The shift comes as the CMHC has also dropped its red flag on real estate price acceleration in the Vancouver market, taking it from a “moderate” rating in May to “low” today.

These assessments, contained in CMHC’s third-quarter report released Thursday, won’t surprise anyone following the Vancouver real estate slump in which sales and prices started crumbling in early to mid-2018 after several years of stratospheric gains that had Vancouver among the frothiest markets in the world.

CMHC tracks long-term changes in each market by also considering indicators of overheating, overvaluation and overbuilding. In Metro Vancouver, the CMHC kept its low rating for overheating and overbuilding from May 2019 and also its moderate rating for overvaluation.

Price acceleration happens when there is speculative activity, said Eric Bond, a Vancouver-based senior specialist, market analysis at CMHC.

“Overvaluation is grounded in the idea that price levels are not justified considering employment growth and wage or income growth,” he said. “We continue to detect a moderate degree of overvaluation, but it’s down from a high degree which existed two quarters ago.”

In other words, Vancouver real estate prices have stopped surging on excessive expectations they will keep rising in the future. However, they remain expensive compared to local economic conditions, even though the gap between the two is now closer than they had been.

The latest report said the CMHC originally detected price acceleration in the Vancouver market in the second quarter of 2016, but its model only indicates “price acceleration is present in a market if a significant price increase occurs in at least one quarter in the previous three years.”

Now, “with lower prices in the resale market in recent quarters, an evaluation of the trends in the most recent data provided sufficient evidence to end the watch on price acceleration” for Vancouver, according to the report.

“What does it mean? We are seeing a greater availability of homes. Buyers have more choices,” said Bond, who said it was difficult to guess what actions policy-makers might take or reverse as the Vancouver market goes from being heated to more balanced.

To compare, the CMHC report, which looks at 15 Canadian metropolitan areas, rated housing markets in Toronto, Victoria and Hamilton as having a high degree of vulnerability.

In Toronto, overheating and price acceleration and overvaluation are still under watch even though overvaluation is easing. In Hamilton, high ratings for all four factors were maintained as being at high degrees, even though overheating, price acceleration and overvaluation have eased since the first quarter of 2019.

The CHMC report focuses on the resale market, but there has also been a significant shift in the presale market where developers and realtors have been trying to coax potential buyers who show any modicum of interest.

There have been gimmicky promotions offering avocado toast and wine for a year, but now also some more significant cash offers or discounts such as covering mortgage, interest and tax payments for a year, said condo marketer Adil Dinani. He’s even driven potential, but non-committal buyers from a recent condo launch in East Vancouver to see the developer’s previous and finished projects in an effort to seal deals.

CMHC Heated Vancouver Housing Market Moderating for First Time in Three Years by Joanne Lee-Young | Vancouver Sun