All eyes have been on Toronto sales, Toronto homes, and Toronto mortgages for the past month or so, and that could be because Vancouver is starting to take a little less heat as market conditions seem to be normalizing there. But there are still signs of trouble as sales are slumping, but home prices remain just as high as ever. This is the very thing that could lead to a housing bubble out West. But CMHC is still holding their stance that there is nothing to really show that Vancouver is in fact, in a bubble.
Tsur Somerville from the UBS Sauder School of Business, gave a few reasons for the slowdown in sales. “You see an increase in the number of listings, drop in sales, all things that create less pressure in the marketplace,” he said. “There’s clearly a slowing down in the market.”
And he’s definitely right. The latest numbers provided by the real estate board of Greater Vancouver show that home sales have dropped 19 per cent from where they sat last year at the same time. So why the change? It comes from a couple of different factors. Somerville says that it’s difficult to actually get an accurate reading, because there are so many luxury homes and multi-million dollar mansions in Vancouver that are making the data unclear.
“Looking at the averages it’s going to be confusing and in some cases disconcerting because that number bounces around on a month-to-month basis, based on how many four-million dollar houses are sold on the West side,” he says.
But one of Canada’s economists believes that it has more to do with the new mortgage rules than it does the mansions. Not amortization schedules or HELOCs this time, but rather the change the federal government has implemented on mortgage insurance.
Helmut Pastrick, Central 1 Credit Union Chief Economist says, “The comparison to last year was heavily influenced by the change in the federal government’s mortgage insurance criteria, which pulled forward a large number of sales into 2011. So we’re comparing that high point to activity so far this year.”
But despite the drop in sales, home prices in Vancouver continue to climb, showing a four per cent increase over the average price of a home the same time last year. And while Jim Flaherty has said in recent weeks that he’s worried about the last condo buyer in Toronto, the same is still holding true for Vancouver.
Yet still, CMHC refuses to acknowledge a problem, saying only that there is no real “clear evidence” of a housing bubble.