Modest Lower Mainland home sales in March will likely give way to a sales plunge extending into the third quarter due to the societal and economic disruption of COVID-19.
Multiple Listing Service (MLS) sales in Metro Vancouver and Abbotsford-Mission metropolitan areas reached 3,927 units. A 35% year-over-year gain was primarily due to low same-month sales in 2019, with seasonally adjusted sales down 10% by our calculation from February. The trend had already eased in early 2020.
March sales provided only an early signal of the COVID-19 economy. While monthly sales were modest, daily sales fell sharply in March’s second half by 30% as COVID-19 fears intensified, government measures ramped up and job losses mounted. Given the time lag involved in purchase decisions and firm sales in MLS, demand likely fell more than what was reflected in sales.
With prospective buyers hunkered down at home and an economic downturn in play, home sales are expected to fall sharply in coming months. A 40% decline in trend would not surprise.
Sharply lower sales will lead to price declines, but their magnitude is uncertain. Both buyers and sellers will step away from the market during the pandemic and distancing period, limiting inventory levels. Price discovery in this market will be difficult and will not provide much indication of post-epidemic conditions. Demand was moderate and market conditions were firm heading into the current downturn, with the average price up 6% from February to $975,600, and the benchmark price up 1.4%.
We anticipate a recovery in 2020’s second half, although the duration of current measures are unknown and household and business finances will be eroded in the interim. Nevertheless, low interest rates, an expected return to a tighter labour market and pent-up demand will support the market.
Heading into the COVID-19 deep freeze on western economies, B.C. export sales tumbled in February to contrast with growth in Canadian sales. Year-over-year merchandise exports declined nearly 17% to $2.77 billion, following a 14% decline in January.
While the headline figure was dire, the contraction was dominated by a severe year-over-year drop in energy sales (down 40%), a 10% pullback in metal ores and non-metallic minerals and decline in farm, fish and intermediate food products. •
Bryan Yu is deputy chief economist at Central 1 Credit Union.
