The ongoing woes in the Vancouver housing market are becoming more pronounced, particularly in the single family house sector. Coming off a sluggish 2018 which saw annual sales slip to an eighteen year low, 2019 has not faired much better. Greater Vancouver detached sales fell 29% year-over-year, recording the worst January since 2009.
Amidst several years of falling sales, inventory continues to build. As of today there is 15 months of inventory in the detached market, well above a balanced market which is distinguished as an MOI (months of inventory) between 4-6.
Unsurprisingly this is placing downwards pressure on prices, with the home price index having declined 9.1% over the past year, although in reality price declines have been much steeper.
As a result, this is placing added pressure on single family builders where profit margins on new homes are being squeezed. Very few spec builders (builders with no contracted buyer) accounted for the dramatic shift in market conditions which we are witnessing today. This is not only putting a dent in profits but has slowed future housing starts significantly. The 12 month rolling sum of housing starts has fallen 15% after peaking in January 2018.
This is resulting in a slowdown in single family homes under construction. However, homes under construction remain at elevated levels suggesting more inventory is en route, adding to a market already dealing with an oversupply of new single family homes.
This could also suggest a slowdown in not only spec building but in general contracting work where builders have been contracted by property owners to build a new home.