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Housing demand remains strong despite diminishing supply

Home sales reached near record levels in November even as home listings began the traditional year-end decline.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Metro Vancouver reached 3,524 on the Multiple Listing Service® (MLS®) in November 2015. This represents a 40.1 per cent increase compared to the 2,516 sales recorded in November 2014, and a 3.3 per cent decrease compared to the 3,646 sales in October 2015.


Last month’s sales were 46.2 per cent above the 10-year sales average for the month and rank as the second highest November on record for residential property sales.


“November is typically one of the quietest months of the year in our housing market, but not this year,” Darcy McLeod, REBGV president said. “The ratio of sales to home’s available for sale reached 44 per cent in November, which is the highest it’s been in our market in nine years.”


New listings for detached, attached and apartment properties in Metro Vancouver totalled 3,392 in November. This represents a 12.5 per cent increase compared to the 3,016 new listings reported in November 2014.

The total number of properties listed for sale on the real estate board’s MLS® is 8,096, a 35 per cent decline compared to November 2014 and a 15.4 per cent decline compared to October 2015.


“Demand remains strong and there are housing options at different price points throughout the region,” McLeod said. “It’s important to work with your REALTOR® to understand your options before you embark on your home buying journey.” 


The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $752,500. This represents a 17.8 per cent increase compared to November 2014.


The sales-to-active-listings ratio in November was 43.5 per cent. Generally, analysts say that downward pressure on home prices occurs when the ratio declines below the 12 per cent mark, while home prices often experience upward pressure when it reaches 20 per cent, or higher, in a particular community for a sustained period of time. 


Sales of detached properties in November 2015 reached 1,335, an increase of 31.9 per cent from the 1,012 detached sales recorded in November 2014, and a 44.2 per cent increase from the 926 units sold in November 2013. The benchmark price for a detached property in Metro Vancouver increased 22.6 per cent from November 2014 to $1,226,300. 


Sales of apartment properties reached 1,553 in November 2015, an increase of 47.6 per cent compared to the 1,052 sales in November 2014, and an increase of 60.3 per cent compared to the 969 sales in November 2013. The benchmark price of an apartment property increased 14 per cent from November 2014 to $435,000. 


Attached property sales in November 2015 totalled 636, an increase of 40.7 per cent compared to the 452 sales in November 2014, and a 49.3 per cent increase from the 426 attached properties sold in November 2013. The benchmark price of an attached unit increased 11.3 per cent between November 2014 and 2015 to $536,600.


*Editor’s Note:  Areas covered by Real Estate Board of Greater Vancouver include: Whistler, Sunshine Coast, Squamish, West Vancouver, North Vancouver, Vancouver, Burnaby, New Westminster, Richmond, Port Moody, Port Coquitlam, Coquitlam, New Westminster, Pitt Meadows, Maple Ridge, and South Delta.

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Source: Real Estate Board of Greater Vancouver

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Home prices are set to rise across BC next year, including Vancouver and the Fraser Valley, but at a slower rate than in 2015, according to a report issued October 26 by the Canada Mortgage and Housing Association (CMHC).

The average Greater Vancouver home price is expected to increase by nine per cent overall year-over-year in 2015 to $887,600, but more modest price growth of three per cent to $914,100 is expected in 2016. The CMHC forecasts a further 2.1 per cent growth in 2017 to $933,200.

 

Total Multiple Listings Service® (MLS®) sales in the Fraser Valley are forecast to reach 19,300 transactions in 2015, before edging lower in 2016 and 2017. Average MLS® home prices are expected to rise 8.8 per cent in 2015 and, like Vancouver, see smaller increases in 2016 and 2017 as higher mortgage rates and the supply of homes for sale grows over the next two years.

 

Home sales in Greater Vancouver are set to reach 41,800 by the end of 2015, the highest level in ten years, before easing back to 38,400 in 2016 and 37,400 in 2017. The CMHC added in its report that these levels would still be well above the 10-year average.

 

CMHC chief economist Bob Dugan said housing market activity in BC has benefited from sliding energy prices, record low mortgage rates and a falling Canadian dollar. However, Dugan said the CMHC expected this “counterbalancing effect" to diminish over 2016 and 17. The CMHC also predicts a “stable but elevated pace of new home construction” in 2016 and 2017, with Vancouver CMA housing starts forecast at 20,700 and 20,100 units, respectively.


