Sliding prices mixed with low interest rates offset impact of sluggish economy
Derrick Penner
Sun
Lower Mainland real estate markets saw big gains in June sales, with the Metro Vancouver real estate board posting its second busiest and the Fraser Valley its fourth-most-active June on record.
A combination of the slide in real estate prices last year and current low interest rates offset the negative influences of higher unemployment and a contracting economy, Carol Frketich, regional economist for Canada Mortgage and Housing Corp., said in an interview.
The Metro Vancouver area covered by the Real Estate Board of Greater Vancouver recorded 4,259 sales through the Multiple Listing Service in June, a 76-per-cent increase from the same month a year ago.
The inventory of unsold homes in the board’s area declined 27 per cent to 13,252 compared with the same month a year ago. The benchmark price for a typical detached home was $701,384 in June, still down 8.4 per cent from the same month a year ago.
The benchmark price is a calculation based on the features of homes most typically sold in that category.
In the Fraser Valley, realtors racked up 1,982 sales during the month, a 40-per-cent increase from the same month a year ago, the Fraser Valley Real Estate Board reported Friday.
The benchmark price of a typical detached home was $471,788, down eight per cent from June 2008. However, it was up 1.3 per cent from May when the benchmark was $465,939.
“The resale market signals that buyers are returning to the market,” Frketich said. “Prices are stabilizing and on the supply side, [the number of] listings is moving lower. So we’re seeing the adjustments we would expect to see.”
The total number of sales for the year to date was still down, owing to the dismally slow months of January and February, but has been trending higher over the past five months, Frketich said.
“Keeping in mind that last year June was a couple of months into the [market] slowdown,” she said, “we would expect to see an improvement [in sales] compared to the second half of last year.”
However, how lasting the boom in sales will be depends on how well the overall economy performs, according to housing economist Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C.
“Real estate tends to be a leading [economic] indicator,” Somerville said. “It’s not that you need to have employment numbers recover for real estate to recover.”
However, June’s boom in sales was stronger than he would expect given the state of B.C.’s labour market and of the global economy.
“Obviously, first and foremost, [the rise in sales] is about mortgage rates,” he said. “From a housing perspective, if the economy is not recovering, there really can’t be a substantive recovery in your housing market,” Somerville said.
In the meantime, buyers with means are being drawn into the market.
In previous months, the strengthening of sales was seen at the entry level with first-time buyers, but Paul Penner, president of the Fraser Valley Real Estate Board, said valley realtors are now seeing stronger sales at the higher end of the market. “Still, a lot of it is driven by interest rates and affordability,” Penner said in an interview.
Though the economy might still be in recession, Penner said there are buyers who have jobs who “still have someplace to go every Monday morning and still have their paycheques every second Friday, so they’re not as frightened by some of the negative projections.”
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