According to the Real Estate Board of Greater Vancouver (REBGV), sales in July hit an 18-year low. This drop in sales activity follows a national trend where home sales are slowing to a crawl and housing inventory for all property types is increasing, particularly impacting the home price drops in Vancouver.
The prediction by most real estate professionals is that this drop in sales activity and the build-up of inventory will trigger prices reductions — particularly in Vancouver’s inflated real estate market. As a result, many real estate professionals anticipate price drops for all property types over the next few months in all of Greater Vancouver.
Average house prices still above last year’s levels, but not for long
While the price for the average home in the Greater Vancouver Area is still above last year’s levels, there’s been a slow down in price growth over the last year. This July 2018, was the fifth month in a row to experience a slow down in growth — to put this in perspective, price growth for the GVA is now well on its way to staying below median levels.
The REBGV report mentions that residential sales across the GVA in July saw a 30.1% decrease on a year-over-year basis, and a decrease of 14.6% compared to June 2018.
“With fewer buyers active in today’s market, we’re seeing less upward pressure on home prices across the region,” said Phil Moore, president of REGBGV. “This is most pronounced in the detached home market, but demand in the townhouse and apartment markets is also relenting from the more frenetic pace experience over the last few years.”
Biggest impact: Higher mortgage rates and stricter lending rules
Moore admits that home sales are usually slower during the summer, however, he doesn’t believe the standard slower summer cycle can fully account for the dramatic drop in sales this year and overall home price drops in Vancouver. Instead, Moore believes the biggest variables impacting the market are stricter lending requirements, higher mortgage rates and the fact that buyers and sellers are once again choosing a “wait and see” approach to the current market.
As fewer homes are being listed across the GVA and fewer homes are being sold, we are now seeing inventory levels that have not been recorded since June 2015. It’s well known among economists that when the sales-to-listings ratio falls below 12%, we can expect home prices to rapidly decrease. As of August 7, 2018, the current sales-to-active listings ratio is around to 17.1%.
If the current national trend continues, prices in the GVA will continue to decelerate and possibly even fall in the near future.