest rates to begin rising in the second half of next year.

National inflation reached an 18-year high of 4.4% in September, according to Statistics Canada. This marked the sixth straight month that the rate exceeded the BoC’s policy target of 1% to 3%.

“The recent increase in [consumer price index] inflation was anticipated in July, but the main forces pushing up prices – higher energy prices and pandemic-related supply bottlenecks – now appear to be stronger and more persistent than expected,” the Bank said.

“Core measures of inflation have also risen, but by less than the CPI. The bank now expects CPI inflation to be elevated into next year, and ease back to around the 2% by late 2022.”

Read more: Rate hike fears driving Canadians to scale down spending – MNP Debt

The central bank added that inflation rates had increased in many countries, boosted by those supply bottlenecks and higher energy prices. “While bond yields have risen in recent weeks, financial conditions remain accommodative and continue to support economic activity,” it said.

The Bank said that it is expecting global GDP to grow by 6.5% this year, 4.25% in 2022, and around 3.5% in 2023. The Canadian economic restart will likely push the national GDP up by 5% this year, before moderating to 4.25% in 2022 and 3.75% in 2023.

“Demand is expected to be supported by strong consumption and business investment, and a rebound in exports as the US economy continues to recover,” the BoC said. “Housing activity has moderated, but is expected to remain elevated.”

Still, the economy will continue to require “considerable” monetary policy support, the central bank said. “We remain committed to holding the policy interest rate at the effective lower bound until economic slack is absorbed so that the 2% inflation target is sustainably achieved,” it noted.

“In light of the progress made in the economic recovery, the governing council has decided to end quantitative easing and keep its overall holdings of Government of Canada bonds roughly constant.”

The central bank will be making its next overnight rate target announcement on December 08.

Copyright © 1996-2021 Key Media, Inc.

Dan Fumano: As both Vancouver and B.C. look to speed up housing, expect debate

Dan Fumano
The Vancouver Sun

Opinion: Changes proposed by both Vancouver and the province are “heading in the same direction,” says Vancouver housing official. They’re also likely to be controversial, especially at the civic level.

Photo showing a detached house in foreground, beside a multi-unit residential building, in Vancouver. The city is moving toward making it easier to build more of the four-storey units without complex zoning changes. Photo by Arlen Redekop /PNG

The governments of both Vancouver and B.C. are eyeing changes to speed up housing construction, moves sure to be criticized by some for going too fast and too far, while others will call them as timid half-measures.

“That’s exactly what we’ve heard: for some people, it’s anxiousness about change in their neighbourhoods. For other people, this is just an initial step that doesn’t go far enough,” said Dan Garrison, Vancouver’s assistant director of housing policy and regulation. “It’s one of the hardest balances to strike.”

Vancouver city council is set to make a final decision next week on significant changes, in the works for a few years, aimed at making it faster and less expensive to build rental housing. These include buildings up to six storeys high on busy arterial streets and — in what’s likely to be the more controversial piece — up to four storeys on side streets a block off arterials.

Meanwhile, the provincial government made its own announcement Tuesday, unveiling changes aimed at increasing housing supply, including dropping requirements for local governments to hold public hearings for zoning changes as long as they are consistent with official community plans.

While the B.C. NDP government’s announcement was welcomed by developers and non-profit housing executives, as well as the organization representing the province’s local governments, expect some residents to complain about the provincial government removing opportunities for public participation in decisions about their neighbourhoods.

The B.C. government has been recently trying new things to help — and sometimes push — local governments to approve more affordable housing more quickly. In one example this year, Vancouver Sun columnist Vaughn Palmer observed Housing Minister David Eby was willing to assume “the political risk” of weighing in on a major local decision, endorsing a massive project proposed for Port Moody encompassing social, rental and market housing.

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Garrison said: “I think you’d have to have been living under a rock to be working in the planning world and housing world and not be aware that minister Eby and the provincial government generally are looking for ways to expedite the delivery of housing, and particularly affordable housing.”

The proposed amendments to B.C.’s Local Government Act will not affect the City of Vancouver, which is governed by a unique law, the Vancouver Charter.

But the changes proposed by both Vancouver and the province are “heading in the same direction,” Garrison said.

They can also be seen as part of a broader trend, including the national example from New Zealand, where the national government recently ordered an end to single-family zoning in its five biggest cities, a move many British Columbians noticed and some want to follow, Postmedia’s Derrick Penner reported this week .

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Rendering from the City of Vancouver showing what types of building densities could be allowed on single-family residential streets a block from arterial streets. Photo by City of Vancouver /PNG

Vancouver’s council will consider proposed changes that, in short, would make it easier to build six-storey mixed-use rental buildings on busy commercial streets (think Kingsway or West 4th Ave.) and four-to-six-storey rental buildings, depending on the level of affordability, on streets outside those commercial shopping areas (think areas dominated by detached houses on Arbutus Street between West 16th and King Edward Avenue, or along West Boulevard and East 41st Avenue).

The change most likely to draw the most opposition would be allowing four-storey apartment buildings, subject to a case-by-case decision from council, on side streets a block off certain arterials (40th and 42nd Avenues, for example).

For many Vancouver neighbourhoods, busy commercial streets are the only place to contemplate anything much bigger than a duplex or triplex. Of course, apartment buildings exist on quiet residential side streets in many other cities in the world, and in some Vancouver neighbourhoods, especially older ones.

So when council considers allowing four-storey rental buildings on certain side streets next week, they will certainly hear arguments about shadowing and neighbourhood character from homeowners in favour of preserving those blocks as they are.

Although the proposed changes include maximum building widths, heights and depths for the side streets, to prevent overly large buildings, there is still “a strong attachment to the house form” in many residential neighbourhoods, Garrison said.

But perspectives seem to be shifting on what neighbourhoods should look like, and the city has been hearing from a wider range of residents.

Edna Cho, a senior housing planner with the City of Vancouver, added: “We also did hear from a lot of people who want to see more change in the neighbourhood, that we go further.”

