B.C. housing markets easing into balance

Weaker home sales continued through April but the slide in sales showed signs of moderating. B.C. Multiple Listing Service (MLS) sales fell for the fourth straight month in April to 6,590 seasonally adjusted units, down 1.8% from March, compared with a 6% drop the previous month. Since a fourth-quarter peak, sales have fallen 30% largely due to federal mortgage stress tests.

Declines were concentrated in the Lower Mainland, Vancouver Island and Okanagan Mainline real estate board regions, which, incidentally, are home to the highest-priced markets in the province. In contrast, sales rebounded in Kamloops, the South Okanagan and northern regions.

Weaker sales are pushing most markets back into a more moderate balanced state. Listings are staying on the market for longer, and active listings are on the rise, particularly in the Lower Mainland and Victoria. That said, there is no flood of new listings with owners opting to remain patient given strength in the labour market and economy.

After four successive declines, the average MLS value edged higher by 0.2% to $698,150.  More substantial sales declines in higher-priced regions and sales softness for higher-priced properties contributed to recent weakness. Since December, the average price has declined about 5.5%, with roughly half accounted for by geographic composition. Benchmark price indexes available for the Lower Mainland and Island markets continued to appreciate at a 1% to 2% monthly pace.

A mild sales rebound is expected in the second half, but demand will continue to be constrained by federal lending restrictions and amplified by rising mortgage rates. A mild price correction is possible if supply ramps up, but a more likely scenario is a lower-growth or flat-price environment given low inventory and solid economic growth.

B.C. retailers posted a solid sales lift in March that was in line with the national gain. Dollar-volume sales rose 0.6% from February to a seasonally adjusted $7.18 billion. The Vancouver metro area led the charge with a 2.4% increase, which offset a slight dip elsewhere in the province. Consumer spending looks to have turned the corner after a recent lull, but the underlying sales trend has been flat since the early fourth quarter, aligning with more subdued employment growth and fewer home sales. That said, year-over-year sales remained solid at 5.1% in March. Strong employment growth for most of 2017, accelerating wages and tourism continue to support high levels of retail spending.

A jump in new vehicle sales was a key contributor to the March gain alongside higher sales at clothing and general merchandise retailers. •

Bryan Yu is deputy chief economist at Central 1 Credit Union.