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TORONTO, VANCOUVER — In the six weeks since Vicky and Mike Plover put their house in Kelowna, B.C., on the market, a so-called healthy housing correction has been turned by a crumbling economy into the worst decline in a generation.
House prices in the B.C. Interior region tumbled by 11.2 per cent last month from the previous October, the sharpest decline in the province and even worse than the national drop, which was the worst year-over-year monthly tumble in 26 years.
Ms. Plover said she remains confident the home will sell but realizes the economy is now working against her and her husband.
“Unfortunately, we were a bit late [to put the house up for sale],” Ms. Plover said Friday morning before her realtor hosted an open house, with another set for Sunday. “It's definitely tougher than it was six months ago. And the economy this fall has made a huge difference.”
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The Plovers have lived in their four-bedroom, 1,940-square-foot house for 18 years.
They now plan to move into something smaller. Their situation is playing out in other markets across the country as the housing slump that started with a correction in overheated prices in Western Canada becomes more pervasive as the outlook for jobs and economic growth weakens.
Nationally, the average price of a resale home in October fell the most, percentage-wise, since August, 1982, sinking 10 per cent from the year before to $281,133, the Canadian Real Estate Association (CREA) says. It was the fifth consecutive month with year-over-year price declines.
Unit sales fell by 27 per cent from October, 2007, declining sharply in every province except Newfoundland and Labrador and the Northwest Territories. Month-over-month sales fell by 14 per cent, the largest drop since June, 1994.
“We declared early this year that the housing boom was over, and these figures on the surface would suggest the bust has begun,” Douglas Porter, deputy chief economist at BMO Nesbitt Burns Inc., said in an interview.
The slowdown in home sales hit more than three-quarters of Canada's housing markets last month, including the five most active: Toronto, Montreal, Vancouver, Calgary and Edmonton.
Fewer sales in Toronto were responsible for nearly one-third of the drop in sales across the country.
In Toronto, Canada's largest housing market, sales fell by 35 per cent year-over-year in October, and prices by 10.5 per cent. Other hard-hit parts of Ontario included the cottage country regions of Muskoka, Haliburton and Bancroft.
The housing market downturn in Ontario, and to a lesser extent in Quebec, is worrisome because it reflects weakening economic fundamentals rather than the sharp price increases that took place in the West, Mr. Porter said.
“In some cities things did get overheated last year, and the correction was what got the ball rolling in terms of lower prices, especially in places such as Calgary, Edmonton and to a lesser extent in Vancouver. But I think more broadly what we're seeing now is a weakening economy starting to make itself heard in the housing market, and that's the bigger story for the next year,” he said.
In the past six weeks the Toronto market appears to have slowed dramatically as buyers become plagued by indecision, said Chander Chaddah, real estate agent at Sutton Group Associates Realty Inc.
“It's definitely taking longer for houses to sell. What you're basically seeing is the decision that people are making is not to do anything,” he said.
The depth of the decline in home prices is a worry for buyers, particularly those with low down payments who don't want to find themselves owing more on their mortgages than their homes are worth if the downturn continues.
Job security is also is also on people's minds as layoffs spread from the auto and forestry industries into the financial, media and technology sectors.
One set of prospective buyers have returned to a home in Toronto's Bloor West Village area so many times, they've probably spent more waking hours there in the past week and a half than the property owners have, Mr. Chaddah said.
He currently has three houses listed on the market for less than $450,000 apiece. Each is drawing about one showing every two or three days, a trickle of the interest shown just months ago, he said.
Even the curiosity seekers who frequented open houses appear to be staying home, with two recent events luring about ten people each instead of the throngs that used to show up.
The lack of interest means many sellers likely won't bother with price reductions, but instead let their listings expire after 60 days and wait until a better time of year to relist, he said.
“It wouldn't surprise me if people are saying, ‘If it's going to take me a couple of months to sell my place, I'm not interested in having the house on the market over the holidays. Why not wait until the early spring?'” he said.
One month's numbers don't make a trend, and before drawing conclusions Mr. Porter said he'd like to see the data for the fourth quarter as a whole.
“Having said that, there's little doubt that the market continues to weaken markedly. We're basically seeing a one-way move since the start of the year, a steady stream of double-digit declines in sales and a slow grind down in prices. It's tough to see that bigger trend turning around any time soon.”
