Home values in BC’s Lower Mainland remained surprisingly resilient through October despite high mortgage rates.

However, housing affordability issues have set the stage for a challenging winter ahead for the real estate sector.

MLS home sales in Metro Vancouver and Abbotsford-Mission slumped to 2,917 units in October, down 1.5% from September. While year-over-year sales growth stood at 4.8%, this was significantly lower than the 16.2% increase seen in the previous month. Sales are 35% lower than the 10-year average for this month, with seasonally adjusted sales down a fourth straight month. There is little doubt that this reflects the impacts of mid-year Bank of Canada rate hikes and bond yield-driven increases in fixed term rates.

Contributing to the rapid deterioration in home sales remains the surprising stickiness of home values, which – combined with elevated rates – is keeping the swelling number of potential buyers on the sidelines and in the rental market. The average home price rose to $1.21 million, up 0.8% from September (albeit slightly lower on a seasonally adjusted basis) and remained 5.7% above a year ago. The benchmark value fell 0.8% on detached homes as more affordable townhomes and apartments held steady. Prices in central Vancouver markets have held up more than in the Fraser Valley.

Market conditions are cooling sharply as unsold inventory increases and new listings dropped in both actual and seasonally adjusted terms. Still, the relatively low supply continues to prop up home values. We predict a period of low sales to continue into the second quarter of 2024, reflecting persistent high interest rates and weaker economic activity. Rate cuts anticipated in the second quarter will drive a substantial increase in home sales given massive population gains over the past year. But affordability remains a headwind for the recovery.

BC’s labour market was flat in October, following a robust September performance. Employment fell 0.1% or by 4,000 people, while year-over-year growth was up 1.8%. October’s decline in total employment followed two prior months of increases.

Full-time employment rose by 1.1% or 23,400 people during the month, while part-time employment fell 4.7% or by 27,500 people. The Vancouver census metropolitan area recorded a 0.3% decrease in employment from the prior month, while the unemployment rate was the same as September at 5.8%.

Goods-producing industries saw employment grow by 1.7% during the month, with the highest sub-sector gains observed in construction, up by 4.6% or 10,200 people. Agriculture also experienced an 11% rise in employment, which translates to a 2,600-person gain. Offsetting these gains was a decline in the level of employment in manufacturing (down 1.5% or by 2,400 people), natural resources (down2.9% or by 1,600 people) and utilities (down 4.7% or by 800 people). Total employment in services industries contracted by 0.5%, with declines mainly in educational services (down 3% or by 6,700 people), information, culture and recreation (-5% or by 6,700 people) and finance, insurance, real estate, rental and leasing (down 1.9% or by 3,400 people). In contrast, professional, scientific and technical services (up 1.9% or by 5,600 people), health care and social assistance (up 0.6% or by 2,100 people), accommodation and food services (up 0.7% or by 1,300 people) and public administration (up 1.4% or by 2,000 people) reported gains.

Data Points : Expect A Chilly Winter for Real Estate as Prices Stick & Sales Drop by Bryan Yu | BIV