Market Update: January 2023

In the fall of 2022 a survey was completed by Rennie (carried out by the Mustel Group) which surveyed 800 adults throughout Metro Vancouver on their views about the housing market, their personal finances, and how changing conditions are influencing their current and future housing-related decisions. Here are some highlights from the survey.

ALMOST 2 POTENTIAL BUYERS FOR EVERY SELLER

Interestingly, owners’ intentions to sell—that is, the proportion of respondents who are either in the process of selling their home or plan to in the next six months—have been relatively consistent over the three iterations of the survey Rennie has carried out annually dating back to the fall of 2021, despite significantly changing macroeconomic conditions over that period.

Having said that, selling intentions did rise modestly from 16% in the spring of 2022 to 19% in their most recent survey, though as I’ve noted previously, in today’s market you’re not selling in today’s market if you don’t need to.

Intentions to buy a home—which, like selling intentions, includes those who are currently looking to buy as well as those planning to buy in the next six months, have been similarly consistent over the past year, having increased slightly to 35% in the most recent survey, up from each of the past two surveys.

That buying intentions have remained stable (and elevated) reflects the magnitude of the underlying demand for housing in this market, even in the face of high and rising interest rates. Additionally, that there are nearly two potential buyers for every potential seller suggests that there will continue to be more housing demand than supply in the coming months, and this in turn underscores the role of the pre-sale market in filling some of the supply gap.

LET’S DEBATE: BUY NOW OR WAIT?

With MLS sales counts having been, shall we say, subdued of late (Metro Vancouver is actually in the midst of its slowest sales period in a decade), it appears that some proportion of potential buyers are, and have been, sitting on the sidelines in response to today’s challenging market conditions. Now, the Rennie survey of Metro Vancouver residents gives us some insight as to why.

Those indicating that they believe home values will be lower in one year than they are today more than doubled from the spring edition of the survey, to 41% of respondents from 16% (and up from 8% in fall of 2021). Unsurprisingly, they’re seeing a similar increase in the proportion of respondents who believe that it will be a better time to buy in one year than it is today: this metric is up to 34% in the current survey, up from 21% six months ago and 13% one year ago.

For what it’s worth, their read of the data on past market cycles and the current macroeconomic environment yields an opposite view, however it’s somewhat beside the point whether or not this perspective ultimately aligns with reality, as intentions govern behavior. With this in mind, buyers and sellers who have positioned themselves to be nimble so they can adapt quickly to changing market conditions (that is, they have financing in order and they have an established relationship with a trusted realtor, among other things), may find opportunities for themselves sooner than later.

HIGHER RATES AT A LATER DATE?

Almost three out of four (73%) survey respondents indicated that they expect interest rates to be higher in one year than they are today. At the same time, a small but growing segment thinks rates will be lower in one year, 11% of respondents indicating as much, versus only 2% in the spring edition of the survey. These views on interest rates are, in turn, having an impact on respondents’ views about other aspects of housing and finances, with a growing share expecting home values to decline in the next year (see above) and 41% indicating that higher rates will impact their housing market decisions in the next 12 months.

With the Bank of Canada indicating in its most recent press release that there is growing evidence that tighter monetary policy is restraining domestic demand, there are some signs that we may be nearing the end of this tightening cycle—though when and where that cycle finishes is up for debate.

My own perspective is that, among other things, the Bank of Canada will, in all likelihood, halt its rate hikes in the new year. Once there is some additional clarity on the future interest rate environment, Metro Vancouver residents are indicating an intention to re-engage with the local housing market, which could lead to a recovery sooner than some of us think.

January Market Report

After seeing record sales and prices during the pandemic, Metro Vancouver’s housing market experienced a year of caution in 2022 due to rising borrowing costs fueled by the Bank of Canada’s ongoing battle with inflation.

The Real Estate Board of Greater Vancouver reports that residential home sales in the region totalled 28,903 in 2022, a 34.3 per cent decrease from the 43,999 sales recorded in 2021, and a 6.6 per cent decrease from the 30,944 homes sold in 2020.
Last year’s sales total was 13.4 per cent below the 10-year sales average.

The headline story in our market in 2022 was all about inflation and the Bank of Canada’s efforts to bring inflation back to target by rapidly raising the policy rate. This is a story I expect to continue to make headlines into 2023, as inflationary pressures remain persistent across Canada.nd a 0.8 per cent decrease compared to the 54,305 homes listed in 2020.

Last year’s listings total was 3.2 per cent below the region’s 10-year average.

The total number of homes currently listed for sale on the MLS® system in Metro Vancouver is 7,384, a 41 per cent increase compared to December 2021 (5,236) and a 19.6 per cent decrease compared to November 2022 (9,179).

The MLS Home Price Index composite benchmark price for all residential properties in Metro Vancouver is currently $1,114,300. This represents a 3.3 per cent decrease over December 2021, a 1.5 per cent decrease compared to November 2022, and a 9.8 per cent decrease over the past six months.

Closing out 2022, the data shows that the Bank of Canada’s decisions to increase the policy rate at seven of the eight interest rate announcement dates in 2022 has translated into downward pressure on home sale activity and, to a lesser extent, home prices in Metro Vancouver. While the consensus among many economists and forecasters suggests the Bank of Canada may be near the end of this tightening cycle, rates may remain elevated for longer than previously expected since the latest inflation figures aren’t showing signs of abating quickly. I’ll watch the 2023 spring market closely to see if buyers and sellers have adjusted to the higher borrowing-costs and are participating more actively in the market than we have seen over the last 12 months.

December 2022 Summary

Residential home sales in the region totalled 1,295 in December 2022, a 51.8 per cent decrease from the 2,688 sales recorded in December 2021, and a 19.8 per cent decrease from the 1,614 homes sold in November 2022.

Last month’s sales were 37.7 per cent below the 10-year December sales average.

There were 1,206 detached, attached and apartment properties newly listed for sale on the MLS in Metro Vancouver in December 2022. This represents a 38 per cent decrease compared to the 1,945 homes listed in December 2021 and a 60.5 per cent decrease compared to November 2022 when 3,055 homes were listed.

For all property types, the sales-to-active listings ratio for December 2022 is 17.5 per cent. By property type, the ratio is 12.3 per cent for detached homes, 19.5 per cent for townhomes, and 21.7 per cent for apartments.

Generally, analysts say 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.

Sales of detached homes in December 2022 reached 371, a 53.3 per cent decrease from the 794 detached sales recorded in December 2021. The benchmark price for a detached home is $1,823,300. This represents a 5.1 per cent decrease from December 2021, a 1.8 per cent decrease compared to November 2022, and an 11.4 per cent decrease over the past six months.

Sales of apartment homes reached 702 in December 2022, a 52 per cent decrease compared to the 1,464 sales in December 2021. The benchmark price of an apartment home is $713,700. This represents a 1.7 per cent increase from December 2021, a 0.9 per cent decrease compared to November 2022, and a 6.9 per cent decrease over the past six months.

Attached home sales in December 2022 totalled 222, a 48.4 per cent decrease compared to the 430 sales in December 2021. The benchmark price of an attached home is $1,012,700. This represents a 0.2 per cent decrease from December 2021, a 1.5 per cent decrease compared to November 2022, and a 9.2 per cent decrease over the past six months.

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