Cho said that since the COVID-19 pandemic has led to more online participation by the publics, the city has observed “a much younger and more diverse demographic” than the crowd in previous years, when in-person attendance was usually required to address council.

The 348-page report going to council next week includes a summary of three years of public engagement on the subject of encouraging more rental housing construction. Respondents expressed “equity concerns” about concentrating almost all apartment developments along busy streets with more noise and air pollution. The report says 82 per cent of survey respondents “supported policies to allow rental buildings in low-density areas close to arterials and commercial districts.”

Those findings might surprise some: If you sat through a lot of public hearings on housing — especially in past years, before online participation — you might be left with the impression almost everyone opposes these kinds of neighbourhood changes . But the people who show up at public hearings — who should be applauded for caring about their communities and participating in these processes — may not be representative of the entire neighbourhood population.

Research has found that members of neighbourhood associations, which often oppose development in cities like Vancouver, tend to be older homeowners who have lived in their homes for longer. Younger renters, for example, may have different priorities, but have traditionally been less likely to show up to council meetings.

At press time, only 11 people had registered to address Vancouver council next Tuesday about the proposed rental housing changes. Expect that number to increase in the coming days.

[email protected]

twitter.com/fumano

© 2021 Vancouver Sun

Thanks, Mom: Over $10 billion gifted to home buyers over last year

Michelle McNally
Livabl

Amidst rising prices and dwindling inventory, it’s no secret that buying a home in Canada has become increasingly difficult, particularly for first-time buyers looking to get their foot on the property ladder.

Hoping to help their loved ones set down roots in a home of their own, parents and family members have been known to contribute to the sizable down payment required for a property purchase.

According to a recent CIBC In Focus report penned by deputy chief economist of CIBC Capital Markets Benjamin Tal, that monetary contribution has amounted to billions of dollars.

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Using CIBC data, the research report estimates that over the past year, financial gifting for home purchases has amounted to just over $10 billion. This accounts for 10 per cent of the total down payments in the market as a whole during that time period.

The number of first-time home buyers that received help from family members was just under 30 per cent this past year, Tal said. Surprisingly, the share of new buyers receiving help did not grow during the pandemic.

Giving money for a downpayment is nothing new. In 2015, approximately 20 per cent of first-time buyers got financial assistance from family. Back then, the size of a financial gift was approximately $52,000, an amount that has now swelled to a record-high average of $82,000. 

First-time buyers aren’t the only group of purchasers receiving support from their relatives. A little under nine per cent of mover-uppers also had help. Although this number has been on a decline, Tal said that the size of the financial gift for this group has “risen dramatically” to $128,000 as of September.

“[The] average size of a gift is highly correlated with home prices,” said Tal’s report. “In fact, over the past half a decade, growth in the average size of gift outpaced home price inflation, averaging 9.7 per cent per year—a full two percentage points faster than growth in home prices.”

No less than two-thirds of first-time buyers that received a gift indicated that the financial gift was the primary source of their down payment, Tal explained. In this case, gifts for first-time property buyers averaged $104,000, and “no less” than $157,000 for mover-uppers.

In Canada’s most expensive markets, where home prices are higher and down payments would be larger, financial gifts were the most expensive.

During the first three business quarters of 2021, the average gift in Toronto is estimated to be $130,000 for first-time buyers and $200,000 for move-up purchasers. Vancouver buyers received even bigger monetary gifts of $180,000 and $340,000 for new and seasoned property purchasers.

 The report states that a large portion of financial gifting for home purchases likely comes from parents’ savings, which grew during the pandemic and therefore led to increased amounts of gifted money. However, data from Equifax estimates that 5.5 per cent of parents use debt to finance their gifting.

Tal explained that in light of the trend and size of home-related gifting, this exchange is becoming an important item that is impacting housing demand and pricing in Canada.

“As for the impact of wealth inequality, clearly gifting acts to narrow somewhat the wealth gap between gifting and non-gifting parents,” said Tal’s report. “At the same time however, gifting clearly works to widen the wealth gap between receivers and non-receivers. That increase in the gap is much larger than the actual gift size as it might make the difference between owning and not owning a house, with receivers potentially benefiting from future home price appreciation.”

© 2020 BuzzBuzzHome Corp.

Real Estate Statistics: The Latest Trends in the Housing Market (2021)

Matthew Speakman
other

The housing market has significant importance for the broader economy, accounting for 17.5% of the U.S. GDP in 2020. 4.2% of the GDP impact is the spending on construction. The other 13.3% includes other spendings on homes such as rent, utilities, and the home buying process, totaling $2.8 trillion. This indicates the real estate industry trends can be indicators of the overall health of the economy.

KEY FINDINGS

• The total housing market value reached $36 trillion.
• There were a whopping 6.69 million homes sold up until July 2021
• By July 2021, the total median home price reached $390,500
• The number of Realtors has increased from 1,11 million in 2009 to 1.53 million in 2021, reaching an all-time high.
• Realtors earn an average of $8,500-75,000 depending on the experience. 
• A typical real estate agent is a white woman who is 54 years old and has some post-secondary education.
• Gen Xers make up the largest percentage of homeowners at 24%
• The main reasons for buying a home in 2021 are the desire to own a home, a larger home and to be closer to family and friends.
• June and July are the best months to buy a house.

Sections

The US Housing Market

A bright spot in an otherwise gloomy 2020 was the real estate market. Following a brief period of retrenchment at the start of the epidemic, home sales skyrocketed. Prices increased due to a dearth of available houses on the market and low mortgage rates. Rising prices increased property values, resulting in more wealth for home sellers.

However, 2021 will not be such a steady rush and this may be excellent news for purchasers. Because of the pandemic, traditional homebuying seasons were canceled in 2020, resulting in a free for all. However, with things returning to a new normal in 2021, expect homebuying seasons to return, with a spike of buyers in the spring and summer months and a slowdown in the winter. 

