Canada’s housing market is inching closer to its “cyclical bottom,” and British Columbia is following suit, with home resale activity in the province gradually stabilizing, according to a recent housing market update from the Royal Bank of Canada (RBC) (TSX:RY).
This has implications for the rest of B.C.’s economy. Activity levels in the resale market tend to lead the rest of the economy, according to Brendon Ogmundson, chief economist with the British Columbia Real Estate Association.
“If we’re in an economy that’s potentially headed for a recession in 2023, the pattern that you see throughout history is that sales decline well in advance of the recession, and then bottom out and start to recover one to four months or so into a recession,” Ogmundson said.
Currently, home sales in the Vancouver market, he said, are roughly 25 per cent below normal levels and are “about as low as they can get,” he added.
According to Robert Hogue, assistant chief economist at RBC, activity in the Lower Mainland and Victoria is levelling off.
“Recent declines have slowed quite considerably, and we’re probably not that far off from the bottom. But that being said, the level of activity, even in B.C., is historically low right now. Things are quiet,” he said.
In the coming months, Hogue said he expects to see home prices depreciate further. The Multiple Listing Service (MLS) Home Price Index for B.C. has declined 10 per cent from its February 2022 peak, with the index for Vancouver dropping eight per cent, according to RBC’s market update.
Despite the bottom being “imminent,” as described by Hogue, he predicts that recovery will be a “large muted affair at first.”
“Higher interest rates and stretched affordability will continue to be huge issues for buyers throughout 2023 and possibly beyond. This is poised to keep activity quiet and limit any price gains,” Hogue said in the update.
Metro Vancouver home listings on MLS reached 53,865 in 2022, a 13.5 per cent decrease compared to the 62,265 homes listed in 2021, according to the Real Estate Board of Greater Vancouver.
“It’s not hard to see a situation where the sales are rebounding into a market that is still under-supplied,” Ogmundson said.
Ogmundson said that even if B.C. hits its cyclical bottom, recovery will be slow throughout 2023, but strong in 2024.
“What we’ve seen throughout history is that the year after a recession, the home sales in the province rise anywhere between 25 and 40 per cent. But, that really relies on interest rates coming down,” he said.
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