REBGV Home Sales In October

The Real Estate Board of Greater Vancouver (REBGV) reported that residential home sales in the region totalled 1,966 in October 2018, a 34.9 per cent decrease from the 3,022 sales recorded in October 2017, and a 23.3 per cent increase compared to September 2018 when 1,595 homes sold.

Last month’s sales were 26.8 per cent below the 10-year October sales average. Read report here.

Declining Home Sales 

Total Greater Vancouver home sales as shown in the chart above, had been declining yearly since 2016 and 2018 sales could end up to be lower than 2008 and 2012. The remaining 2 months of 2018 for November and December, being seasonally low sales months, are not expected to add to many sales to the year.  

The total units of homes sold in the the Greater Vancouver area from January to October 2018 showed close to one-third drop in sales compared to the same period a year ago. The average detached home price for the month registered a decline of 5.1% compared to its price in October, 2017.

Declining Home Prices

After turning flat-line or declining slightly for the second half of 2017 and the first half of 2018, detached home prices turned down and accelerated in its decline the past  3 months. Both townhouses and condos were showing weakening sales and demand, and October showed signs of decline in their prices. Kindly read the post Home Sales Dropped 43.5% In September.

The excessive credit injection into the housing market the past 10 years had driven home demand and prices to levels far exceeded the ability of home owners to carry their mortgage loan obigations.  

 

Rising Interest Rates

Interest rates had spiked up considerbly since 2015. After the financial crash of 2008, interest rates were brought down to unpreceedingly low levels from 2009 to 2017.  Since the middle of 2017, the Bank of Canada's Overnight Rate had moved up gradually. Most economists are forecasting that Canada will have to deal with higher interest rates in the coming months.

Compared to the long-term equilibrium rate, the current Bank of Canada overnight rate is still very low. If rates climb another 100 basis points or more, many over-leveraged home owners will face considerable hardships to deal with their mortgage payments.  

10-year US Treasury Yield

The 10-year US Treasury yield broke theh 10 years down trend line (in red) and breached the 5 years treasury yield peak around 3%. Mortgage rates are closely linked to the 10-year yield. If the 10-year ticks higher, mortgage costs are going to go higher which will impact the housing market.

Real Estate Cycle

The Canadian housing market, especially detached homes peaked in 2016. Total home sales for 2017 was lower than 2016, and 2018 todate home sales were pointing to an all time low sales, probably lower than that of 2008. Declining detached home sales had resulted in motivated sellers dropping their prices.

Both the resale and presale multi-family markets for townhouses and condos were showing signs market cooling off the past few months. Many more townhomes and condos in recent months were selling below their asking prices compared to early part of the year. Motivated sellers were more willing to sell their homes at much larger discounts from their listing prices.   

We will continue to provide our housing market update to our readers in the coming months.