Home values in B.C.’s Lower Mainland remained surprisingly resilient through October despite high mortgage rates.
However, housing affordability issues have set the stage for a challenging winter ahead for the real estate sector.
MLS home sales in Metro Vancouver and Abbotsford-Mission slumped to 2,917 units in October, down 1.5 per cent from September. While year-over-year sales growth stood at 4.8 per cent, this was significantly lower than the 16.2-per-cent increase seen in the previous month. Sales are 35 per cent lower than the 10-year average for this month, with seasonally adjusted sales down a fourth straight month. There is little doubt that this reflects the impacts of mid-year Bank of Canada rate hikes and bond yield-driven increases in fixed term rates.
Contributing to the rapid deterioration in home sales remains the surprising stickiness of home values, which – combined with elevated rates – is keeping the swelling number of potential buyers on the sidelines and in the rental market. The average home price rose to $1.21 million, up 0.8 per cent from September (albeit slightly lower on a seasonally adjusted basis) and remained 5.7 per cent above a year ago. The benchmark value fell 0.8 per cent on detached homes as more affordable townhomes and apartments held steady. Prices in central Vancouver markets have held up more than in the Fraser Valley.
Market conditions are cooling sharply as unsold inventory increases and new listings dropped in both actual and seasonally adjusted terms. Still, the relatively low supply continues to prop up home values. We predict a period of low sales to continue into the second quarter of 2024, reflecting persistent high interest rates and weaker economic activity. Rate cuts anticipated in the second quarter will drive a substantial increase in home sales given massive population gains over the past year. But affordability remains a headwind for the recovery.
B.C.’s labour market was flat in October, following a robust September performance. Employment fell 0.1 per cent or by 4,000 people, while year-over-year growth was up 1.8 per cent. October’s decline in total employment followed two prior months of increases.
Full-time employment rose by 1.1 per cent or 23,400 people during the month, while part-time employment fell 4.7 per cent or by 27,500 people. The Vancouver census metropolitan area recorded a 0.3-per-cent decrease in employment from the prior month, while the unemployment rate was the same as September at 5.8 per cent.
Goods-producing industries saw employment grow by 1.7 per cent during the month, with the highest sub-sector gains observed in construction, up by 4.6 per cent or 10,200 people. Agriculture also experienced an 11-per-cent rise in employment, which translates to a 2,600-person gain. Offsetting these gains was a decline in the level of employment in manufacturing (down 1.5 per cent or by 2,400 people), natural resources (down2.9 per cent or by 1,600 people) and utilities (down 4.7 per cent or by 800 people). Total employment in services industries contracted by 0.5 per cent, with declines mainly in educational services (down three per cent or by 6,700 people), information, culture and recreation (-down five per cent or by 6,700 people) and finance, insurance, real estate, rental and leasing (down 1.9 per cent or by 3,400 people). In contrast, professional, scientific and technical services (up 1.9 per cent or by 5,600 people), health care and social assistance (up 0.6 per cent or by 2,100 people), accommodation and food services (up 0.7 per cent or by 1,300 people) and public administration (up 1.4 per cent or by 2,000 people) reported gains.
Bryan Yu is chief economist at Central 1.