Number of sold homes drops by more than half compared to 2007

Derrick Penner
Sun

SALES SLIDE: The B.C. Real Estate Association reported October sales at about half the level of a year ago, a drop that can be correlated with recent dismal financial news. Here is a comparison with October 2007. Photograph by : Bill Keay, Vancouver Sun files

To ad lib a phrase, with apologies to T.S. Eliot, October has been the cruellest month for British Columbia real estate so far in 2008 with sales drying up in the face of brutal news in financial markets.

Multiple-Listing-Service-recorded sales across B.C. plummeted 51 per cent in October compared with the same month a year ago, the B.C. Real Estate Association reported Friday, over a month that saw the Standard and Poors/TSX Composite Index — Canada‘s bellwether stock index — shrink by 17 per cent.

And as potential homebuyers watched their mutual funds, stock holdings or other investments wither with no sign of a reversal, they stayed on the sidelines of real estate, Cameron Muir, chief economist for the B.C. Real Estate Association, said in an interview.

“Look at it as a kind of a reverse wealth effect,” Muir said, referring to the phenomenon that when a homeowner sees his home’s value rising, he feels wealthier and more willing to make major purchases.

“Now that we see equity markets have come down from lofty heights, we’ve seen prices come off in most housing markets in the province, that (wealth effect) has evaporated.”

In the month of October, that meant MLS sales of 4,018 across the province compared with 8,160 in the same month a year ago.

The dollar value of all those sales added up to $1.7 billion in October, a 54-per-cent drop from the $3.7 billion recorded in October 2007.

And the average price in B.C. dropped 6.5 per cent to $420,259 compared with $449,259 in October 2007.

Muir said he expects the “snakes-and-ladders” volatility in financial markets to continue for some time yet before they become consistent. Once that happens, he expects real estate sales to rebound a little.

However, when markets hit consistency is tough to predict, Stan Hamilton, a professor at the Sauder School of Business at the University of B.C., said in an interview.

“If somebody came out tomorrow and said [markets are] going down another 20 per cent, and you believed them, then we could start to make decisions,” Hamilton said. “But they can’t even tell us if [markets are] going up or down, they being everybody including myself.”

In the meantime, Hamilton added that the people who were counting on investments in the stock market or mutual funds to provide their down payment on a home has watched that capital shrink, with no certainty around when that will change.

Hamilton said October’s drop in financial markets happened “after governments have gone through their first and second levels of policies to save the world,” so people are staying away from real estate.

“Nobody likes to make a commitment that has reasonable odds of backfiring on you,” he said, “whether you are buying or selling.”

Economically speaking, Muir said that while B.C.’s prospects have dimmed, British Columbians are currently well off enough to justify more activity in the real estate market.

Muir said sales levels in 2008 mirror those of 2000, a time when provincial unemployment was higher and the economy in rougher shape.

© The Vancouver Sun 2008

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