Sharp drop in home sales

The housing market slowed dramatically in Greater Vancouver last month, with the number of existing homes sold falling by 70 per cent from the year before.

Last month, 874 resale homes were sold through the Multiple Listing Service (MLS), compared with 2,883 sales in November, 2007, according to information released yesterday by the Real Estate Board of Greater Vancouver (REBGV).

The benchmark price declined by 13 per cent from May to November, from $568,411 to $495,704.

For the 11 months ended in November, prices have fallen by 8.3 per cent. In the past three years, prices are up by 20 per cent, and they are up by 60 per cent over the past five years.

New listings declined by 11 per cent in November from the year before, to 3,012.

More housing units were sold in Edmonton last month than in Vancouver, although the number of units sold there fell to the lowest level since 1998, according to a report yesterday from the Realtors Association of Edmonton. A total of 891 resale housing units changed hands, a drop of 25 per cent from November, 2007. The average price fell by 2 per cent from the previous year to $318,588, The number of homes listed in Edmonton on the MLS fell by 510 to 8,015. Average days on the market increased by five to 63.

Home prices have become overvalued in many parts of Canada, and prices nationally may have to correct by an average of 10 per cent to fall in line with economic fundamentals, Carl Gomez, vice-president of research at Bentall Capital LP, said in an interview.

In early 2008, home prices rose to a value of about 9.5 times income, well above the long-term average of seven times income, Mr. Gomez said in a report yesterday. In Canada, home prices rose by 80 per cent from 1997 to 2008.

Housing markets vary widely in different parts of the country, however, and using a national average can be misleading, Mr. Gomez said. In both Alberta and B.C., for example, home prices may need to drop by as much as 25 to 30 per cent to correct runups in value, he said.

In Ontario, a 10-per-cent price drop could be in the cards, he added. The big unknown is the impact of the current economic slowdown, which will likely make the magnitude of the corrections both faster and deeper, he added.

(prepared by Lori McLeod/Globe & Mail)