BCREA 2020 Third Quarter Housing Forecast Update

The recession prompted by COVID-19 is on pace to be one of the worst on record for the BC economy. However, looking at recent data in the housing market, it would be difficult to tell there was a recession at all. While home sales initially fell to historic lows in April, sales have recently soared, more than regaining pre-pandemic levels. Consequently, the outlook for the housing market is much brighter following a stronger than expected summer.

The explanation for the counter-intuitive performance of the housing market lies in the very unusual characteristics of the COVID-19 recession. Unlike in a typical recession, many of the job losses have been felt in lower-wage, frontline service sector jobs, typically held by younger workers. Meanwhile, higher-wage sectors that tend to drive the ownership market have seen employment levels fully recover. As a result, sales activity has spiked as record-low mortgage rates unleashed a wave of pent-up demand previously sidelined by the pandemic.

Moreover, while a recession typically means a buildup of inventory as job losses and falling incomes force households to sell, social distancing measures, mortgage deferrals and sellers’ reluctance to move during the pandemic caused the supply of re-sale listings to decline through the spring.

The combination of strong home sales and an undersupplied market, along with a desire for more space on the part of buyers, has meant that many markets are now seeing sharply rising average prices despite a weak provincial economy.

While significant uncertainty remains, including the end or transition of key government supports and a concerning rise in COVID-19 cases, the unexpectedly swift rebound in the market means that BC home sales will almost certainly finish 2020 higher than 2019. We are forecasting total sales of 82,380 this year, before rising to 96,860 in 2021, as a recovering economy and low mortgage rates continue to drive demand. The average home price is forecast to rise 7.7 per cent this year and 3.7 per cent in 2021.

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Provided by: BCREA

“Copyright British Columbia Real Estate Association. Reprinted with permission.”

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Statistics released today by the Canadian Real Estate Association (CREA) show national home sales and new listings continued to rebound in July 2020, with new listings hitting their highest level on record for the month of July, while sales posted the highest level of any month in history.

Summary:

• National home sales rose 26% on a month-over-month (m-o-m) basis in July.
• Actual (not seasonally adjusted) activity was up 30.5% year-over-year (y-o-y).
• The number of newly listed properties climbed 7.6% from June to July.
• The MLS® Home Price Index (HPI) rose 2.3% m-o-m and was up 7.4% y-o-y.
• The actual (not seasonally adjusted) national average sale price posted a 14.3% y-o-y gain.

Home sales recorded over Canadian MLS® Systems rebounded by a further 26% in July 2020, raising them to the highest monthly level ever recorded.

The British Columbia Real Estate Association (BCREA) reports that a total of 10,090 residential unit sales were recorded by the Multiple Listing Service® (MLS®) in July 2020, an increase of 26.6 per cent from July 2019. The average MLS® residential price in BC was $770,810, a 12.9 per cent increase from $682,702 recorded the previous year. Total sales dollar volume in July was $7.8 billion, a 43 per cent increase over 2019.

“The strong recovery in sales activity continued in July,” said BCREA Chief Economist Brendon Ogmundson. “Increased demand for more living space combined with an undersupplied market is producing significant upward pressure on home prices, particularly in the market for single-family homes.”

Active listings remain down significantly year-over-year, creating upward pressure on prices, though increased demand for single-family homes has somewhat skewed average prices in some markets.

Year-to-date, BC residential sales dollar volume was up 8.4 per cent to $32.5 billion, compared with the same period in 2019. Residential unit sales were down 1.4 per cent to 43,718 units, while the average MLS® residential price was up 10 per cent to $754,842.

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Home buyer and seller activity in Metro Vancouver* exceeded historical levels in July.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential home sales in the region totalled 3,128 in July 2020, a 22.3 per cent increase from the 2,557 sales recorded in July 2019, and a 28 per cent increase from the 2,443 homes sold in June 2020.

Last month’s sales were 9.4 per cent above the 10-year July sales average.

“We're seeing the results today of pent up activity, from both home buyers and sellers, that had been accumulating in our market throughout the year,” Colette Gerber, REBGV Chair said. “Low interest rates and limited overall supply are also increasing competition across our market.

There were 5,948 detached, attached and apartment properties newly listed for sale on the Multiple Listing Service® (MLS®) in Metro Vancouver in July 2020. This represents a 28.9 per cent increase compared to the 4,613 homes listed in July 2019 and a 2.8 per cent increase compared to June 2020 when 5,787 homes were listed.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 12,083, a 15.1 per cent decrease compared to July 2019 (14,240) and a 5.8 per cent increase compared to June 2020 (11,424).

“Safety remains the top priority for our REALTOR® community,” Gerber said. “We continue to limit in-person interactions with clients and employ different technology solutions to ensure home buyers and sellers can get as much information as possible in a virtual setting.”

For all property types, the sales-to-active listings ratio for July 2020 is 25.9 per cent. By property type, the ratio is 25.1 per cent for detached homes, 31.1 per cent for townhomes, and 24.7 per cent for apartments.

Generally, analysts say that downward pressure on home prices occurs when the ratio dips below 12 per cent for a sustained period, while home prices often experience upward pressure when it surpasses 20 per cent over several months.

The MLS® Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,031,400. This represents a 4.5 per cent increase over July 2019 and a 0.6 per cent increase compared to June 2020.

Sales of detached homes in July 2020 reached 1,121, a 33.3 per cent increase from the 841 detached sales recorded in July 2019. The benchmark price for a detached home is $1,477,800. This represents a five per cent increase from July 2019 and a 0.9 per cent increase compared to June 2020.

Sales of apartment homes reached 1,400 in July 2020, a 12.6 per cent increase compared to the 1,243 sales in July 2019. The benchmark price of an apartment property is $682,500. This represents a 4.2 per cent increase from July 2019 and a 0.3 per cent increase compared to June 2020.

Attached home sales in July 2020 totalled 607, a 28.3 per cent increase compared to the 473 sales in July 2019. The benchmark price of an attached home is $797,700. This represents a 3.7 per cent increase from July 2019 and a 0.9 per cent increase compared to June 2020.

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Provided by: REBGV