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Business Briefing Vancouver housing slump: When fear of missing out becomes fear of 'getting stabbed by a falling knife’

Briefing highlights

  • FOMO in Vancouver
  • Toronto home sales inch up
  • Realtor group projects rebound
  • Stocks, loonie at a glance
  • EU rejects two mergers
  • GM posts fourth-quarter profit
  • U.S.-China trade talks to resume next week
  • From today’s Globe and Mail

FOMO

informal: fear of missing out: fear of not being included in something (such as an interesting or enjoyable activity) that others are experiencing

— Merriam-Webster

The psychological shift among Vancouver homebuyers threatens to prolong the city’s deep slump, Bank of Montreal warns.

The Vancouver area housing market “clearly continues to struggle” amid provincial taxes on foreign buyers of local real estate, higher borrowing costs and mortgage-qualification rules from the commercial bank regulator that have been in place for just over a year now, said BMO senior economist Robert Kavcic.

“The market remains in all-out correction mode, and the psychology there is clearly shifting, from ‘FOMO’ to “FO getting stabbed by a falling knife,” Mr. Kavcic said today.

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In an earlier report, he warned that “the longer [this] festers, the longer this correction could go on.”

As The Globe and Mail’s Brent Jang reports, Vancouver area home sales tumbled 39 per cent in January from a year earlier, though they were up 3 per cent from December.

Sales of 1,103 last month, by the way, were the weakest for a January since 2009, at the height of the financial crisis.

Sales of higher-end sales were particularly hurt.

The benchmark price, meanwhile, fell 4.5 per cent, which, as Mr. Kavcic noted, was also the fastest drop since the recession.

The number of listings rose sharply from a year earlier as buyers held back.

As Phil Moore, president of Real Estate Board of Greater Vancouver, put it, the policy measures are hitting the market, rather than economic fundamentals.

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“Today’s market conditions are largely the result of the mortgage stress test that the federal government imposed at the beginning of last year,” Mr. Moore said in releasing the numbers this week.

“This measure, coupled with an increase in mortgage rates, took away as much as 25 per cent of purchasing power from many homebuyers trying to enter the market.”

Toronto’s market has also been hit by similar issues, though Mr. Kavcic doesn’t think the psychological shift is the same as in Vancouver.

“I’m just guessing but we’re probably not there yet in Toronto,” he said, adding that “the decline hasn’t been as deep, lasted as long, nor has it been as widespread (i.e., across all segments) yet.”

Indeed, as The Globe and Mail’s Janet McFarland reports, Toronto home sales perked up marginally in January, rising 0.6 per cent from a year earlier. Average prices rose 1.7 per cent, the Toronto Real Estate Board said today.

“Sales were basically flat from a year ago (with some nasty weather to finish the month), and up about 3.4 per cent, month over month, after seasonal adjustment,” BMO’s Mr. Kavcic said of the Toronto numbers.

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“That is much improved from a 23.9-per-cent year-over-year spill in the prior month, but keep in mind that sales plunged early last year as the new [mortgage] rules took effect (so the comparisons have become much easier)”

Sales are still far shy of where they had been, however.

“All in, the Toronto market is still soggy, but continues to gradually stabilize,” Mr. Kavcic said.

The group also released a fresh out, projecting sales in the region will rise 7.3 per cent this year, and prices 4.2 per cent.

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