Following October’s uptick, B.C. home sales cratered in November by 9.5 per cent to reach a seasonally-adjusted 4,849 units.
Actual sales fell 50 per cent from a year ago. While this outsized decline partly reflects robust sales a year ago, levels are 25 per cent below pre-pandemic February 2020. Higher mortgage rates following Bank of Canada monetary policy tightening continues to push prospective buyers out of the market. Variable rate mortgage rates climbed by 400 basis points in 2022.
Souring of home sales was particularly evident in the Greater Vancouver Real Estate Board area, where activity fell 13.3 per cent, with Fraser Valley sales down a more modest 8.7 per cent. Victoria area sales declined 11.7 per cent.
Year to date, B.C. sales have declined 34.1 per cent, the deepest among all provinces and likely reflects the province’s distinction of having the highest debt-to-income ratio and sensitivity to interest rate hikes. Outside of the northeast quadrant, sales are down anywhere from 20 per cent in the northern Interior to more than 40 per cent in the Fraser Valley as some of the high-flying markets have retraced.
Weaker transaction activity dwarfed further moderation in new listings, putting further downward pressure on prices. B.C.’s average price fell 2.5 per cent to $913,974 and 14 per cent from peak. While compositional factors contribute, the multiple listing service (MLS) housing price index for B.C., which adjusts for housing attributes, fell 1.3 per cent and is down 8.5 per cent from peak. This measure does lag behind turning points in average prices and underlying patterns are likely weaker. Single-family homes are slowing the quickest. The deepest retrenchments from peak have come in the Fraser Valley (minus-13.8 per cent) and Chilliwack (minus-20 per cent). That said, this comes after rapid pandemic gains, and for all markets covered, prices are still sharply higher than pre-pandemic levels.
Challenging housing market conditions are anticipated to continue through 2023’s first half. Sales remain constrained by interest rates and weaker economic growth, while home sellers remain stubborn in pricing although levels will erode slowly. The combined effect of easing fixed rate mortgages through the course of the coming year, forecasted Bank of Canada rate cuts by early 2024 and robust population is expected to propel sales higher in the later stages of 2023.
Manufacturing sales in British Columbia declined in October for the second straight month. Sales decreased 1.2 per cent over the previous month. Durable goods industries fell significantly, down 4.7 per cent over the previous month. On the other hand, non-durable goods industries were able to increase sales, up 2.9 per cent over the previous month representing its third consecutive month of increases.
Industries within the durable goods that dragged down sales were primary metal manufacturing, down 18.8 per cent, followed by machinery manufacturing, down 13.1 per cent. However, not all durable goods industries saw a decline in sales. Computer and electronic products manufacturing recorded an increase of 10.7 per cent in sales to $207 million, a new high for the industry. Miscellaneous manufacturing also increased 10 per cent. On the other hand, the increase in non-durable goods recorded higher sales in food manufacturing, up 1.8 per cent. Paper manufacturing increased 2.8 per cent in October over the most recent months of data.
Demand is expected to start decreasing in the coming months as rate hikes begin to work their way through the economy. Sales are expected to decline, albeit marginally, as inflation remains stubbornly high. Rate hikes are beginning to affect prices, especially on input prices as commodities costs continue to fall from peak earlier in the year.
Bryan Yu is chief economist at Central 1 Credit Union.