Despite what appears to be a healthy economy, consumer confidence is at its lowest point in five years
Scott Simpson
Sun
New homes sale listings in August suffered their second-largest monthly drop in 25 years on the Multiple Listing Service, the B.C. Real Estate Association said Friday.
Association chief economist Cameron Muir said the number of new MLS residential listings dropped 22 per cent from July on a seasonally adjusted basis as “home seller fatigue” sets in due to a sustained decline in buyer interest.
The total dollar volume of residential sales fell 49 per cent to $2.2 billion in August compared to August 2007.
Residential unit sales followed the same pattern. They were down 47 per cent to 5,175 units last month compared to 9,834 units in August 2007.
On a regional basis, the biggest drop was in Greater Vancouver where sales fell from 3,493 units to 1,611 — a 53.9-per-cent decline.
In an interview, Muir said B.C.’s economy appears to be in very good shape, but consumer confidence nonetheless is at its lowest point in five years.
“We are still seeing quite strong job growth. We are seeing unemployment around 4.3, 4.4 per cent. That’s near historic lows.
“All that stuff is positive. What’s not as positive is that households are not as confident as they were a year ago.
“That kind of erosion in consumer confidence was brought on not only by erosion of affordability in housing. When we see gas prices spike up as we saw not too long ago, that affects your budget right away and households start to reassess their risk,” Muir said.
Meanwhile in an economic research paper released earlier this week, BMO Capital Markets chief economist Sal Guatieri suggested the decline is not a short-term trend.
“Canada faces the prospect of lower house prices in the year ahead, similar to many other countries — the U.S., Britain, Ireland, Spain, France, and Australia,” Guatieri wrote.
“After six years of unsustainable growth, prices have run smack into the affordability wall. Demand is sagging, listings are at record highs and prospective first-time buyers are choosing to rent rather than own.”
Guatieri said the average house price in major Canadian markets rose 78 per cent from early 2002 to late 2007 — “more than twice as fast as income.”
He said that a nationwide decline in average prices is being “skewed by deep sales drops in high-priced regions like Vancouver” — but said that in spite of the disproportionately large drop here, a national “softening trend is undeniable.”
The last time that home prices were reasonable, relative to income, was mid-2006 and suggested prices would need to fall about nine per cent over two years “to restore a normal ratio to income,” he said.
© The Vancouver Sun 2008