B.C.’s housing market slide deepened through September with lower sales and prices. Further rounds of interest rate tightening by the Bank of Canada and resurgent bond yields will continue to erode purchasing power.
Multiple Listing Service sales fell for an eight consecutive month in September to a seasonally- adjusted 5,068 units according to the latest Canadian Real Estate Association data. This was 4.3 per cent lower than August. Levels have declined a staggering 50 per cent from pandemic peaks and 20 per cent from pre-pandemic February 2020. Soaring interest rates, equity market losses and pessimistic sentiment have pushed buyers out of the market.
Lower home sales were observed broadly among real estate board areas and regions. Combined sales in the Lower Mainland-Southwest fell 3.9 per cent despite a positive bounce in Chilliwack, while Vancouver Island area sales fell 6.1 per cent. Okanagan area sales were down 7.1 per cent. Affordability erosion, rather than local economic factors, is the dominant theme influencing markets at this point.
The sales slump has triggered a buyers’ market reflected in a downward price trend, albeit, the average price held steady with a 0.3 per cent monthly gain to $957,157, marking the first increase since February. Greater Vancouver real estate board prices rose two per cent, while prices fell across the rest of province including a nine per cent decline in Chilliwack, about two per cent on the Island. Benchmark prices, which adjust for composition but typically lag behind average price trends, fell more broadly with a near two per cent decline in the Lower Mainland and pullbacks in Chilliwack (3.3 per cent), the Island (two per cent) and interior (1.2 per cent).
Negotiating power has shifted to buyers, but the evolution of supply has been surprising. While inventory is clearly on the rise, with active listings up about 50 per cent from the beginning of the year, the flow of new listings has eased. This suggests a lack of panic selling and delayed listing as a tight labour market and strong rental demand allow for seller patience.
We anticipate further downward price pressure as interest rates continue to rise through to the end of the year, although sales are anticipated to stabilize. Supply of homes for sales may move up more quickly as higher interest rates create financial hardship for an increasing number of homeowners, while owners that delayed listing their homes for sales move forward, which would further curb prices.
B.C. manufacturing sales edged up in August following four consecutive months of decline. Dollar-volume sales at B.C. factories rose 0.5 per cent to a seasonally adjusted $5.77 billion. Factory sales remained elevated compared with a year ago and pre-pandemic levels, with 15.2 per cent higher sales above last August and 31.5 per cent higher than February 2020.
The increase in non-durable goods’ sales (1.3 per cent) contributed to August’s provincial increase in manufacturing sales as food sales increased. Meanwhile, durable goods manufacturing remained steady with a 0.1 per cent decline from the prior month. While monthly data fluctuates, B.C.’s manufacturing sector continued to face challenges in resources-related production. Further rate hikes will likely continue to cut demand for housing in the U.S. and Canada and consequently affect wood prices.
Bryan Yu is chief economist at Central 1 Credit Union.