Canadian housing data continued to disappoint in the month of June. Albeit the year-over-year decline in home sales was not nearly as disappointing as the month of May. National home sales fell 11% year-over-year in June, a slight upgrade from the 16% decline suffered in May. As sales dipped, so too did the total amount spent on real estate. The total dollar volume dipped 12% year-over-year in June, totalling $23.5B CDN. A tough blow to government tax coffers which have reaped record sums of property tax dollars in recent years.  The national slowdown was particularly unkind to the province of BC where home sales slid 33% year over year, the largest drawdown since June of 2008. Weak buying activity hit Greater Vancouver & Victoria the hardest, sales fell 38% and 30% respectively. However, the pullback was not exclusive to the province of BC. Other than small year over year gains in Quebec City, Toronto, and Montreal, most major cities were hit with a drop in home sales. The average sales price across the nation dipped in June for the first time since June of 2012, shedding 1% year over year. While this marked the fifth month in a row in which the

The Vancouver Real Estate market was blindsided with another demand side policy from the BC Government. Beginning November 30th strata corporations will be able to fine owners or residents up to $1,000 a day for defying the corporation’s bylaws on short-term rentals. The maximum fine was previously set at $200 per week, a small price to pay when renting your condo illegally on Airbnb. While the new law will be implemented across the province, this adds to recent regulations implemented by the municipal Government in the city of Vancouver. Current city bylaws state short-term rentals are only permitted in your primary residence with a business licence. Further, the strata must permit short term rentals, which the vast majority do not. While the immediate impact of these changes is unknown, we can certainly speculate this will discourage fringe buyers who might be contemplating purchasing a condo with the intent of becoming a full time Airbnb host. Demand has been dwindling in the Vancouver condo market as of late, with sales slipping to a five year low in the month of June. Will we see a few more listings hitting the market as sellers dump their Airbnb properties? Vancouver condo inventory levels

It’s shaping up to be a slower summer in BC’s once red hot housing market. Home sales for the month of June ticked in at 7884, a 33% decline year over year, this marked a five year low. This appears to be more than just a summer doldrum. Total sales for 2018 appear to be heading back to pre housing boom levels. Through the first six moths of this year home sales are down 20% compared to the same time period a year ago. As sales fell 33%, inventory simultaneously increased. Inventory for sale jumped 21% from June of 2017. This was the first year over increase since June of 2012. However, inventory remains below historic norms for this time of year. Although, the addition of a record high 55,000 units under construction should help in the months ahead. The average sales priced dipped 2% year over year in May, and continued that trend in June, recording a 1.3% decline on a year over year basis. The slowdown raised concerns about stricter borrowing conditions. Brendon Ogmundson, BCREA Deputy Chief Economist, summarized the month as “The impact of the B20 stress test is still being felt across the province, Lower demand as the

While history doesn’t repeat, it certainly does rhyme. All real estate booms follow a very similar pattern. Higher prices tend to pull demand forward, at the same time drawing in a larger class of investors. This creates two things, well actually three things. Sales increase, available inventory for sale declines, which results in rising prices. As we can see, just a few years ago there was a healthy number of condos for sale. However, in a very short time frame condo inventory plunged to record lows over the past few years. Rising prices and a perceived scarcity created a fear of missing out and buyers snatched up remaining units almost regardless of price or condition. This allowed condo prices to inflate rapidly, growing 30-40% year over year in many areas. These market conditions create an excellent opportunity for developers to build and maximize profits. Demand appears insatiable and it feels we will never have a surplus of housing again. As such, developers rush to meet the demand. To no surprise, Condo units under construction in greater Vancouver has reached an all-time. As of May 2018, there were over 35,000 apartments under construction, more than three standard deviations from the long term

As the Vancouver Real Estate market heads into the dog days of summer it is desperately trying to shake an abnormally sluggish first half. To suggest sales have been weak might be an understatement, Vancouver detached housing sales have fallen to a 27 year low in the month of June.  Home sellers and Realtors remain relatively confused and unsure when this storm will pass. Many have chosen to take their home off the market and try again at a later date.  This is probably why we have seen new listings start to dwindle as we experienced following the foreign buyers tax back in August 2016. New listings for the month of June tumbled 29% year over year, down to their lowest total in thirteen years. Despite new listings declining, for sale inventory still moved higher, increasing 8% year over year. It jumped to the highest level for the month since June of 2012. This is in large part due to historically weak sales.  There were just 177 sales in the month of June, this marked the lowest total ever recorded dating to 1991 when the Real Estate Board of Greater Vancouver began compiling comprehensive market data. This marked a 35% decline

The steady as she goes condo market has started to wobble. Despite the noise in the detached market, the condo market has been churning out rather impressive price appreciation. Those days appear to be nearing an end. The average price per square foot, which has been an accurate gauge of condo prices in a sea of data confusion, officially peaked out in January 2018. Six months later prices have failed to push new highs, despite prices generally pushing new highs in the spring selling season. The average price per square foot now sits at $1034, a 5% increase year over year. While that’s still in positive growth territory, the deceleration of price growth has been noticeable in 2018. While condo prices have begun to stabilize, this is in large part due to a declining number of buyers. Who knows where they all went but Vancouver condo sales sank 32% year over year in June. There were a total of 475 condo sales this month,  the lowest since June of 2012. As sales have begun to slide, inventory has finally stopped falling. After nearly three years of consistent declines in overall inventory, it pushed higher by jumping 40% on a year