“Demand for homes in Vancouver is well supported due to a strong labour market, low mortgage rates and steady population growth,” said Richard Sam, CMHC principal, market analysis for Vancouver.

 

Source: CMHC

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October 28, 2015 - The US Federal Reserve ("the Fed") opted to leave its key interest rate unchanged at its current level of between zero and 0.25 per cent. In its accompanying statement, the Fed cited that inflation continues to run below the Fed's long-run objective of 2 per cent and US economy activity was expanding at a moderate pace, hampered by a high dollar and attendant softness in exports. The Fed anticipates that it will only be appropriate to raise its target rate once the labor market shows further improvement and it can be reasonably confident that inflation will move back to its 2 per cent target over the medium term.


Most economists agreed that the Fed was unlikely to raise rates at the October meeting, preferring to wait until December before initiating a lift-off from the zero rate policy that has prevailed since 2008. A global economic slowdown since the summer has provided a significant amount of cover for the Fed to put off raising rates until it can better grasp the impact of slower global growth and a high US dollar on the US economy. The Fed also wants to be "reasonably confident" that its preferred measure of inflation, which is currently tracking at just 1.4 per cent, will  reach 2 per cent over the medium-term, usually defined as about 2 years.  Our modeling suggests a somewhat low-probability that inflation will reach 2 per cent before the end of 2016.  If that holds, and the Fed puts off tightening longer than currently expected, key bond yields in both the US and Canada should remain low, meaning low mortgage rates will continue throughout next year. 


source: BCREA

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CREA ECONOMICS NOW


US Economic Growth (Q2'2015) - July 30, 2015


US real GDP grew at a modest 2.3 per cent annual rate in the second quarter, led by positive contributions from personal consumption, exports, and government expenditures. Most importantly, the contraction in GDP initially reported for the first quarter was revised away, with GDP now estimated to have grown 0.6 per cent.   

Improved US economic growth will help the Canadian economy regain its footing in the second half of the year, but may also prompt the US Federal Reserve to begin tightening monetary policy as early as September. If so, we could see Canadian long-term interest rates, and therefore longer-term mortgage rates, dragged higher in spite of recent action by the Bank of Canada.  


Source: BC REA (BC Real Estate Association, July 30, 2015)

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Vancouver, BC – July 14, 2015. The British Columbia Real Estate Association (BCREA) reports that a total of 11,294 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in June, up 25.6 per cent from the same month last year. Total sales dollar volume was $7.1 billion, a 42.6 per cent increase in comparison to the previous year. The average MLS® residential price in the province rose to $631,962, a 13.5 per cent increase since last June.

 

“BC home sales posted the second strongest June on record,” said Brendon Ogmundson, BCREA Economist. “A growing provincial economy and record low borrowing rates continue to push demand higher, particularly in the lower mainland.”

 

“While consumer demand is surging, the supply of homes for sale has not kept pace. The resulting imbalance of supply and demand has put upward pressure on prices in many areas of the province, most notably with respect to single-detached homes,” added Ogmundson.

 

Year-to-date, BC residential sales dollar volume increased 36.8 per cent to $32.6 billion, when compared with the same period in 2014.

 

Residential unit sales climbed by 23.1 per cent to 51,559 units, while the average MLS® residential price rose 11.2 per cent to $631,946.

 

source: BCREA

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What's driving our local housing market?

April 20, 2015 - Cameron Muir, Chief Economist, BCREA
 

Housing market watching is a bona fide pastime in Vancouver. It’s no wonder that seldom a week goes by without an attention-grabbing headline proclaiming unaffordability on a global scale, a dangerously threatening bubble or how much a Chinese billionaire paid for a dot com billionaire’s monstrosity of a home.

 

This overemphasis on the extreme can make it difficult to understand that buyers and sellers are behaving rationally and that market fundamentals are rather sound.

 

The key driver of housing in Vancouver hasn’t changed. It’s the people who live, work and raise their families here and their life stage, financial wellbeing and confidence that create the ebb and flow of the market.

