Derrick Penner
Sun

The correction in Greater Vancouver and British Columbia real estate markets should be shallow, according to Canada Mortgage and Housing Corp., provided the province maintains projections for weaker economic growth and doesn’t go into a full recession.

CMHC released its fall market forecasts Thursday, which predict lower housing sales to the end of 2008 and on through 2009, with price declines to the end of 2009 in the range of seven per cent provincially and nine per cent in Metro Vancouver.

“Certainly we’re in a period of very uncertain economic times,” Carol Frketich, CMHC’s B.C. regional economist, said in an interview.

However, the national housing agency’s assessment is that 2008 and 2009 will be merely slow-growth years, not no-growth or recession years.

CMHC’s forecast is that B.C.’s economy will still grow from 1.5 per cent to two per cent, which is down considerably from the 3.1 per cent of a year earlier.

As a result, Frketich estimates that 2008 will end with 75,000 housing resales, down 27 per cent from 2007. And 2009 will see another slight slide to 74,400 sales, with both years running below B.C.’s long-term average for sales.

Prices should fall nine per cent in 2009 to a provincial average of $418,200, Frketich said.

Robyn Adamache, CMHC’s senior analyst for Vancouver, said sales within the Real Estate Board of Greater Vancouver’s area will have fallen 32 per cent to 26,500 sales by the end of this year. However, she expects 2009 sales to edge up to 27,500 in 2009.

Vancouver prices, she added, should fall nine per cent to $535,000 compared with the 12-month average price in 2008.

“The main thing we will be watching is to see how our employment situation changes because of all that [economic] uncertainty out there,” Adamache added.

During CMHC’s annual housing-outlook conference, held Thursday at Vancouver‘s Hyatt Regency hotel, Frketich said population growth projections still point to long-term growth in the housing market once the pain of a correction is over.

Frketich said medium-term projections for demographic change, immigration and inter-provincial migration should see some 34,000 new households formed per year for the next five years, which will help boost the housing market.

Tsur Somerville, director of the centre for urban economics and real estate in the Sauder school of business at the University of B.C., said the trend of migration in North America has been a westward movement since Europeans first came to the continent.

“It’s hard to imagine that not continuing. … Having said that, that doesn’t mean if you buy a house now, that you are going to see that price again for four or five years, or maybe more.”

© The Vancouver Sun 2008

Paul Luke
Province

Sliding house prices in B.C. are filing the sharp edge off the market for first-time homebuyers, Canada Mortgage and Housing Corp. says.

B.C.’s average resale house price will rise 2.4 per cent to $449,450 in 2008 as strong growth early in the year offsets subsequent declines, CMHC regional economist Carol Frketich said yesterday.

But in 2009, the provincial average will fall seven per cent to $418,200, Frketich told CMHC’s housing outlook conference in Vancouver yesterday.

Softening prices will cool the competition for homes, giving buyers more time to reflect, Frketich said.

It will also give those taking their first plunge into home ownership a break.

“First-time homebuyers have been having a more difficult time getting into the market,” Frketich said.

“This price adjustment could release some of that pent-up demand for housing.”

A better-supplied resale market means fewer foundations will be poured this year and next, she said.

Total provincial housing starts will fall by 8.7 per cent this year and by another 18.4 per cent next, she said.

Mortgage rates should stay within 25 to 50 basis points of current levels in the last quarter of 2008, CMHC said.

Posted rates should fall slightly in the first half of 2009, reflecting an easing cost of credit to financial institutions.

But rising bond yields should nudge rates marginally higher in the second half of next year, CMHC said.

“For the last quarter of 2008 and in 2009, the one-year posted mortgage rate will be in the six- to 6.75-per-cent range, while three- and five-year posted mortgage rates are forecast to be in the 6.5- to 7.25-per-cent range,” CMHC said.

In a separate report, the Canadian Real Estate Association said the falling average sale price nationally reflects a decline in sales in the highest-priced markets, noting that prices are still rising in a majority of markets.

The association said the average sale price of an existing home fell 5.4 per cent in September to $289,916 from $306,347 a year earlier. But it noted prices are up in 65 per cent of the boards it represents.

“The recent price declines in the Canadian housing market reflect lower activity in some of Canada‘s priciest housing markets that had posted large price increases,” said CREA president Calvin Lindberg.

Vancouver, Canada‘s most expensive market, has had year-over-year sales declines in the 40-per-cent range, and many analysts suggest the results are skewing the national number.

