B.C. housing market activity cooled again in October as higher mortgage rates further strained affordability.
MLS home sales fell 6.9 per cent from September to 5,707 transactions (seasonally adjusted), following a 4.1-per-cent decline the prior month.
Unit sales in B.C. have been on the decline since mid-2023 but they remained 16.1 per cent higher than the early year trough. In October, the average MLS price in the province decreased 1.7 per cent.
Sales fell in most B.C. regions with some of the sharpest declines observed in the largest real estate board areas, reflecting the underlying driver of higher rates. The Fraser Valley experienced a 13.4-per-cent drop in home sales, while Greater Vancouver saw a 10.2-per-cent decline, marking the poorest performing month since November 2022. Home sales in the Kootenay and Chilliwack fell four per cent and 3.6 per cent, respectively, while sales dipped 5.3 per cent in Kamloops. In contrast, monthly unit sales figures were up 12.1 per cent in the Okanagan Mainline, and up 8.4 per cent in South Okanagan.
Despite experiencing a 1.7-per-cent decline to $976,967 in October, average home prices in B.C. remained high, sitting 33.1 per cent above the levels recorded in the pre-pandemic month of February 2020. Nevertheless, price growth reversed its course during the month as market conditions slowed. October’s value was 8.2 per cent lower than peak in February 2022. Amongst B.C. regions experiencing price declines, Chilliwack home prices fell 4.1 per cent following two months of back-to-back gains. The Fraser Valley real estate market also saw prices decrease 1.4 per cent. Prices in the Greater Vancouver area fell slightly by 0.7 per cent, and prices in the Kootenay retracted 3.9 per cent. In contrast, Vancouver Island and Southern Interior markets showed more strength. Adjusting for home attributes, seasonally adjusted benchmark prices fell in most B.C. real estate markets.
As of October, market conditions appear relatively balanced, as indicated by the sales-to-new-listings ratio, which has declined from April to 46.8. Low volume and easing prices are expected through early 2024. The combination of higher interest rates and inflation has created a challenging mix for Canada’s indebted households, leading to difficulties in meeting their debt obligations, particularly as mortgage renewal terms are reached. More listings are likely to appear on the market in the coming months while prospective buying is constrained by high rates.
B.C. urban-area housing starts remained surprisingly resilient in October following a September decline, with activity surging 55.2 per cent to an annualized 57,401 units from 36,983 units in September. The six-month trend shows 48,085 units, marking a 3.7-per-cent decline from the previous month but still elevated. Volatility in monthly housing starts is not unusual given the scale of multi-family projects. Multi-family home starts were the main source of October’s gains as they rose by 65 per cent. Single-detached units saw a modest increase of 0.3 per cent during the month.
Increases were observed among most census metropolitan areas. Metro Vancouver drove the overall gain, with an increase of 34.8 per cent in housing starts to an annualized 34,757 units.
Year to date, housing starts increased by almost 14 per cent to 39,788 units when compared to the same period in 2022. Total multi-family housing starts increased by 22.9 per cent to 35,003 units during the period, but single-detached unit starts declined by 25.6 per cent to 4,785 units compared to the same period last year. In Vancouver, total housing starts from January to October were up 36.9 per cent in comparison to 2022.
While surprisingly strong, we still forecast a roll back over the next year owing to weak pre-sale trends in 2022-23 and elevated interest rates, which constrain both buyers and financing conditions for builders.
Bryan Yu is chief economist at Central 1.