It was another feel good headline for the Vancouver Real Estate market in September as media outlets promoted the record breaking 56% year-over-year increase in home sales. The incredible surge in activity has trounced all market forecasts, even surpassing the most optimistic scenarios initially touted by local real estate brokerages, who are obviously inclined to remain upbeat, even in the worst of times.

However, behind the buzz of the media headlines, something is brewing. The health of the housing market is diverging at an unprecedented pace. The single family housing market is ripping hot, sales were up a whopping 72%, the highest total for September in over a decade. Inventory has collapsed to a six year low, sparking bidding wars for families desperate for more space during work from home orders. This is forcing prices higher, with both the average and median sales price ripping 13% and 12% respectively.

This flurry of activity has also shown up in the condo market, where sales activity for the month of September was the highest in over two decades. There’s just one problem, new listings are piling up faster than sales. New listings ripped to record highs, and were 42% above the ten year average. Condo inventory in Greater Vancouver is now at a six year high and growing. Prices are inching lower, obviously, but this has failed to show up in official price metrics, at least for now.

How long can these two segments of the market diverge?

Many buyers of single-family homes are move-up buyers who are relying on the sale of their condo in order to climb the property ladder. It certainly seems plausible that if condo inventory continues building this could become a drag on the detached housing market.

Furthermore, investor activity, a key driver of condo demand, remains tepid. Without investors there is not enough buyers to soak up inventory. This is perhaps best evidenced in the downtown condo market where where roughly half of all supply is owned by landlords, and inventory has recently grown the most. These landlords are being pressured by a sudden weakness in the rental market as immigration slows due to the pandemic/ recession.

I’ll stop short of making any predictions, but what I can say is these two markets can not diverge forever. Eventually there will be a rebalancing, and probably sooner rather than later. It’s never been more important to look beyond the headlines.

Three Things I’m Watching:

1. Greater Vancouver condo listings hit a record high in September, rising 42% above the ten year average.

2. In the three months ending June, Canada’s population grew by just 25,384, or 0.1%, Statistics Canada reported Tuesday. That marks the second smallest one-quarter increase in data going back to World War II.

3. K-shape recovery across Canadian industries. Just five of the 20 industrial sectors tracked by Statistics Canada were producing more in July than February.