The Value of the Housing Market

The U.S Housing Market is booming amidst the pandemic

COVID-19 left Americans trapped in their homes and millions of others out of jobs. Yet, amid the pandemic and recession, the housing market flourished.

• In 2020, the total housing market value reached $36 trillion, increasing $2.5 trillion within the year, the biggest jump year-on-year since 2005.
• The booming market started in July 2020, when the total number of homes sold reached 6.8 million, increasing 1.2 million from June 2020.

Homes are selling at a rapid rate

By July 2021, the total number of homes sold was at a seasonally adjusted rate of 6.69 million, with 5.99 million of them being existing houses.

The first part of 2021 constituted an 18% increase from the previous year, with $41.3 million spent on home sales. While Americans are buying relatively the same amount of newly constructed houses as in 2020, there was a $6.8 million increase in existing home spending.

0 Million

The number of total homes sold in 2021

30000 Million

The number of existing homes sold in 2021

0 K

The number of new homes sold in 2021

The median price for new homes sold had a 15.55% year-on-year increase

Prices for both existing and newly constructed homes experienced an upward trend in the last decade. In 2020, the price for existing homes peaked at $296,700, a $24,800 increase from the previous year. At the same time, the price of newly constructed homes increased by $11,600, reaching $333,100 by the end of the year.

Starting from January 2021, the median home price surged, except for a slight decrease in March 2021. By July 2021, the total median home price reached $390,500.

Median Price of Home Sales in the US

The increase in total home sales and median price coincides with a decrease in mortgage rates

The record-low mortgage rates come as a result of the Federal Reserve lowering rates in response to COVID-19.

However, the July 2021 Federal Reserve meeting minutes released show that they plan to taper their bond-buying program. Though the market did not respond to the news, the moment the Fed starts applying changes to their bond-buying program, the mortgage rates will surge.

“Currently, there are fewer than three months of supply of homes on the market, the lowest on record since the turn of the century”

Newly Constructed Housing Units in the US

The housing market faces a supply shortage of 2.5 million housing units

The data from the U.S. Census Bureau shows there were 1,391,000 newly constructed houses in July 2021. This is a slight increase of 51,000 housing units from last year’s same period. 

The small change in the market supply with houses indicates that the buyers will continue to fight for homes that will keep the price high for some time.

Real Estate Agent Statistics 2021

Nowadays, Tech has enabled homebuyers to do most of the legwork themselves when it comes to discovering listings. However, that first search is only a small fraction of the total house purchasing process. 

While finding your ideal home all by yourself might save you the hefty commission rates that many real estate agents charge, for many, going Han Solo may not be the best option, and may end up costing more than a realtor’s commission in the long run.  In these situations, it really pays to have a helping hand from a specialist. 

General Real Estate Agent Statistics

Demand for homes is high but so is for real estate agents

In fact, the number of active agents and NAR members has increased from 1,11 million in 2009 to 1.53 million in 2021, reaching an all-time high.

This trend reflects the recovery of the real estate market following the 2007-2009 financial crisis, as residential home sales started to increase from 2011 onwards.  

Home Sales vs. Number of Realtors

 

This growth in real estate agents and home sales also correlates with the low mortgage rates which hit another all-time low of 2.87 in the last 50 years. These low rates make credit cheap and amply available,  fueling more bidding wars and encouraging an already fiery housing market.

0 %

of Realtors are licensed sales agents

0 %

are broker associates

Real Estate Agents vs. Realtors

A person cannot use the title “Realtor” unless they are a member of the National Association of Realtors, pays an annual due of $150 a year and complies with NAR Code of Ethics and Standards of Practice.

There are over 3 million active real estate licensees in the United States

It is estimated that there are more than 3 million active real estate agents in the US but only 1,534,008 (NAR) are Realtors.

This means that real estate agents and Realtors are not one and the same. Although we use the terms “real estate agent” and “Realtor” interchangeably in common language, real estate agents are not necessarily Realtors.

Real estate professionals helped 88% of sellers during the sale

Buying a house through a real estate agent is a regular real estate trend that has persisted for years. 

In 2021, 88% of buyers acquired their property through a real estate agent or broker, 5% directly from a builder or builder’s agent, and 5% from the previous owner.

90% of homebuyers would recommend their real estate agent to others

Homebuyers are generally pleased with their real estate agents’ knowledge of the buying process and responsiveness. NAR reports that 90% of buyers would at the very least recommend their agent to others. 

Buyers have generally recommended their agent at least once since buying their house.

41% of homebuyers found their real estate agent through referrals 

NAR reports that real estate professionals earn their income mostly through referrals.

 41% of homebuyers consult with a realtor referred to them by a relative, neighbor or friend.

This means that the main source of income for real estate agents is through referrals.

Honesty and integrity are the most sought after qualities for a real estate agent

Finding a trustworthy and honest agent was the most essential factor for homebuyers, according to 98% of respondents. 

Other essential qualities to consider while selecting an agent were knowledge of the purchase process and agent’s responsiveness at 94%.

Homebuyers also valued communication and negotiation skills at 89% and 82%, respectively, and deemed skills with technology to be critical for their agents at 45%.

Essential Qualities of a Real Estate Agent

Real Estate Agent Income

On average, real estate sales agents bring in $43,000 a year, a decrease from $49,700 in 2019. However, the first years are the most difficult  for real estate agents in terms of gross income and expenses. Realtors with 2 years or less experience earned an average of $8,500 annually compared to Realtors with 16 years or more experience who had a median gross income of $75,000.

Being a New York real estate agent pays the best

No prizes for guessing that New York, with its extremely expensive real estate in its suburbs and Long Island has the highest average annual salary for real estate agents at $102,200. 

The top-5 states for real estate agent salaries are largely located in the Northeast and the West, encompassing both the Pacific Coast and the mountain states of Colorado and Utah. 

43% of Realtors are paid by the Seller

In general, 55% of real estate agents are paid by the seller, while just 21% are compensated by the buyer only. When the buyer reimbursed the agent, it was usually a percentage of the sales price rather than a flat charge.

