Vancouver Single Family Housing Starts Down 15% From Peak

Steve Saretsky -

The ongoing woes in the Vancouver housing market are becoming more pronounced, particularly in the single family house sector. Coming off a sluggish 2018 which saw annual sales slip to an eighteen year low, 2019 has not faired much better. Greater Vancouver detached sales fell 29% year-over-year, recording the worst January since 2009.

Amidst several years of falling sales, inventory continues to build. As of today there is 15 months of inventory in the detached market, well above a balanced market which is distinguished as an MOI (months of inventory) between 4-6.

Unsurprisingly this is placing downwards pressure on prices, with the home price index having declined 9.1% over the past year, although in reality price declines have been much steeper.

MLS benchmark price for REBGV houses

As a result, this is placing added pressure on single family builders where profit margins on new homes are being squeezed. Very few spec builders (builders with no contracted buyer) accounted for the dramatic shift in market conditions which we are witnessing today. This is not only putting a dent in profits but has slowed future housing starts significantly. The 12 month rolling sum of housing starts has fallen 15% after peaking in January 2018.

Vancouver single family housing starts.

This is resulting in a slowdown in single family homes under construction. However, homes under construction remain at elevated levels suggesting more inventory is en route, adding to a market already dealing with an oversupply of new single family homes.

Vancouver single family homes under construction.

This could also suggest a slowdown in not only spec building but in general contracting work where builders have been contracted by property owners to build a new home.

Join the Monday Newsletter

Every Monday morning you'll receive a short and entertaining round-up of news on the Vancouver & Canadian Real Estate markets.

"*" indicates required fields

The Canadian Economy

Steve Saretsky -

Happy Monday Morning! We got a string of new data this past week confirming inflation in consumer goods, and housing are proving to be more than transitory. Canada’s consumer price index continued to drift higher with prices hitting an 18 year high, up 4.7% from last October. The recent floods in BC...

Steve Saretsky -

The calls for impending interest rate hikes continues. CIBC’s chief economist, Benjamin Tal, was out recently suggesting the Bank of Canada could hike its benchmark interest rate at least six times beginning in early 2022. “I think there is a risk of getting into the market at today’s rates,” noted Tal....

Steve Saretsky -

The BC Government announced it is looking at several cooling measures for the housing market in 2022. They have highlighted two measures. The first is an end to the blind bidding process, and the other is a mandatory “cooling off period” which will allow any buyer a 7 day recession...

Steve Saretsky -

The Bank of Canada continues to slowly drain liquidity after flooding the system with a firehose of cash during the pandemic. Bank of Canada governor Tiff Macklem announced the end of Canada’s QE program (also known as money printing). Furthermore, in Macklems words, “We expect to begin increasing our policy...

Steve Saretsky -

Consumer price inflation ripped higher in September, surging 4.4% year-over-year, the fastest pace of price increases in 18 years. Let’s discuss this further. We have an inflation problem and the Bank of Canada remains of the view that inflation will be transitory. Although they really can’t say otherwise, for if...

Get the Saretsky Report to your email every month

The Saretsky Report. December 2022