There is much to learn from financial mania’s. In particular, the role of human behaviour responsible for inflating asset prices to previously unimaginable heights. Economist Robert Schiller has done some excellent work on this topic in his book Irrational Exuberance. In essence, Schiller highlights a few key themes. Mainly that real estate booms seem just as mysterious and hard to understand as the stock market booms when they happen, there are always popular explanations for them- explanations that are not necessarily correct, but people love a good story. Meanwhile, higher prices tend to drive a positive feedback loop where initial price increases lead to more price increases as the effects of the initial price increases feedback into yet higher prices through increased investor demand. This second round of price increases feeds back again into a third and then a fourth round, and so on. A recent publication from CMHC highlights strong human behaviour dynamics have been playing out in the Vancouver & Toronto Real Estate markets. After surveying 30,000 recent homebuyers, CMHC found evidence of euphoric and perhaps irrational behaviour. For instance, respondents were asked about whether how much they paid was aligned with their plan budget. Respondents were also

The condo market across Greater Vancouver and into the Fraser Valley suburbs has been carrying the Real Estate market for quite some time. Despite detached home sales cratering to a thirty year low, it seemed condos were somehow exempt. Condo sales remained robust as inventory levels continuously declined lower each month, placing further upwards pressure on prices. As of May, condo prices in the Valley were up as much as 42% year over year. However, that trend appears to be reversing. Condo inventory has climbed higher each month following a ten year low registered in December 2017. While the recent uptick is part of a seasonal trend, the year over year increases have been far from normal. Condo inventory levels increased by an eye watering 40% year over year in Greater Vancouver, and 48% in the Fraser Valley. This was the single largest percentage increase recorded on a year over year basis since May of 2007. While inventory levels remain below normal levels, it is important to gauge market trends. Inventory has jumped substantially and appears to be trending higher at a time when sales are weakening. Condo sales dropped as much as 30% in Greater Vancouver this May. With

With National home sales declining by 16% year over year in the month of May, marking the worst year over year decline since May of 2008, we turn our attention to the province of BC where home price growth has grossly outpaced any other province in recent years. On the surface the BC economy appears to be humming along, unemployment rates remain low, declining from 5% in April to 4.8% in May, with a plunge in the Vancouver metro area from 4.5% to 3.8%. Labour force participation rates and employment rates remain elevated which is helping pump Year-over-year growth in average hourly wages from 5.6% in April to a whopping 6.9% in May. However, a recent slowdown in the housing market is beginning to test the province of BC. Fewer full-time positions drove a 0.5%, or 12,000-person dip in total employment from April. Overall, employment has eroded since a December peak, cutting year-over-year growth to 0.1% which was the weakest since 2015. This might not be surprising considering recent data on the housing front. BC home sales dropped by a head turning 29% year over year in May. This marked the largest percentage decline on a year over year basis since May

Canada’s national housing market continued its sluggish performance in the month of May. Despite the warmer weather and usually busy spring selling season, buying activity has been awfully quiet. New mortgage regulations which are now in full swing have stymied fringe buyers, particularly millennials. According to new data from credit bureau TransUnion, new mortgage originations among millennials in Canada fell by 19.5% between the last quarter of 2017 and the first three months of 2018. That has also been showing up sales data. National home sales declined by 16% year over year for the month of May. This marked the worst year over year decline since May of 2008 when home sales dipped 17%. Total home sales of 50,604 marked the  lowest total since May 2011. Seasonally adjusted home sales edged 0.1% lower on a month over month basis, or 15% on a year over year basis. Either way you slice it not a great month for one of the worlds most resilient housing markets. As sales continue to slide inventory is slowly beginning to build. For sale inventory crept up by 4% year over year, increasing for the first time in three years. The average sales price dipped 6% year over

There’s a clear shift underway in the Canadian housing market. After years of borrowing and runaway price inflation, regulators seem content to shift course, at least for the time being. It was just a few weeks ago when CIBC announced they were expecting a 50% decline in new mortgage originations later this year. Now, RBC Capital markets has also declared the best days for the Canadian mortgage lenders are in the rear view mirror. In a recent publication from RBC Capital Markets they noted, “We believe annual mortgage loan growth will likely slow from +5.3% Y/Y today to +2–3% over the next couple of years. Our forecast of slowing mortgage loan growth reflects continued weaker home sales activity and continued moderating home price appreciation.” RBC does not expect mortgage loan growth to turn negative, noting that loan growth has only turned negative once, and that was in the early 1980’s. During which Canadian unemployment rose from 7% to 13%. Following recent regulations, slowing home sales have become a nationwide phenomenon. Other than condo sales in Ottawa and Quebec City, home sales declined year over year across all major cities in the month of April. OSFI’s mortgage stress test is reflecting in

The great Canadian real estate bull market has pushed home prices to dizzying heights over the past two decades. And with ever-rising prices it has sucked in more capital and resources creating an almost self enforcing feedback loop, where an entire economy has become dependent on rising house prices. This misallocation of capital and resources is particularly well documented in the labour force where every year the number of realtors, mortgage brokers, and homebuilders seems to grow exponentially. Per Stats Canada, the share of employment tied to construction as well as finance, insurance and real estate is nearly two standard deviations above its long-term average. I’m no economist but somehow it seems building an economy dependant on selling each other more expensive homes is probably not the greatest long term growth strategy. To illustrate this point we can see here that residential investment as a percentage of GDP now outpaces investment in machinery equipment research and development. Currently there are over 55,000 new homes under construction across BC, with a record high number of housing starts also underway. This has created a massive shortage in the trades sector, while sending construction costs and house prices higher. However, with the real