How Real Estate Agents Are Compensated

Real Estate Agent Demographics

The real estate sector is undeniably competitive. Although a college degree is not a prerequisite to enter the industry, it appears that some demographics of Realtors are typically given more representation than others. 

Even though we have come a long way as a society, there’s still a lot to do since discrepancies in the real estate market among different ethnic groups, genders and socio-economic backgrounds are still too large to ignore. Let’s take a closer look at the demographics of the NAR membership this year:

74.2% of all real estate agents are white

read more

White realtors make up the largest percentage among real estate agents pointing to a huge gap between them and their Black, Hispanic/Latino and Asian counterparts.

64% of realtors are women

read more

As far as numbers go, the real estate industry is very much a woman’s world. Women have been active in the real estate industry practically since its beginning in 1794 and its legalization as a business in the 1840s.

Realtors’ median age is 54 years old

read more

The median age for a Realtor is 54 years old down from 57 years old in 2013 and 2012. So, the typical real estate agent is someone who has more experience and has a college degree.

93% of realtors have post secondary education

read more

According to the latest NAR member profile study, the majority of realtors have a bachelor’s degree (32%), associate’s degree (13%), or have some college completed (29%).

Real Estate Technology Statistics

Technology is continuing to change the way real estate agents do business and interact with clients. While older technologies such as e-mail, social media, and GPS are widely used on a daily basis, there are also new developing technologies such as Photofy and the usage of drones.

Agents may go “all-mobile,” avoiding the conventional office atmosphere and using drones to take pictures of a property, and even use virtual home tours to present a home to a customer on the other side of the world.

Percentage of realtors that use a smartphone nearly every day 96%

Percentage of realtors that use texting (SMS) for communication 93%

Percentage of realtors that use Facebook for their work 76%

Percentage of realtors that use drones for their work 73%

Percentage of realtors that use a website 69%

Homebuying Statistics 2021

As we zoom in on the housing market, we found that the typical homebuyer is a white, married, 48 years old, with a median income of $113,300. While the average American home buyers had similar behaviors and purchasing motives over the years, we witness differences among generations. 

Millennials continue to be the biggest homebuyers group, with most of the younger millennials being first-time buyers. They are also the group that relies most heavily on mortgages to finance their home.

A top favorite of all homeowners continues to be a detached single-family home in the suburban area. Homebuyers usually start their buying process during the spring and summer months, visiting ten houses before purchasing the one they liked. 

Homebuyers Age

1 out of 4 homebuyers was in between 41 – 55 years of age

This makes Gen Xers the largest age group of homeowners. They are followed by older millennials (31 – 40 years), that make up 23% of the homebuyers.

These two groups have been the largest age group of homebuyers in the last five years. However, we see a decrease in these two groups as younger millennials (22 – 30 years) come to the workforce, start families, and buy homes.

In 2017, only 6% of homebuyers were younger millennials. The number more than doubled to 14% in 2021.

American Homebuyers Age in 2021

Homebuyers Ethnicity

Ethnicity of American Homebuyers in 2021

9.33% of homebuyers were 22 – 56 years old Latinos compared to 2.67% that are Latinos over 56 years old

While White/Caucasians comprise 83% of homebuyers, we see an increase of African-Americans and Latino homebuyers at younger ages. In 2021, 6% of homebuyers age 32 – 41 were African-American, 4.1% more than African-American homebuyers older than 76 years.

Homebuyers Marital Status

There are twice as many single women homeowners aged 30 – 54 years compared to single men

Throughout the years, we see that married couples are the ones buying most homes,  actually, 6 out of 10 homeowners are married couples. It is logical because when couples get married they want to start a new life together to create a family which involves having a home. 

However, out of single people, women own more houses. In 2021, single women comprised 18% of total homeowners compared to 9% of single men homeowners.

Marital Status of American Homebuyers in 2021

Homebuyers Yearly Income

In 2021, the median income of homebuyers increased by 3.41% from the previous year

Over the past five years, we see an increase in homebuyer’s medium income, jumping by $8,000 in the last five years. Just this last year, it increased by $3,300. 

Yearly Income of American Homebuyers in 2021

In the last 8 years, Gen Xers, continue to be the top earners with a yearly income of $113,300 in 2021

Homebuyers Behaviors

For most Americans, buying a home is their biggest life investment. Close to a third of them said the desire to own a home was the main purchasing drive.

The typical buyer buys a previously owned home in a suburban area, a behavior mostly prevalent in younger generations. The behavior is plausible as older generations prefer to live in community-based homes.

Americans usually purchase their homes in the spring and summer months, hoping to settle in before the new school year starts.

The main reasons for buying a home in 2021

1 %

the desire to own a home

0 %

the desire for a larger home

0 %

the desire to be closer to family

The desire to own a home is more prevalent in younger generations, with 1 in 2 homebuyers of 22 – 31 years old saying this was the main drive to purchase a home.

In contrast, older generations buy their houses mainly because they want to be closer to their families or own a small home. As retirement approaches and children move out of the house, it is convenient for the elderly to downsize their homes.

Why Are Americans Buying Homes in 2021?

9 out of 10 people younger than 40 years old bought a previously owned home

For the last five years, 85% of homes bought were previously owned houses. The number comes as no surprise since the new homes built every year have kept relatively low. However, homebuyers have different reasons for buying a previously owned home compared to a new one.

Reasons for Buying a Newly Constructed Home in 2021

In 2021, avoiding renovations was the main reason why Americans invested in a new house. Close to a third of new homes buyers said they purchased because they appreciated the ability to choose and customize design features. It means the higher price will save them in the long run by allowing them to spend less money on problems with plumbing or electricity.

35% of previously owned homebuyers said the better overall value was the primary reason for purchasing their home. Existing homes come in the market cheaper than a new home, which is an advantage for people looking for a house at a reasonable price.

Reasons for Buying a Previously Owned Home in 2021

Favorite location to buy a home

1 out of 2 homebuyers bought a house in the suburban area.

