Housing slowdown is a considerable economic threat

Amid markers of newfound economic robustness, data from the Canadian Real Estate Association showed that national home sales in 2018 declined by 11.1% annually.

This represented the greatest shrinkage ever since the recession in 2008, immediately following a 4.64% shrinkage just the previous year – and might even herald further slowdown that would pose a considerable risk to economic stability.

Any such weakness may become apparent soon as any unsuccessful sale would account for approximately $64,000 lost in possible spin-off economic activity, CREA estimated. Also, just 3 transactions are already equivalent to the economic activity arising from 1 new job.

“Spin-off activity is typically general household purchases, furniture and appliances, moving costs, renovations, and professional services (financial, legal, real estate, appraisal, etc.). Those professional services represent nearly half of the spin-off dollar value,” Better Dwelling explained in its analysis of the CREA data.

Read more: Transactions hit 18-year low

Earlier this month, BMO senior economist Sal Guatieri cautioned that the outsized economic footprint of real estate – approximately 76% of the $11.415 trillion total national wealth as of Q3 2018 – might be a major liability in the event of a “sharp, sustained correction in house prices given the wealth effect on spending.”

A recent analysis by Altus Group also warned that among the country’s hottest markets, Vancouver is “exhibiting the most potential for downside risk,” considering the prevailing environment of increasing borrowing and construction costs.

“A key challenge that has become more apparent as of late in Vancouver has been the price sensitivity of consumers, with higher priced projects, or those priced above the competition, experiencing below average sales rates.”