The year of discontent persists for the housing sector as the confluence of federal mortgage stress-testing measures, higher interest rates, provincial policy measures and buyer skittishness continued to weigh on the market.
Price levels are in retreat as sellers tone down their expectations in light of the shift in the environment.
Multiple Listing Service (MLS) sales in the combined Metro Vancouver and Abbotsford-Mission (Lower Mainland) region fell 38% on a year-over-year basis to 3,063 units, marking the fewest August sales since 2012. Similar declines were observed across housing types. That said, seasonally adjusted sales edged higher, pointing to a bottoming of the cycle. A vigorous second-half rebound is unlikely given rising interest rates and policy constraints.
While sales plunge, resale inventory remains modest. Active listings rose 33% on a year-over-year basis due to slower sell-through of units. There have been few signs of a surge in new listings, and inventory levels are still low. Sales to active listings, which serve as a barometer of market strength, are trending near 18%, seasonally adjusted – a level typically associated with a balanced market. But this is being propped up by stronger conditions in the apartment and townhome sector, while the detached market remains in recession. Apartment and townhome conditions have also softened but have been buoyed by a strong economy and demand for relatively affordable properties. A swath of new condos slated to complete in the next year is an upside risk to inventory levels as completed units trigger resale of existing homes by residents and by pre-sale investors.
Prices are adjusting lower, albeit in a low-volume environment. While up 5% from a year ago to $916,940, the average price has drifted lower in recent quarters. The MLS home price index, which adjusts for compositional effects, fell 1.4% from July (unadjusted) with similar declines across product types. Seasonally adjusted, the benchmark has fallen about 3% since May, led by a 6% drop in the detached market. Further downside is likely with a peak-to-trough pullback in the 5% to 10% range.
B.C. international goods exports pulled back in July, extending this year’s erratic but generally positive trend. Year-over-year growth decelerated to 8.8% from 11.5% in June to reach $3.76 billion.
July’s pullback reflected weaker sales in energy (down 6.9% year-over-year), electronic and electrical equipment (down 13.3%) and metal ores and non-metallic mineral products. In contrast, sales accelerated in forestry and were strong in the machinery, auto and consumer goods sectors.
Bryan Yu is deputy chief economist at Central 1 Credit Union.