A lot of people are predicting a recession across Canada and the US.

Goldman Sachs predicts that there is a 15% chance in next 12 months and a 35% chance in the next 24 months of us seeing a recession.

But since our last recession was based around subprime mortgages in the USA, we ASSUME that a recession will cause a housing crisis, while in fact, this isn’t always true.

A study in the US showed that home appreciation averaged 4.6% during economic growth and 4% during times of recession. So yes, it does impact housing but not to the level that we remember in 2008. That appears to be an outlier.

But the big question is, what does a housing crash really mean in VANCOUVER and should we expect one. Let’s dive into the numbers:

5 years ago the benchmark price in Vancouver was $901,900. Today it is $1,374,500.

10 years ago the same benchmark price was $603,700.

In order for people that bought 5 years ago to sell for less today than they did when they bought 5 years ago, it would require a 35% price drop. And keep in mind this isn’t taking into account any of the equity that they have put into their home or the principal that they have paid down over those 5 years.

For those that bought 10 years ago, that price drop would need to be 44%.

I bring up these numbers because when we hear people talking about a housing correction it is often tied to what they remember happening in 2008 in the USA. The big difference is that leading up to 2008 people were buying homes with $0 down and raking up lines of credit to buy. It was known as the subprime mortgage crisis.

This is far from what is happening in Vancouver today.

If prices come down today, it is due to oversupply, under-demand, a rise in borrowing costs, and a change of momentum.

We have not seen oversupply and under-demand in this market since the 80’s. What we do have a change in is a rise in interest rates and a change in momentum.

Rising interest rates have definitely changed the purchasing power for many people but they are not at a rate yet that I believe will drastically change the market.

What has changed is the confidence in the market, otherwise known as momentum. Over the last 2 years, it was all about rushing to get in, places selling 20% over asking, and record-breaking sales. All of a sudden there has been a breath in the market and the media and economists have flipped the narrative to us being on the brink of a crash.

Personally, I do not see this being a reality. I see us being in a cooler market than what we have been in for the past 2 years, and I see us moving back to a more balanced market, which is actually a much healthier state.