BC Economic Snapshot Feb. 16, 2013

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VANCOUVER, BC, Feb. 16, 2013/ Troy Media/ – B.C.’s housing market activity picked up slightly in January, but continued to languish within the exceptionally weak range observed since August.

Total MLS residential sales edged up to 5,120 seasonally-adjusted units in during the month, marking a 1.8 per cent gain from December. While this reversed part of the previous month’s decline, unadjusted sales were down nearly 14 per cent from January 2011.

This was the weakest start to a year since 2001, with the exception of the extreme low observed during the recessionary period of 2009. Among B.C.’s regions, northern markets led January gains with a 26 per cent monthly rebound from a weak December. Sales activity generally held steady in other parts of the province, with sales sliding about 1 per cent on Vancouver Island, and little changed in the Okanagan.

Despite general stability in January sales, most markets have recorded a deceleration in sales activity since mid-2012, coinciding with weaker labour markets and tighter mortgage insurance rules.

The provincial average price jumped 2 per cent from December to a seasonally-adjusted $515,350. However, average prices are highly volatile, and changes can reflect shifts in the geographic distribution of provincial sales as well as the impacts of price outliers. The unadjusted average price was down 2.7 per cent from same-month 2012. January MLS report points to a continuation of weak market activity across the province despite a semblance of sales stability.

Many markets remained mired with an excess of inventory in both resale and new home product, which should precede price declines. However, further price declines are expected to be modest. Sellers are generally in a position to be patient, given the persistence of low interest rates and steady employment, rather than sharply cut prices.

The flow of provincial new listings contracted for fourth consecutive month on a seasonally-adjusted basis and fell to the lowest levels since 2010 suggesting that the lower chance for a successful sale is leading some sellers to stay on the sidelines.

Home sales trends are expected to rise through 2013, but momentum will be impeded by slow employment growth and the ongoing impact of more stringent mortgage insurance rules on first-time buyer demand and subsequent move-up activity. Annual sales are expected to remain level compared to 2012 at about 68,000 units.

Automotive
New motor vehicle sales in B.C. slipped for a third month in December, but activity remained significantly above same-month 2011. Total new vehicle sales dipped to 14,190 seasonally-adjusted units during the month, marking a 0.3 per cent decline from November and the lowest level since December 2011.

Despite a recent downtrend, vehicle sales in 2012 still rose to a four-year high as low financing costs, aggressive pricing incentives and a shortage of used inventory pulled more buyers from the sidelines.

Total sales in the B.C. and Territories region reached 176,320 vehicles in 2012, marking a 9.8 per cent jump from 2011 and the highest level since 2008. Gains were led by a 14 per cent gain in passenger car sales, while light truck sales rose by a more modest 7 per cent.

Given a lack of production in B.C., new vehicle sales are a secondary indicator for the provincial economy and a signal of consumer willingness to make large-scale purchases. The downward trend in activity in the second half of the year was generally consistent with deterioration in broader economic activity and subdued labour market conditions. Slow-growth economic conditions and employment growth below 2 per cent will likely keep activity subdued, with sales largely being driven by replacement demand.

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