{"id":13139,"date":"2019-07-23T10:10:47","date_gmt":"2019-07-23T17:10:47","guid":{"rendered":"http:\/\/www.roryc.ca\/blog\/?p=13139"},"modified":"2019-07-10T09:36:56","modified_gmt":"2019-07-10T16:36:56","slug":"b20-accounted-for-about-30-of-bc-home-sales-downturn","status":"publish","type":"post","link":"https:\/\/www.roryc.ca\/blog\/2019\/07\/b20-accounted-for-about-30-of-bc-home-sales-downturn\/","title":{"rendered":"B20 Accounted for About 30% of BC Home Sales Downturn"},"content":{"rendered":"<p style=\"text-align: justify;\">Few if any would suggest that mortgage stress testing introduced last year by the Canadian government had no impact on home sales in BC, but how just how much of a role did the rule change have in cooling the market?<\/p>\n<p style=\"text-align: justify;\">The British Columbia Real Estate Association (BCREA) recently conducted a study to find out just that, though the analysts behind the number-crunching exercise admit it\u2019s not a perfect science.<\/p>\n<p style=\"text-align: justify;\">\u201cSince B20 [stress testing] applies across all Canadian markets, we do not have a suitable control group to use as a baseline for comparison,\u201d writes BCREA Deputy Chief Economist Brendon Ogmundson alongside colleague and fellow economist Kellie Fong.<\/p>\n<p style=\"text-align: justify;\">Guideline B-20, which was drafted by federal banking watchdog the Office of the Superintendent of Financial Institutions, included expanding mortgage stress testing to uninsured mortgages.<\/p>\n<p style=\"text-align: justify;\">Effective January 2018, mortgage applicants with downpayments of at least 20 percent \u2014 the minimum to avoid insurance \u2014 had to qualify at a rate a full 2 percentage points higher than the contract rate.<\/p>\n<p style=\"text-align: justify;\">As the stress-testing policy is Canada-wide, BCREA ran its outdated forecast model, which didn\u2019t consider stress testing, to get an idea of where home sales might have stood in 2018, before applying several models that do.<\/p>\n<p style=\"text-align: justify;\">As per the pre-stress-test model, BCREA suggests home sales across the province would have totalled 90,500, representing a drop of 11,000 sales from 2017 and the result of higher interest rates, affordability woes and a weaker economy.<\/p>\n<p style=\"text-align: justify;\">Yet home sales in 2018 actually sank to 78,346. \u201c[T]his means that factors outside of those explicitly controlled for in the model need to explain about 13,400 additional lost sales,\u201d explain the BCREA economists.<\/p>\n<p style=\"text-align: justify;\">The study doesn\u2019t suggest the stress test claimed all of those would-be sales \u2014 but the average lost sales over 12 months averaged a 10-percent decline, or an additional 7,500 transactions across the five models BCREA did run.<\/p>\n<p style=\"text-align: justify;\">In the most severe case, 11,500 transactions (a 15-percent change in sales) were wiped out, while in the mildest case, 5,300 sales (7 percent) never occurred because of the stress test<\/p>\n<p style=\"text-align: justify;\">\u201cOn average, we estimate that B20 accounted for about 30% of the total downturn in BC home sales observed in 2018,\u201d conclude Ogmundson and Fong.<\/p>\n<p style=\"text-align: justify;\"><a href=\"https:\/\/www.livabl.com\/2019\/07\/bc-home-sales-lower-mortgage-stress-test.html\" target=\"_blank\" rel=\"noopener noreferrer\">BC Home Sales Were Up to 15% Lower Because of The Mortgage Stress Test<\/a> by Josh Sherman | Livabl<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Few if any would suggest that mortgage stress testing introduced last year by the Canadian government had no impact on home sales in BC, but how just how much of &hellip; [<a href=\"https:\/\/www.roryc.ca\/blog\/2019\/07\/b20-accounted-for-about-30-of-bc-home-sales-downturn\/\">read more<\/a>]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[],"class_list":["post-13139","post","type-post","status-publish","format-standard","hentry","category-market-updates"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>B20 Accounted for About 30% of BC Home Sales Downturn &#8226; Rory C Real Estate | Oakwyn Realty<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.roryc.ca\/blog\/2019\/07\/b20-accounted-for-about-30-of-bc-home-sales-downturn\/\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:title\" content=\"B20 Accounted for About 30% of BC Home Sales Downturn &#8226; 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