Is the West Coast Housing Market Headed for a Crash?
It seems like you can hardly throw a rock in Progressa’s home city of Vancouver (and Toronto!) without entering into a spirited discussion about the city’s housing market, and the associated crisis of affordability that is making home ownership more and more difficult for residents. Prices have been rising steadily for quite some time, but the question has been in the back of many people’s minds: is this a bubble, and could it burst?
New statistics indicate that significant change in the market may be imminent. Thanks to strength earlier this year, average condo prices are still higher than a year ago, up 10.3 per cent in a year to $695,500 in August. But prices have now turned negative, and are down 1.6 per cent since May. While prices may be fluctuating somewhat, home sales are a different story: these were down 36.6 per cent from the same month a year earlier, the region’s real estate board noted.
Much of the decline in price and in sales has come from the high end market in areas like West Vancouver. If sales and prices drop in this segment, sellers have less wealth to use for buying in other segments — including other areas and other kinds of homes such as condos and townhomes — spreading out the downward pressure on sales and prices of these types of dwellings.
Potential buyers may be holding off in hope of further price declines – another factor that puts negative pressure on the market as homes linger unsold for longer periods of time.
Some longtime residents of Vancouver may actually be rooting for the possibility of a significant price drop in the wake of a larger economic downturn – “Homepocalypse” is a popular search term. An event such as this, though unlikely, would increase housing affordability across the region. The negative consequences would be very significant, resonating across multiple industry sectors.
Such an event would cause unemployment to spike, put negative pressure on spending, and would likely end up hurting a large portion of the job market adjacent to real estate. The strong provincial economy would likely prevent such a massive, sudden correction from ever happening, but some analysts still have it on their radar.
We are not real estate experts here at Progressa and therefore these kinds of thought experiments should not be taken as gospel. Housing, however, is the largest component of most people’s personal financial strategy. Especially in cities like Vancouver, as housing markets go, so goes the general financial health of residents. It will be vital to monitor housing market changes in the near future to ensure stability and prosperity.