The Canadian Real Estate Association (CREA) released their figures a few days ago saying that in Metro Vancouver, the average home price was down 3.8 per cent in September from a year earlier. This 'Vancouver effect' skewed the national average price, which was up 1.1 per cent. Exclucing Vancouver, the national average price was up 3.4 per cent from a year ago.
Gregory Klump, CREA's chief economist, said the drop in Vancouver was caused by fewer really expensive sales this year compared to last year.
"Last year, the average was pitched higher by a whole bunch of high-priced sales, while this year, those sales haven't recurred, so it's lower." Klump said. "I like to use the following analogy: If you line the kids up in class from shortest to tallest and take the average height, and then you excuse the 10 tallest kids and recalculate the average, then the average height will have shrunk, but none of the kids have."
For this reason, average house prices are not the most consistent information to use, Klump said.
"It's like looking in a funhouse mirror," Klump said. "It doesn't really give you a true picture of what's going on with regard to price, which is why you really want to look at the home price index, which keeps the quality of homes constant over time." Explanation of the Home Price Index.
The Multiple Listing Service home price index is down 0.8 per cent to $606,000 in Vancouver year-over-year in September, while it is up 3.9 per cent nationally.
"Stricter high-ratio mortgage regulation further exacerbated a moderating trend in consumer demand,” said Cameron Muir, BCREA Chief Economist. “Reducing the maximum amortization from 30 to 25 years had the equivalent impact to affordability as a 100 basis point increase in mortgage interest rates."
“An expanding population, strong full-time employment growth and persistent low mortgage interest rates are expected to bolster housing demand in the months ahead,” added Muir.
Robyn Adamache, Canada Mortgage and Housing Corporation's senior market analyst for Vancouver, said sales of single-family homes are down 29 per cent for the first nine months of 2012 compared to the same period last year, while townhouse sales are down 20 per cent and apartment sales are down 16 per cent.
Adamache also said there is a shift in sales volume away from very expensive single-family homes in areas such as the west side of Vancouver, West Vancouver and Richmond and toward more affordable homes in places such as Maple Ridge.