Almost all major markets in British Columbia saw sales fall in February as compared to February 2017. The Victoria market was the hardest hit, seeing sales fall year-over-year by almost 20% for the month. Rising interest rates and government policy decisions are the likely culprits for the cooling of the market, though the Bank of Canada elected to hold its overnight rate at its current position of 1.25%. The rush of late 2017 by homebuyers to secure mortgages before the government imposed stricter regulations may put those homebuyers in a position of owing more on their mortgages than the market value of their home if prices fall in the coming months.
IN THE NEWS
Homebuyers that rushed to purchase before the new stricter mortgage rules came into effect at the end of last year may soon find themselves at risk of owing more than their house is worth. If the NDP’s new housing measures lead to a drop in prices, recent homebuyers may find themselves ‘underwater’.
UBC professor and economist, Tom Davidoff says some buyers that rushed to secure mortgages for greater than they would have qualified for under the stiffer rules on January 1 are particularly vulnerable to both rate increases and declining housing prices.
The tightening of regulations around mortgage lending may have an adverse impact on local and provincial governments. The restrictions are aimed toward promoting affordability and are intended to bring housing prices down to more sustainable levels. In doing so, the revenues derived from property taxes that are tied to property values will likely fall as well. The costs of delivering municipal services continues to rise and this may create a funding shortfall that is often covered by higher tiers of government.
Rising interest rates and stricter mortgage requirements are reducing home buyers’ purchasing power especially in the entry level of the market, according to Jill Oudil, President of the Real Estate Board of Greater Vancouver. Home sales fell by 9% compared to February 2017, with sales of detached homes falling by 39.4%. As a result, the detached home market in Greater Vancouver is bordering on becoming a buyer’s market according to Oudil.
The CMHC has released a report that says that new home construction in both Vancouver and Toronto failed to keep pace with surging demand, which left house prices with nowhere to go but up. From 2010 to 2016 home prices soared by 48% in Vancouver and 40% as a result of conventional economic factors as well as a weak supply response.
BC UNEMPLOYMENT RATES
||Rate from Feb to Mar 2018
||Rate from Jan to Feb 2018
Table source: http://srv129.services.gc.ca/ei_regions/eng/rates_cur.aspx
REAL ESTATE ACTIVITY BY REGION
- Units sold: 9.0% decrease from February, 2017
- Active listings: 3.0% increase from February, 2017
- New listings: 15.2% increase from February, 2017
- Benchmark price: $1,602,000 (0.8% decrease over last 6 months)*
- Units sold: 19.3% decrease from February, 2017
- Active listings: 3.6% increase from February, 2017
- Benchmark price: $840,300 (9.0% increase from February, 2017)*
- Units sold: 3.2% increase from February, 2017
- Active listings: 19.0% decrease from February, 2017
- New listings: 6.7% decrease from February, 2017
- Average residential price: $376,217 (13.5% increase from February, 2017)
- Units sold: 0.8% decrease from February, 2017
- Active listings: 6.6% decrease from February, 2017
- New listings: 5.6% increase from February, 2017
- Benchmark price: $992,100 (15.7% increase from February, 2017)*
- Units sold: 7.8% decrease from February, 2017
- Active listings: 0.7% decrease from February, 2017
- New listings: 2.4% decrease from February, 2017
- Average residential price: $534,067 (1.4% increase from February, 2017)
*Benchmark based on the MLS HPI® benchmark for single family detached homes.