After holding steady in October, Lower Mainland area housing market activity took a dive in November as sales slid sharply and prices further retreated.
Home sales in the region spanning Metro Vancouver and Abbotsford-Mission reached 2,411 units, a stunning decline of 55 per cent from November 2021. While owing in part to strength a year ago, sales were still a third below the average November performance from 2010 through 2019.
Higher mortgage rates remain the main drag on housing activity as policy rate hikes lifted variable rates, while fixed-term rates remained elevated. The Bank of Canada increased its policy rate by 50 basis points on October 26, which further curbed November sales activity as more prospective buyers were priced out of the market. The more recent 50 bps hike will only serve to further reduce short-term home sales. Expectations of a weaker economy in 2023 will likely weigh on sales in the new year.
Average and benchmark home values retreated sharply in November. The average price in the region fell 3.3 per cent (unadjusted) to $1.108 million. This is 7.2 per cent below year-ago levels. From peak, the average price is down about 16 per cent, but still 20 per cent higher than pre-pandemic February 2020. While sales composition is a factor, whether by unit type or region, prices are falling. The benchmark value, which adjusts for housing attributes, fell 1.7 per cent during the month and is down about 13 per cent from peak. Detached home prices fell nearly two per cent in November, with townhouses down 1.4 per cent and apartments down 1.1 per cent. The pullback has been most acute for detached properties.
Weaker demand is grinding down seller price expectations. That said, many sellers are opting to not engage in the current weak market, with new listings down 22 per cent year over year. Active listings, while 44 per cent above a year ago and trending higher due to fewer sales, remain relatively low. The sales-to-active listings ratio is easing but still trends in a range normally consistent with a balanced market. However, negotiating power is now clearly on the side of buyers.
We anticipate further downside price pressure into 2023 due to deteriorating affordability and a weaker economy. That said, a lack of supply in the market and considerable underlying demand from a tight labour market alongside strong population growth is expected to provide some insurance against a housing price crash.
B.C. exports recovered after September’s decline. Based on our calculations, sales rose 1.2 per cent month to month after adjusting for seasonality, retrieving some of the loss from the prior month. Year-over-year, goods exports to international markets were valued at $5.4 billion in October. That was 7.1 per cent higher year over year following last month’s 16.6 per cent growth. Broadly, the trend has eased since April largely owing to lower commodity prices.
The latest monthly growth in B.C. goods exports was led in large part by the energy sector, which posted a 9.8-per-cent gain in October following losses in previous months. That said, the year-over-year growth in exports of energy products dropped 7.7 per cent to $2.1 billion following September’s 23.6-per-cent gain. The normalization in energy prices remained the driver in B.C.energy exports’ return to yearly growth.
In addition to energy, exports of metal ores and non-metallic minerals also posted a 22-per-cent seasonally-adjusted monthly growth but were 1.4 per cent lower year over year.
In contrast, exports of metallic and non-metallic mineral products reported a large seasonally-adjusted monthly contraction at 41.1 per cent, bringing the yearly change to a negative 20.1 per cent.
Bryan Yu is chief economist at Central 1 Credit Union.