© The Vancouver Province 2008

Plans for renovations up slightly

Eric Beauchesne
Sun

OTTAWA — Home-buying intentions of Canadians have remained steady despite the financial-market turmoil and cooling of the housing market, according to results of a survey conducted earlier this month.

Overall intentions to purchase a home in the next two years remain steady at 22 per cent and have not changed since January 2008, Royal Bank of Canada said in releasing the results of a survey conducted by polling firm Ipsos Reid.

Meanwhile, a related annual survey conducted for RBC in August, prior to the eruption of the current financial crisis, found that 70 per cent of homeowners planned to renovate or make home improvements in the next two years, up slightly from 66 per cent last year.

“Despite recent economic events, we’ve noted that Canadians still believe a home is a good investment and many are continuing with their home-improvement plans,” said Catherine Adams, RBC’s vice-president of home equity financing.

Given the choice, 75 per cent of Canadian homeowners would opt for hammers and paint brushes, rather than packing tape and cardboard boxes, if their home needed major renovations.

While 55 per cent say they would definitely continue to renovate even if housing prices were to drop, that’s down from 66 per cent in 2007.

The survey also found that most of those planning renovations will spend less than $50,000 and indicate they plan to spend $10,801 on average, up about 10 per cent from $9,850 in 2007.

Looking back, the survey found that 63 per cent of homeowners have renovated in the past two years.

Seven-in-10 had a budget and just more than half stuck to it, the analysis said, adding that more are establishing a realistic renovation budget.

© The Vancouver Sun 2008

B.C. association’s prediction more optimistic than credit union’s last week

Derrick Penner
Sun

British Columbia real estate sales will fall substantially by the end of this year, but will stage a modest recovery in 2009, according to the latest forecast of the B.C. Real Estate Association.

Sales recorded through the Multiple Listing Service should fall 28 per cent to 73,700 units across the province by the end of 2008, from 102,805 units in 2007, according to the forecast, released Wednesday.

That is more optimistic than the forecast released last week by Central 1 Credit Union, which predicted sales will continue to fall through 2009, and with steeper price declines, before recovering in 2010.

However, both forecasts agree that the point when the housing market turns higher from the downturn will depend on the world financial crisis subsiding, B.C. not slipping into recession and a return of at least a little bit of consumer confidence.

“I don’t know that the [B.C. Real Estate Association] forecast is optimistic,” Cameron Muir, BCREA’s chief economist, said in an interview.

Muir predicted sales levels in 2009, while higher than in 2008, will be similar to levels last experienced in 2001 and 2002, which were relatively low.

“It’s not like they’ll be bouncing back into this great market,” he said.

However, Muir said real estate sales in B.C. have fallen further than the underlying economy suggests they should.

While he expects B.C.’s economy to slow further in 2009, he also believes it is possible consumers will have recovered enough from their financial fears by the middle of next year to consider major purchases again.

By then, Muir said prices will have dropped enough to make housing more affordable to more potential buyers.

His forecast is for the provincial average home price to dip nine per cent in 2009 to $413,000 compared with 2008.

Muir forecasts that the average price for all 2008 will be three per cent higher than 2007, but that masks the fact that prices peaked in March and have been dropping since then.

“I would argue that the housing market has already been shocked,” he said. “Prices have declined 14 per cent [on a month-to-month basis] between March and September.”

At some point, Muir said he expects inventories of unsold homes to decline as people decide they don’t need to sell, and then sales should increase.

Helmut Pastrick, chief economist for Central 1 Credit Union, said while his forecast does not agree exactly with the BCREA’s, he does agree that B.C.’s economy won’t go into recession, and consumers will get a bit of their wind back at some point in 2009.

“We’re talking about degrees really, and magnitudes,” Pastrick said in an interview.

By magnitude, Pastrick forecasts that B.C.’s MLS sales will fall 30 per cent to 70,700 units by the end of 2008, and a further 17 per cent to 59,000 by the end of 2009.

On prices, Pastrick forecasts that prices will decline 13 per cent from 2008 to 2009 to reach $385,000, and a further five per cent to $366,000 in 2010.

However, forecasting market changes can be notoriously difficult, according to Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.

All that a series of forecasts with differing results can tell you, Somerville said, is the general direction of activity while outlining a range of views about what might happen.

“[Economists are] good at predicting what’s going to happen when we’re moving in one direct path,” Somerville said. “We’re really bad at predicting when markets are going to turn.”

For example, Somerville said that in January, when oil was headed to its peak price of $147 per barrel, few economists would have forecast that by October it would be $67 per barrel.

© The Vancouver Sun 2008