As the mercury soars in Greater Vancouver, so Vancouver home prices and sales-to-listings ratios rise – creating continued “problematic conditions” for the real estate market, according to the Canada Mortgage and Housing Corporation (CMHC).
In its latest quarterly Housing Market Analysis for the Vancouver Census Metropolitan Area (CMA), which examines 2017’s first quarter, the CMHC said it “detected strong evidence of overvaluation in Metro Vancouver’s housing market in the first quarter of 2017. Growth in economic fundamentals, such as population and wages, cannot fully account for the recent run-up in in home prices since the third quarter of 2015.”
The report added, “Population and wage growth, along with record-low mortgage rates, continue to be supportive of house price growth. In particular, job creation has been strong in the Vancouver CMA… However, the HMA framework suggests that price levels have exceeded those supported by these strong local fundamentals. Current price levels appear stretched both relative to income and across housing types.”
The quarterly Housing Market Analysis (HMA) assesses real estate markets across Canada, using four key risk factors: overheating, when demand for homes in the region outpaces supply; sustained acceleration in house prices; overvaluation of house prices, in comparison to levels that can be supported by economic fundamentals; and overbuilding, when the inventory of available housing units is elevated.
Even though only one of the four risk categories saw “strong evidence of problematic conditions” in Vancouver CMA, this was enough to give Vancouver a high overall risk rating – along with Victoria, Toronto, Hamilton and Saskatoon.
Despite the high demand and low supply of currently available homes for sale in Vancouver, the CMHC detected only “moderate evidence of overheating during the first quarter of 2017.”
It added, “The sales-to-new-listings ratio has increased since the previous report, leading to the detection of overheating. Conditions in different segments of the Vancouver market have further diverged since the beginning of the year.”
The HMA also described “moderate evidence of price acceleration in Metro Vancouver’s housing market for the fifth consecutive quarter” – reflecting the recovery of home prices during 2017’s first quarter, following the decline in the second half of 2016.
The report added, “While average prices did decline on a month-over-month basis in the second half of 2016, the decline was primarily driven by a slowdown in the single-detached market.”
The CMHC continued to find scant evidence of overbuilding in the Greater Vancouver housing market.
“Low new home inventories and low vacancy rates in the primary rental market point to weak evidence of overbuilding,” the HMA said.