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Metro Vancouver's red-hot housing market gets official alarm downgrade, but affordability still an issue

Last Updated Aug 1, 2019 at 8:07 pm PDT

Summary

Metro Vancouver's housing market has dropped from a high degree of vulnerability to a moderate one: CMHC

Cooling of the market due to economic fundamentals like narrowing of gap between what you make and cost of a home

VANCOUVER (NEWS 1130) – The real estate market in Metro Vancouver appears to have cooled to the point experts aren’t as worried about the bubble bursting.

According to the Canada Mortgage and Housing Corporation, the region’s housing market has dropped from a high degree of vulnerability to a moderate one for the first time since 2016.

“While home price growth over the past few years significantly outpaced local income growth, these imbalances have narrowed based on growth in economic fundamentals and lower home prices in different segments of the resale market,” Senior Specialist Eric Bond explains.

What this means is the market is at less risk of a sudden drop, or disrupting the economy, which isn’t a bad thing.

“Fundamentally, we’d rather have the slow decline over multiple years than, sort of, some rapid, really disruptive drop,” real estate expert Tsur Somerville with UBC’s Sauder School of Business explains.

However, a slow decline also means housing prices won’t match average incomes for awhile.

“Expensive Westside homes have come down the most, and suburban condos have come down the least,” he notes.

“The biggest risk in Vancouver — for quite some time — is a correction in housing prices because they’re so unaffordable,” Somerville adds.

Elsewhere in B.C., the CMHC notes Victoria’s market is at a high risk, but how fast prices are going up and over evaluation are seeing some improvements.

Meantime, a moderate degree of vulnerability remains at the national level, but imbalances between house prices and housing market fundamentals have narrowed over the past year while certain markets are at higher risk.

It says Toronto, Hamilton and Victoria continue to have a high degree of vulnerability, but overheating, price acceleration and overvaluation show signs of abating in all three markets.

Edmonton, Calgary, Saskatoon, Regina and Winnipeg have moderate vulnerability, but evidence of overbuilding remains.

Ottawa, Quebec City, Halifax, St. John’s, N.L., Montreal, Moncton, N.B., all have low overall vulnerability, but overheating persists in Montreal and Moncton.