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No Stops Yet

The current housing market story isn’t going anywhere. With a huge increase of 340% year-over-year can we expect any less? The housing market is still on the rise with April homes hitting a median house increase of 15% to $920,000. There is no stopping as we look at the charts. Now we just wait..

Real Estate Market by Steve Saretsky: The housing story is far from over

The Real Estate Board of Greater Vancouver is expected to release April’s housing data today. Brace yourself for some eye-popping media headlines. Home sales across Greater Vancouver surged 340% year-over-year. Yes, you read that correctly. The move is almost entirely due to weak base effects from last year when housing activity collapsed at the onset of the pandemic. However, let’s unpack this a little further.

April home sales still hit record highs, regardless of base effects. The median sales price increased 15% to $920,000. I expect the Real Estate Boards home price index, which is the number the media likes to report on, should show gains of around 12%. Months of inventory for sale remains incredibly tight, at just 2.1 months of supply- a reading which suggests prices will move higher- and they will. All in all, the data looks incredibly bullish, and the media will have fun gobbling this one up.

However, for fortunate readers of this newsletter, I’d like to share a few additional insights. Despite the obviously bullish data, please keep in mind that the way sales data is reported is ultimately a lagging indicator. So while prices will continue to move higher over the coming months, as noted by the lagging home price index, there appears to be a sentiment shift in the market over several weeks. There are fewer showings, fewer offers, and an element of buyer fatigue appears to be setting in. This view is nearly synonymous across the Real Estate industry. I will stop short of making any predictions, but a slowdown in the housing market appears inevitable.

This does not mean a bust is imminent, but rather, a much-needed pullback seems probable. Across the nation, home prices have ripped to new highs, growing 20% on an annual basis- this is not, nor was it sustainable. And while the housing market remains hot, we should not be surprised to see that it is now cooling. I discussed this at length in my recent interview with Yahoo Finance, and my co-host John Pasalis also noted the same thing is taking place in the Greater Toronto Area.

Again, I want to emphasize that the recent fizzle in the housing market won’t show up in any data this month, and perhaps not next month. However, it is typically anecdotes and sentiment that lead markets. I am far from proclaiming an end to the recent bull market, but logically a slowdown makes sense after the recent run-up. As the economy nears a re-opening, people will be desperate to get out of their homes and think less about Real Estate and more about summer vacations.

Let’s keep an eye on this. It is early but an interesting development. As we all know, housing remains a key pillar to economic recovery. As noted by the often outspoken David Rosenberg last week, total residential construction has surged 22.5% in the past year. That has taken the housing share of GDP to a record high of 9.3% — double the historical norm. Strip out housing, and GDP contracted 3.5% in the past year.

The housing story is far from over.

Three Things I’m Watching:

1. Greater Vancouver home sales bounce 340% in April due to weak base-effects.

2. Canadian home price growth far outstrips other countries. (Source: Globe & Mail)

3. The cost of lumber continues to surge, potentially crippling future new housing starts. (Source: Bloomberg)



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About Steve Saretsky

Steve Saretsky is a Vancouver Residential Realtor and author behind one of Vancouver’s most popular Real Estate Blogs Vancity Condo Guide. Steve is widely considered a thought leader in the industry with regular appearances on BNN, CBC, CKNW, CTV and a contributor to BC Business Magazine. For more expert insights on the real estate market and trends, visit Saretsky’s website at www.stevesaretsky.com Steve Saretsky [email protected] 604-809-8149