Over the years we see a slight decline in homes bought in the suburban area, even though it continues to be a favorite location for Americans.

1 in 5 homebuyers bought a small townhome

In the past two years, row houses are becoming more popular. While in 2021, 22% of home buyers purchased a small townhouse, only 18% of them did the same in 2014.

June and July are the best months to buy a house

A house stays in the market for 69 days during summer. On the other hand, winter months are considered the slowest with homes typically staying in the market for 92 days.

Winter also falls behind with the number of closed sales, with 505,135 fewer home sales compared to the summer months of the same year.

Homebuying Process

On average, it takes two months to buy a home

Homebuyers usually view 5 to 6 houses online and visit 8 to 10 places before purchasing the one they like during the search time.

Process of Search for American Homebuyers in 2021

First Step Taken During the Homebuying Process in 2021

43% of home buyers start their buying process by searching online

In contrast, only 18% of them contact a real estate agent.

However, 33% of 23 – 31-year-old homebuyers said their first step was learning about the homebuying process.

1 in 2 American home buyers said they found online the home they purchased.

Over the years we see that more and more people are using the internet to find their homes, a 9% jump from 2013.

At the same time, 28% of homebuyers found their home through real estate agents, a decrease of 6% from 2013.

Where the Buyers Found the Home They Purchased in 2021

Key Takeaways: The Future of Housing Market

The housing market boom came due to a disproportion of supply and demand in the market, contributing to a jump in home prices. At the same time, shrinking mortgage interest rates lured buyers into purchasing a house.

The pressing question for every home buyer and seller in the current hot market is the market going to crash in 2022?

According to experts, a crash may be a big word, however, they expect the market to flatten out.

First, experts predict that the construction of new houses will increase to 1.68 million units in 2022 from 1.38 million in 2020. With more homes in the market, the price may flatten as there will be less strife among the buyers.

Second, experts predict mortgage rates will rise to a full percentage during 2022. The low mortgage rates came as a result of actions taken by the Federal Reserve. However, as the market stabilizes, the Fed may change its strategy.

For the American homebuyer, this means that in the future, there will be an increase in mortgage rates. However, so will the supply of houses, which most likely will contribute to lower home prices.

 

Copyright © 2021 Timeshatter

Office real estate may be struggling, but there are bright spots in commercial real estate

Murtaza Haider and Stephen Moranis
other

Industrial real estate has emerged as an unexpected saviour, with leasing volumes rising across Canada

With offices and educational institutions resuming face-to-face operations by early next year, downtown spaces are expected to be back in demand. Photo by Galit Rodan/Bloomberg files

The suburbs made a remarkable comeback during COVID-19, as residential prices, rents and sales escalated faster than those in the urban core, while commercial real estate data depict a similar picture of strength and resilience in the areas outside the downtown areas.

 

Indeed, the real estate story during COVID-19 is a tale of not one, but several markets. One is that the roaring housing market defied all predictions of doom and gloom, with unprecedented increases in demand coupled with lacklustre supply pushing housing prices upwards.

Another is focused on commercial real estate markets, which are further differentiated by geography and type. Often concentrated in the urban core, office real estate continues to struggle with growing vacancy rates and softening of rents. The short-term forecasts for office markets spell even more trouble, with vacancy rates projected to rise further.

But not all is lost in commercial real estate. Industrial real estate, especially suburban warehousing space, has emerged as an unexpected saviour, with leasing volumes rising across Canada. And if you thought COVID-19 had taken the retail sector down, think again. The on-again, off-again restrictions have certainly hurt retail real estate as has the shift to e-commerce. But retail leasing volumes started to recover after the second quarter of 2020, and retail vacancy rates are forecasted to stay steady.

Recent data from CoStar Group, which tracks and analyzes activity in commercial real estate markets, demonstrates the diversity in market trends. For example, office leasing, like residential real estate sales, declined in the first quarter of 2020. But office leasing has since struggled to fully recover, while residential sales sprang back almost immediately. 

 

The decline in office leasing is most pronounced in Toronto, where CoStar Group data show leasing volume in the third quarter of 2021 was 47 per cent lower than the average for the same quarter from 2018 to 2020. Other major markets, including Calgary and Edmonton, which were struggling even before the pandemic, showed similar declines.

The office market in Vancouver, though, showed resilience. Leasing volume there was up by 33 per cent in the third quarter of 2021 compared to the average for the same quarter from 2018 to 2020. Why is Vancouver bucking the trend? Carl Gomez, chief economist and head of market analytics at CoStar Group Canada, believes it’s because of the number of small- to medium-sized tech companies located there.

Toronto’s urban core is dominated by firms specializing in banking, finance, law, and insurance. The shift to working from home has been more pronounced in those sectors, according to Statistics Canada. The decline in office space leasing was, therefore, expected given the declining demand.

Suburban office markets, however, have managed to stay in the black. The net absorption of office space has been negative in downtown Toronto since the second quarter of 2020. But the suburban Greater Toronto Area (GTA) has fared much better, with positive net absorption quarter after quarter.

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The urban-suburban divide also persists in Vancouver. The net absorption of office space has been negative downtown, at least since the first quarter of 2020. The suburban office markets, on the other hand, have reported positive net absorption. Even in the second quarter of 2020, soon after COVID-19 was declared a pandemic, suburban Vancouver reported almost one million square feet in net absorption.

The suburban markets are also conducive to the growth in industrial real estate. By the fourth quarter of 2020, industrial leasing had topped pre-pandemic leasing levels in Canada. Furthermore, an additional 16 million square feet of industrial real estate is in the pipeline for Toronto and almost eight million for Vancouver.

 

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The better-performing suburban commercial real estate markets in Toronto and Vancouver suggest a slight shift in location preferences that the pandemic has accelerated. However, one should not be quick to write-off downtown areas just yet. With offices and educational institutions resuming face-to-face operations by early next year, downtown spaces are expected to be back in demand, which might require vacancy forecasts to be revised downwards.