 

In spite of the hype about foreign investors, they are a miniscule sideshow compared to the market power of 2.5 million local residents and the roughly 40,000 that call Metro Vancouver their new home each year. 

 

According to the Census, 0.8 per cent of the housing stock in the Vancouver CMA was occupied by foreign and/or temporary residents in 2011, exactly the average for Canada’s CMAs and the same proportion as Victoria and Montreal.

 

Feedback from those Realtors who’ve been involved in a transaction within the past month consistently shows that approximately 2-4 per cent of home sales each month involve foreign investors, however, that is considerably less than the 10-14 per cent that involves local/domestic investors.

 

Strong population growth led by immigration combined with a limited supply of developable land has caused a predictable escalation in home prices and resulted in housing affordability challenges. However, it has also contributed to housing densification, made rapid transit feasible, and created vibrant urban communities.

 

While Vancouver is regularly dovetailed with San Francisco and Sydney as unaffordable cities, the same group also top the charts in livability, city infrastructure, and quality of life.

 

Densification of the housing stock has also made it more diverse. Single detached homes now make up less than a third of all homes in Metro Vancouver, where nearly 80 per cent of new housing starts are multi-family units.

 

With home builders keeping pace with demand, apartment prices have inched up just four per cent over the past five years, less than the Consumer Price Index. In contrast, single-detached home prices advanced 26 per cent over the same period as a result of strong demand and their relative scarcity.

 

The multi-million dollar home is more of an exception than a rule in the region. Last year, nearly 70 per cent of all homes sold on Metro Vancouver’s MLS® transacted at a price below $800,000 and 30 per cent less than $400,000. 

The local nature of the Vancouver housing market and of housing markets in general obliges knowledge at a similar level.

 

Market conditions can not only vary between cities and countries, but also between communities and neighbourhoods.

 

Source: BC Real Estate Assocation

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The Strongest April for Home Sales in a Decade

BCREA reports that April was the strongest month for residential sales in a decade and 2015 is shaping up to post the strongest level of consumer demand since the last recession. The inventory of homes for sale is down from the previous year, with April showing the lowest level since 2007. This increasing demand and waning inventory has favoured home sellers in Vancouver, Victoria, Okanagan Mainline and the Fraser Valley.

 

Source: BCREA.

 

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Bank of Canada Interest Rate Announcement - April 15, 2015


The Bank of Canada announced this morning that it is maintaining its target for the overnight rate at 0.75 per cent. In the press release accompanying the decision, the Bank noted that temporary sector-specific factors as well as pass-through effects from a lower Canadian dollar to import-prices is keeping core inflation close to its 2 per cent target in spite of increasing slack in the economy. The Bank now expects the growth impact of low oil prices to be more front-loaded than assumed in January and for growth to rebound beginning in the second quarter with real GDP growth projected at 2.5 per cent on average through the middle of 2016.  Weak first quarter growth will translate to a widening of the Canadian output gap and downward pressure on projected inflation, but the Bank expects a higher rate of growth in the second half will push the economy back onto its previous trajectory, reaching full-capacity around the end of 2016. 

Since unveiling a surprise interest rate cut in January, each successive Bank of Canada announcement has brought heightened anticipation. However, stable oil prices, a low Canadian dollar and firm core inflation mean that the Bank is likely to take a wait and see approach as to the ultimate impact of low oil prices on the Canadian economy. Monetary policy generally operates with a four to six quarter lag, which is why the Bank opted to reduce its target rate in January to cushion the potential impact of low oil prices. Unless the Bank anticipates further shocks to the economy or a deepening impact on growth and employment arising from the oil sector, it may ultimately hold rates constant for the remainder of the year. 


For more information, please contact: 

Cameron Muir Brendon Ogmundson
Chief Economist Economist
Direct: 604.742.2780 Direct: 604.742.2796
Mobile: 778.229.1884 Mobile: 604.505.6793
Email: cmuir@bcrea.bc.ca Email: bogmundson@bcrea.bc.ca


Source: The British Columbia Real Estate Association (BCREA) is the professional association for more than 18,500 REALTORS® in BC, focusing on provincial issues that impact real estate. Working with the province’s 11 real estate boards, BCREA provides continuing professional education, advocacy, economic research and standard forms to help REALTORS® provide value for their clients.

