Demand heats hot Metro housing market

The head-spinning housing boom in the Lower Mainland continued unabated through February as homebuyers continued to scoop up properties at a record pace, undeterred by rapid price growth.

Multiple Listing Service sales in the region spanning Metro Vancouver and Abbotsford/Mission reached 6,544 units in February, up 90% from same-month 2020. This was the second-strongest February on record. Seasonally adjusted sales surged 12.6% from January to exceed previous cycle highs.

Through two months, sales rose 78% from 2020 and exceeded 2016 by 1.8%.

Buyers remain motivated by the low-mortgage-rate environment, while the pandemic has contributed to higher savings and a desire for more space as many people work remotely. Higher demand for suburban areas, away from the high-priced core Vancouver market, is evident with a doubling of Fraser Valley market sales, while Greater Vancouver growth came in at 76%.

Increased new listings (up 23% year-over-year) provided more choice for buyers but were far outpaced by demand. The sales-to-active-listings ratio jumped above 50% to the highest level since 2016, highlighting a strong seller’s market that has driven average prices up 15% year over year and 3% from January to a record high of $1.06 million.

Average prices are often skewed by sales composition. That said, the composite price index, which adjusts for housing attributes, rose a comparable 3% from January and a robust 8.9% from a year ago. The latest data also suggests rising apartment prices after a dormant year. Strong price growth in detached prices (up 16.5% year-over-year) may be pricing more families into multi-family units, while vaccine optimism is likely driving investors back into the market.

We still believe that sales will trend lower soon. Mortgage rates have likely bottomed, and high prices are eroding affordability. Meanwhile the shift to a post-vaccine world will usher in a return to a more normal working environment, limiting opportunities to search for housing and reducing a push towards suburban markets. Spending power will likely diminish as households redeploy spending into services and tourism. •

Bryan Yu is chief economist at Central 1 Credit Union.