Murtaza Haider is a professor of Real Estate Management at Ryerson University. Stephen Moranis is a real estate industry veteran. They can be reached at the Haider-Moranis Bulletin website, www.hmbulletin.com.

© 2022 Financial Post

 

Canadian Real Estate Report: 2021 Housing Impacts to Condo Sector

RE/MAX Staff
other

 Staggering gains in detached housing values have sent condominium sales soaring throughout the first eight months of 2021 in major Canadian real estate markets, according to a new report by RE/MAX Canada

The RE/MAX Canada 2021 Condominium Report, which examines trends and developments in five major Canadian real estate markets and more than 100 sub-markets, found that buyers turned to condominiums in 2021, as freehold housing values escalated beyond their reach. The strongest gains in sales were made in the West, where Greater Vancouver and Calgary saw condominium sales rise 87 and 83 per cent respectively between January 1 and August 31 of 2021, compared to the same period in 2020, which experienced a notable downturn in condo sales. The Greater Toronto Area (GTA) led the East in terms of percentage increases in condo sales at 71 per cent, followed by Halifax-Dartmouth at 36 per cent and Ottawa at 29 per cent. The greatest upswing in pricing occurred in the East, with both Halifax-Dartmouth and Ottawa posting double-digit price gains of 30.0 per cent and 18.0 per cent respectively. More moderate appreciation was reported in Greater Toronto (seven per cent), Vancouver (6.7 per cent) and Calgary (three per cent).

“Affordability, coupled with availability, set the stage for the exceptional rebound in condominium sales across Canadian real estate  markets in 2021,” says Christopher Alexander, Senior Vice President, RE/MAX Canada. “Double-digit acceleration in detached housing values revived slumping condominium sales early in the year, with demand shifting into high gear as detached supply dwindled and prices accelerated. Younger buyers have been behind the push for condominiums to date, with most looking to lock in low interest rates and buy before prices climb beyond their means.”

Growth in condo market share across the Canadian real estate market occurred in all but one regions surveyed, according to the RE/MAX Canada 2021 Condominium Report. The greatest concentration of condo sales was reported in Greater Vancouver, where condos represented nearly half (48.2 per cent) of total residential sales in 2021, up from 46 per cent one year ago. Condominium apartments and townhomes in the GTA followed with a 34.5 per cent share of the overall market, up from 30.8 per cent one year earlier. Almost one in four properties sold in Ottawa between January 1 and August 31, 2021 was a condominium, compared to the same period in 2020 (24.3 per cent versus 23.3 per cent). Meanwhile in Halifax-Dartmouth, the condominium segment represented 17.3 per cent of total residential sales, up from 15 per cent one year earlier. While overall sales climbed in Calgary year-over-year, condominium market share declined by just under one per cent in 2021, to 14.2 per cent.

“Home-buying activity in the condominium segment has surged in Calgary in 2021, driven in large part by their affordable price point,” says Elton Ash, Executive Vice President at RE/MAX Canada. “Supply has declined from almost eight months to just under five year-over-year, although inventory levels are still 16 per cent ahead of 2020 levels. Once excess product is absorbed – and that is occurring at a steady pace throughout the city – condominium values are likely to experience further appreciation, especially as the average price for detached housing continues to climb in the city.”

Regional Canadian Real Estate Insights

GREATER VANCOUVER CONDO MARKET TRENDS

While strong demand has contributed to a significant uptick in condominium apartment sales in the Greater Vancouver Area, more moderate gains have been reported in terms of price in 2021. According to the Real Estate Board of Greater Vancouver (REBGV), the average price of a condominium apartment hovered at $740,221 in August of 2021, an increase of 6.7 per cent over the August 2020 average of $693,691. 

 

Copyright © 2021 RE/MAX Ontario-Atlantic Canada Inc.

Real estate agents caught on hidden camera breaking the law, steering buyers from low-commission homes

Tiffany Foxcroft
other

 A CBC Marketplace investigation has found that some real estate agents are breaking the law by steering unwitting buyers away from low-commission homes. 

Posing as homebuyers and sellers, Marketplace tested if real estate agents are engaging in this anti-competitive behaviour and found some agents deceiving the very buyers they are supposed to represent, in an effort to pad their own bottom line.

• Watch the full investigation tonight at 8 p.m. (8:30 NT) on CBC-TV or stream anytime on CBC Gem.

Experts and industry insiders say what Marketplace has uncovered is indicative of an industry working for the benefit of real estate agents, at a cost to home sellers and buyers.

“There’s a huge inertia, and maintaining the status quo, it absolutely benefits existing realtors 100 per cent,” said broker and real estate agent Michael Walsh, one of the few speaking out on this issue.

The Canadian Real Estate Association (CREA) and the Real Estate Council of Ontario (RECO) would not talk to Marketplace about the investigation. However, shortly after learning about the findings, RECO issued a notice about steering to the over 93,000 real estate agents, brokers and brokerages under its purview, noting that such behaviour breaches the code of ethics.

“In addition to being illegal, the conduct undermines consumer protection, consumer confidence and the reputation of the real estate profession as a whole,” said the notice.

Across the country, the National Realtor Code of Ethics, as well as provincial real estate laws, dictate that agents must act with honesty and promote the interests of the individual they represent. Some provincial laws, including in Alberta and Ontario, address the issue of steering specifically.

The Real Estate and Business Brokers Act (REBBA) in Ontario states that when a buyer enters a representation agreement with a real estate agent, the agent “…shall inform the buyer of properties that meet the buyer’s criteria without having any regard to the amount of remuneration, if any, to which the brokerage might be entitled.” 

Not doing so is called steering.

But those calling the practice out say RECO and other regulatory bodies are not doing enough to protect consumers and foster an industry that is fair and free from abuse.

Joanne Petit, in Vaughan, Ont., put her house up for sale  without a real estate agent to help save on commissions that would have cost over $73,000. (Dave MacIntosh/CBC)

‘It’s not fair, and I think more people have to know about it’

When Joanne Petit and her husband, Frank, put their house up for sale this spring they decided to do it without a real estate agent. 

