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Real-estate agents are going extinct just like travel agents did, award-winning professor says. ‘You just don’t need’ them anymore because of the internet – Fortune

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Last week, the National Association of Realtors, one of the country’s largest industry associations, reached a groundbreaking $418 million settlement over an alleged conspiracy to inflate realtors’ commissions. Some have said the settlement signals an end to real-estate agents as we know them. But an award-winning finance professor, specialized in housing economics, says the demise of this particular profession has been coming for a while. 

Indeed, Andrew C. Spieler, a distinguished professor in business and finance at Hofstra University, likens real estate agents to travel agents. Like travel agents, realtors were once the “gatekeepers” of information. They had access to MLS listings that consumers couldn’t find on their own, so buyers had to be much more “dependent” on their agents to even start house hunting, Spieler tells Fortune. 

“You just don’t need them,” he says in regard to both travel agents and real estate agents. “I mean, there’s still a few out there, but it’s going to compress the industry.” Spieler is an award-winning academic who has won several industry awards for his real-estate research. 

It’s not rocket science, he says. It’s the internet. Online, homebuyers have access to nearly all the information they’d need to purchase a home. On websites like Zillow and Realtor.com, consumers get almost all of the details they’d want to know, plus photos of the property. 

Questioning the use of real estate agents was “inevitable even without the settlement,” Spieler says. “If you think about what an agent does for you, I think it’s very different than what they used to do for you because so much more information is available on the internet.”

Before the advent of the internet (and online real estate marketplaces, more specifically), homebuyers had to be much more “dependent” on their real estate agents to even show them inventory, he says. In fact, it was hard to even start house hunting “unless you happened to be driving by and someone had a for-sale sign.” Back in the day, real estate agents would just print out the MLS listings (that only they had access to), or “if you’re lucky, [they’d] email it to you,” Spieler says. 

“Now, that part of the process is completely removed,” he says. “The buyers are so much more informed. And to me it comes down to, ‘What am I paying for as the buyer?’”

Really, the main purpose a real-estate agent serves now is getting the transaction done with the “least amount of stress,” Spieler says. They still can be useful in situations where buyers or sellers need to make a quick move to avoid a “misstep” in the transaction.

Let’s talk commissions

Getting back to the NAR settlement itself, another main concern buyers and sellers have with using real estate agents today is commission rates. NAR agreed to pay the $418 million in damages across several antitrust lawsuits, including the $1.8 billion verdict that landed on Halloween last year. These found NAR and other brokerages conspired to inflate realtor commissions. While NAR still denies any wrongdoing in these cases, the organization said it would prevent broker compensation offers on MLS and require users to complete written representation contracts with buyers.

Commission rates can be particularly sour for buyers and sellers of expensive properties. Take a $2 million home, for example. At a standard 4% commission rate, the realtors on the transaction would take home $80,000 (although that figure is distributed among the buyers’ agent, the sellers’ agent, and a broker). Typically, a commission rate falls between 4% and 6% of the transaction price.

“That’s a lot to pay for,” Spieler says. “And for what? Sometimes you sell the house pretty quick. You find the person, and you’re shuffling some papers. It’s a lot of money when you think about it.”

In total, analysts suggest Americans pay about $100 billion in real estate commissions each year, but the result of the NAR settlement could cut that by 30%. With such a steep drop in commissions earnings, some experts argue this could mean the demise in real estate agents—or as Spieler puts it, a major “compression,” or downsizing of the profession. Currently, there are about 1.5 million realtors in the U.S.

Other real estate experts, however, argue the NAR settlement won’t really change that much in the long run. 

“I do think we’re in for a little shake-up, but in the end, we’ll find a workaround all the way back around to where we’re doing business very similar as we are today,” Ken Johnson, a former broker and current associate dean in the Florida Atlantic University’s college of business, told Fortune’s Alena Botros

But what the NAR settlement does indicate, however, is realtors could start making less on commissions. While realtors may hope for more transactions, they’re not a “commodity” like stocks, Spieler says. And with historically low inventory levels, there’s just less business to go around. 

“You’re going to squeeze some people out” of the real estate profession that way, Spieler says, which means “less profits in the industry. I’d expect you to definitely see a compression in agents.”

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Greater Toronto home sales jump in October after Bank of Canada rate cuts: board

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TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.

The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.

The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.

“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.

“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”

The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.

New listings last month totalled 15,328, up 4.3 per cent from a year earlier.

In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.

The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.

“I thought they’d be up for sure, but not necessarily that much,” said Forbes.

“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”

He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.

“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.

“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”

All property types saw more sales in October compared with a year ago throughout the GTA.

Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.

“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.

“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”

This report by The Canadian Press was first published Nov. 6, 2024.

The Canadian Press. All rights reserved.

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Homelessness: Tiny home village to open next week in Halifax suburb

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HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.

Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.

Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.

The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.

Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.

They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.

The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.

This report by The Canadian Press was first published Oct. 24, 2024.

The Canadian Press. All rights reserved.

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Here are some facts about British Columbia’s housing market

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Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.

Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.

Average residential home price in B.C.: $938,500

Average price in greater Vancouver (2024 year to date): $1,304,438

Average price in greater Victoria (2024 year to date): $979,103

Average price in the Okanagan (2024 year to date): $748,015

Average two-bedroom purpose-built rental in Vancouver: $2,181

Average two-bedroom purpose-built rental in Victoria: $1,839

Average two-bedroom purpose-built rental in Canada: $1,359

Rental vacancy rate in Vancouver: 0.9 per cent

How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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