Real estate boards, real estate associations and REALTORS® may reprint this content, provided that credit is given to BCREA by including the following statement: “Copyright British Columbia Real Estate Association. Reprinted with permission.” BCREA makes no guarantees as to the accuracy or completeness of this information.

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BC Home Sales Forecast to Rise Through 2016

BCREA 2015 First Quarter Housing Forecast Update


Vancouver, BC – February 11, 2015. The British Columbia Real Estate Association (BCREA) released its 2015 First Quarter Housing Forecast Update today.


 "Stronger economic conditions both at home and abroad combined with favourable interest rates and population growth are expected to bolster housing demand over the next two years,” said Cameron Muir, BCREA Chief Economist. “After a year in which housing demand ratcheted higher across the province, the retrenchment of oil prices is expected to attenuate housing demand in some regions while bolstering it in others."

 

Multiple Listing Service® (MLS®) residential sales in British Columbia are forecast to rise 2.4 per cent to 86,050 units this year and a further 3.9 per cent to 89,400 units in 2016. The ten-year average is 82,100 unit sales. A record 106,300 MLS® residential sales were recorded in 2005.  


The average MLS® residential sales price is forecast to rise 4.5 per cent to $594,000 this year, with most of the upward pressure being exhibited on the South Coast. Elevated consumer demand is expected to be partially offset by resale inventories and additions to the housing stock in 2016. As a result, the average MLS® residential sales price is forecast to increase by 2.4 per cent to $608,500 next year.

 

Source: BCREA

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Canadian and US Employment - February 6, 2015

The Canadian economy gained 35,000 thousand jobs to start 2015 while the national unemployment rate declined 0.1 points to 6.6 per cent. Stronger than expected job growth to start the year and rebounding oil prices may prompt a rethink among those expecting a second rate cut by the Bank of Canada in March.

In BC, employment was up by 6,700 jobs in January. Full-time employment was particularly strong for a second consecutive month, rising by 12,800 while part-time employment declined 6,100. The provincial unemployment rate ticked 0.1 points higher to 5.6 per cent as the additions to people looking for work outnumbered job growth.

In the United States, the labour market continues to gain strength.  January payroll growth registered 257,000 jobs while previous months estimates were revised higher by a combined 147,000 jobs. The US unemployment rate rose to 5.7 per cent due to an expanding labour force.


Source: BCREA (British Columbia Real Estate Association).

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SPOTLIGHT: Recent Trends in Employment Overall, employment conditions in the Vancouver CMA showed improvement in 2014, which was one of the factors supporting housing demand.


The unemployment rate declined to 5.7 per cent in 2014 from 6.6 per cent in 2013, which was its lowest level since the economic downturn in 2009. Although there was an increase in the labour force, employment growth outpaced the increase in the labour force resulting in a lower unemployment rate.


Full-time employment grew by 1.4 per cent and part-time employment grew by 7.7 per cent, adding 14,700 and 19,400 jobs, respectively.


Source: Labour Force Survey, Statistics Canada

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January 21, 2015. In a bombshell announcement this morning, the Bank of Canada announced that it is lowering its target overnight rate to 0.75 per cent. The surprise loosening of monetary policy is in response to the recent dramatic decline in oil prices and the consequent negative impact on Canadian growth and inflation. The Bank expects the Canadian economy to grow 2.1 per cent in 2015 and 2.4 per cent in 2016. Given the initial drag on growth from lower oil prices, it does not expect the Canadian output gap (the difference between actual GDP and GDP at full capacity) to close until the end of 2016. 


While we expected the sharp decline in oil prices and the uncertainty regarding when they might stabilize would keep the Bank of Canada from raising interest rates in 2015, the Bank has instead opted for a more aggressive approach.  How long the Bank intends to keep its overnight rate at 0.75 per cent is unclear, but given strong underlying growth pre-oil shock, if oil prices rise as expected in the second half of the year we could see this move reversed by the end of 2015.   For now, the BC housing market should continue to benefit from low and now likely lower mortgage rates


Source: BC Real Estate Association

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