Joanne and Frank lived in Vaughan, Ont., where agents typically charge home sellers five per cent commission on the sale price of their home. In Joanne’s case, this would have amounted to over $73,000 plus 13 per cent HST.

In real estate sales, the commission paid to the listing agent by the seller is shared with the agent representing the buyer. Typically the commission is split in half.

In the industry, it’s referred to as the co-operating brokerage commission, and when a property is advertised on the Multiple Listing Service (MLS), the industry rules require that an amount of commission for co-operating brokerages must be included. This information, however, is hidden from public view and only visible to other agents and brokerages through an internal version of MLS.

To save on some of these costs, Joanne decided to skip the listing agent and instead paid a $200 flat fee to a discount brokerage that listed her house on MLS but left the rest of the work to her.

“I know there have to be people like myself looking on MLS to buy a house … and [they would]  say to their agent, ‘I would like to see this house,'” she reasoned. 

 

Petit’s home was listed on MLS for a $200 flat fee. She decided to do the work of selling herself to save the $36,000 she would have been charged by a listing agent. (David MacIntosh/CBC)

Joanne was still prepared to pay the real estate agents representing the buyer one per cent commission, which totalled nearly $15,000. After six weeks on the market, Joanne received zero calls from agents with interested buyers.

“They called a lot because they wanted us to sign with them, they wanted us to list with them, they wanted to be the selling agent,” said Joanne, who eventually asked one of those local agents why no buyers were interested. She says he informed her that her house had been, in the words of the agent, “blackballed.”

“Agents want to work with agents, and agents want their 2.5 per cent commission,” Joanne told Marketplace. “It’s not fair, and I think more people have to know about it.”

Marketplace producers posed as homebuyers with hidden cameras

To test if Joanne’s house was indeed being snubbed by agents avoiding the low commission,  producers from Marketplace posed as homebuyers looking to purchase a home just like hers and in the same neighbourhood. 

The team contacted three local real estate agents who showed up first in an online search.

Each of the agents was asked to book a showing for Joanne’s property as well as two other nearby properties listed on MLS. 

Marketplace‘s test found that two out of the three agents steered the potential buyers away from Joanne’s home.

While one agent was upfront with the buyers about the low commission and offered to help the would-be buyers purchase the home anyway, the other two agents did not tell the buyers about the commission and discouraged or thwarted them from seeing the home.  

One of the agents steered the buyers by telling them the house was overpriced by $200,000, and said the owners would not budge on price. The other agent told them she was unable to book a showing at all, and suggested the property might have tenants, a turnoff for many homebuyers wanting to move in themselves.  

WATCH | Real estate agents found ‘steering’ on camera:

 

Hidden cameras show real estate agents steering  buyers away from low-commission homes

Marketplace posed as potential homebuyers and asked real estate agents to show them a low-commission home being sold by the owner, Joanne Petit. Some agents attempted to steer the would-be buyers away from the property. 2:12

Joanne said she never received a call from the agent who said she couldn’t book a showing.

She says the other agent did call but didn’t ask if they would be willing to negotiate, even though that agent told the buyers they would not. Joanne says the agent also didn’t inquire about the price of the home, which was in line with other sales in the same area.

“Right off the bat, she wanted to know if she was getting 2.5 per cent [commission]. When we told her that there would only be a one per cent commission, she said, ‘OK, thank you, I’m not interested, I’ll keep my clients to myself.'”

The identities of the three agents have been concealed because Marketplace‘s investigation determined that this problem is industry-wide, and not isolated to these specific agents. 

In a second test, Marketplace made calls to 50 real estate agents in five markets across Canada. Half the time the team called as homeowners looking to sell, and half the time as buyers. When producers asked 25 agents if they, as sellers, could lower the commission they offer to buying agents, 88 per cent warned against doing so. 

“Although they’re not supposed to do it, some agents may be very cognizant of what they’re getting paid and push their buyer to another home,“ said an agent in Halifax.

“I have had agents say to me, ‘You know we’re looking at two houses, they’re both a good fit but I’m definitely sort of massaging them towards yours because there’s more in it for the realtor,'” said another agent in Winnipeg.  

‘It’s just completely unethical’

RECO says that commissions are negotiable and “sellers decide how much, if anything, they wish to offer to pay a buyer’s brokerage,” but when all 50 agents were asked about the commission they charge, nearly all quoted the same amount. A quarter of the agents referred to their fee as standard, and the majority said they would not negotiate. Marketplace shared what they documented with real estate lawyers including Lisa Laredo, who’s practised real estate law in Ontario for over 15 years. 

“It’s beyond steering, it’s just completely unethical,” said Laredo about the hidden camera test. “You’re not actually providing a service, you’re not servicing anyone but yourself.” 

 

Lisa Laredo, a real estate lawyer in Ontario, says steering by real estate agents is against the law and unethical. (Norm Arnold/CBC)

When Marketplace reached out to the two agents who steered, both denied doing so. The one also stands by her assessment the house was overpriced.

Michael Walsh, who runs an agency exclusively for buyers, is not surprised by the findings of Marketplace‘s test and says the current framework for real estate sales enables steering. 

“That’s part of the inherent issue in the model where buying agents are offered compensation by listing agents. We wouldn’t be having this conversation if that wasn’t in place.”

Historically, all real estate agents only worked for home sellers and only had a fiduciary duty to them. It wasn’t until the 1990s that buyers’ agents came to exist in Ontario after some agents advocated for the change. However, the commission structure, wherein sellers incentivize agents to bring buyers, remained in place. 

Michael Walsh is the president and broker at Exclusively Buyers Inc., a brokerage that only represents homebuyers. (David MacIntosh/CBC)

Walsh and researchers studying the industry agree that the only way to truly fix this problem is to change the way real estate agents are paid, so the buying agent’s commission is not paid by the home seller via the listing agent.  

