In this episode, we unpack the latest developments in Vancouver's real estate market and the broader economic landscape. Home prices in Vancouver have experienced an unexpected surge, breaking a six-month downward trend. Despite this, the Bank of Canada (BOC) has maintained its interest rates at 5%, leading to alarming trends such as increased mortgage arrears and a shocking spike in corporate bankruptcies.
The BOC's decision to hold rates at 5% was expected, with the central bank highlighting slow economic growth and easing wage pressures. While there's a possibility of rate cuts in the future, some critical data points suggest the need for more aggressive action. Markets are pricing in three cuts this year, but the BOC's historical tendencies may result in a delayed response.
Insolvency data is revealing a concerning picture, with business insolvencies reaching levels not seen since 2006. Corporate bankruptcies are particularly alarming, hitting a monthly high of 570 in January, far surpassing the long-term average of 170. This downturn in the business sector is leading to a decline in private sector payrolls and a five-quarter negative trend in per capita GDP, signaling a potential recession...
Mortgage arrears are on the rise, reaching 0.18%, a 28% increase from the 2022 low. Although still below pre-pandemic levels, the 500-mortgages in arrears increase is the largest since 2020, indicating potential challenges ahead. However, the impact on the Vancouver housing market remains relatively muted, with residents not rushing to sell their homes despite the higher rates.
The local real estate market in February witnessed a 14% increase in total sales compared to the previous year, reaching 2,070 units—the highest since August 2023. However, this surge is still 23% below the 10-year average, suggesting a selective hyperactivity driven by low inventory. New listings increased by 31% year-over-year, bringing total inventory up by 6% and shockingly, the active inventory is sitting 0.3% above the 10-year average, indicating a potentially sustained low-inventory environment.
The sales-to-active ratio experienced a significant 6% increase, reaching 23%! This marks a return to a sellers' market after five months. This trend is evident across property types, with detached, townhomes, and apartments all experiencing notable increases. Prices also rebounded after a six-month decline, showing a remarkable 1.9% increase in the HPI in February.
Despite economic challenges and sounding like a broken record, the Vancouver housing market remains resilient. Home prices are inching closer to peak 2022 levels, defying the two-year interest rate hike cycle. With a median price of $960,000 and average price of $1,279,000,
the market is showing signs of strength. However, warnings from market experts, suggest that broader economic issues might not be fully reflected in the BOC's decisions.
As the market forges ahead, we explore the implications of tightened inventory and the potential impact on buyers. Investment houses provide a cautionary perspective, hinting at larger economic problems than acknowledged by the BOC. With corporate insolvencies
rising and employment numbers under threat, the broader economic outlook remains uncertain and we urge you to consider a holistic view beyond central bank statements.
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Dan Wurtele, PREC, REIA
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Ryan Dash PREC
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ryan@thevancouverlife.com