‘The industry functions as a cartel’

“In terms of commissions, the industry functions as a cartel. They enforce on the entire industry a certain high and relatively uniform commission level,” said Stephen Brobeck, a senior fellow and former executive director of the Consumer Federation of America, a non-profit organization based in Washington, D.C.

Brobeck’s research, which spans over 20 years, has determined that “decoupling” realtor commissions could drop the standard rate of real estate commission by one to two per cent over a couple of years, saving consumers billions of dollars a year.

“If the commissions are decoupled, for the first time buyers would be able to negotiate their commissions and they would come down. That would also encourage sellers to negotiate more vigorously with their listing agents and those would most likely come down,” Brobeck said. 

“Furthermore, it would give discounters a far greater opportunity to penetrate this marketplace, because they would not have to pay the going rate for buyer agent commissions.”

• Click here for full statements from those featured in this investigation

Brobeck’s argument and how commissions are paid is also at the core of two large anti-trust lawsuits in the U.S against the National Association of Realtors and major brokerages including RE/MAX LLC, Keller Williams and Realty Inc. The class-action suits claim that “anticompetitive conduct causes America’s homebuyers to pay inflated commissions.” These claims are also currently under investigation by the U.S. Department of Justice.

Discount brokerages make up about 10 per cent of the market share in the U.S. There are no figures available for Canada but it’s considered to be about the same or less according to discounters in the industry.  

Stephen Brobeck is a fellow with the Consumer Federation of America. He says with respect to commissions, the real estate industry functions as a cartel. (CBC)

Brobeck says it’s now up to provincial governments to make this change happen. Until then he also recommends that consumers not give up on negotiating the commission they pay.

“If you’re a seller you ought to try to negotiate the commission down by a full percentage point,” he said. “Secondly, if you’re trying to sell an expensive home, or you’re working with a broker who will help you sell one home and buy another home, they may knock an additional percentage point off the home.”

Joanne and Frank, however, remained steadfast in their resolve to sell without a listing agent. 

“The right person is going to come along at the right time,” said Joanne defiantly.

And in the end, patience did pay off. After three months on the market, they sold their house near full asking price to a private buyer, with no agents involved.

• If you have tips on this or any other story, please email the Marketplace team at [email protected]

©2021 CBC/Radio-Canada

Can the First-Time Home Buyer Incentive be salvaged?

Fergal McAlinden
other

It remains to be seen whether proposed tweaks can revive the much-maligned federal program

 On paper, it seemed a welcome break for Canadians hoping to enter the housing market: a federal incentive program aimed at reducing the monthly mortgage burden and easing the passage to home ownership for qualified first-time buyers.

Over two years after its introduction, though, the jury is still out on whether the First-Time Home Buyer Incentive, unveiled by the federal government in September 2019, has had any significant impact in addressing the mounting challenges faced by would-be homeowners across the country.

Figures released to Parliament in April painted a damning picture of the program, revealing that it had seen an uptake of just over 9,000 successful applicants since its introduction – with the $170 million released in incentives representing a small fraction of the program’s $1.25 billion overall value.

One of the most significant stumbling blocks in the incentive, which offers mortgage relief through a shared-equity program between homebuyers and the government, appeared to be the fact that ever-soaring house prices across much of Canada meant that it had little impact on prospective buyers in the country’s hottest markets.

While the government introduced changes to the program late last year – announcing increased household income and buyer’s income thresholds for Vancouver, Victoria and Toronto – those amendments still meant that the program’s maximum eligible home price remained well below the going rate in those markets.

The program has faced staunch opposition from the get-go, with Conservative MPs Tom Kmiec and Stephanie Kusie urging the government to scrap the scheme in May 2020 after it had been in operation for less than a year.

Read more: Conservative MPs urge feds to eliminate First-Time Homebuyer Incentive

Still, the governing Liberals have stuck resolutely by the plan, announcing in their platform prior to September’s federal election – in which they were returned to government, having emerged once more as the largest party in Parliament – that they would retain and rejig the scheme if re-elected.

Under that platform’s proposals, changes to the program would give applicants a choice between the current shared-equity approach and a loan that’s repayable when the property is eventually sold – theoretically allowing new homebuyers to keep more of any increase in their home’s value while also reducing mortgage costs.

CanWise Financial president and RateHub co-founder James Laird told Canadian Mortgage Professional in recent weeks that the First-Time Home Buyer Incentive was an “illogical, complex program” that made little sense and should have been abandoned completely, rather than reworked.

In Newfoundland and Labrador, Robert Jennings (pictured top), owner and mortgage broker at East Coast Mortgage Brokers, said that while the scheme was often raised as a topic among clients, actual uptake had proven limited.

“I would say we have a fair amount of conversations, but it doesn’t lead to a lot of usage,” he said. “The usage rate is very low. I believe if I were to pinpoint it, the lean on the property [government involvement] would be really discouraging to a young, proud first-time homebuyer.

“I feel like maybe in Newfoundland in particular, there’s a home ownership pride that they don’t want to share or give up… Of course, there’s the eligibility issues as well. It seems like in a lot of cases trying to put a square peg in a round hole.”

Read next: What the Canada election result means for the mortgage industry

While Jennings said that the scheme had arguably fallen short in its attempts to create a smoother path to first-time home ownership, he believes efforts at a federal level to address the country’s growing housing affordability crisis are to be applauded.

“Everybody made it a big deal in their platforms – not just first-time home ownership, but home ownership in general and affordability,” he said. “I just really hope that they re-evaluate everything.

“They had good intentions, but I feel like they missed the mark. There’s no reason not to try; the problem’s not going away. I’d like to see what happens when the dust settles and I hope that it [the housing crisis] remains a priority, because they certainly made it seem like it would on the campaign trail.”

A good place to start, Jennings said, would be for the federal government to work collaboratively with stakeholders and those who work daily in the mortgage and housing industries – whether that be on changes to the stress test or potential longer-term amortizations.

“What I want is them not to do things blindly,” he said, “to embrace input, do their homework and try to get it done – but also get it done right.”

 

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