B.C. Housing Starts Increase, But Hike May Be Short-Lived

By Raphael Alexander, Vancouver Sun

I wrote in early January about the “bubble” economy in British Columbia, which, despite the Olympics-related building, still resulted in a massive collapse in the construction industry in tandem with the recession. Construction jobs contracted by 11.9 per cent in the province in 2009, as we were one of the last districts in Canada to feel the effects of the global economic meltdown.

Although January construction numbers are up to 198,600 jobs, it is below the 202,100 jobs from a year ago, and a far cry from the 220,800 jobs during the boom.

The good news is that new construction is on the rise in the province, with the seasonally adjusted annual rate of housing starts reaching 186,300 units in January, a 5.8-per-cent increase from December.

That’s much better than the 149,081 housing units to begin 2009, but the construction starts have progressed steadily until now, according to the Canada Mortgage and Housing Corp. It’s even better than the figure that economists from financial institutions had been predicting.

In cities, housing starts are up 4.4 per cent, and within those numbers the increase of multiple urban starts [like condos] also increased by 5.7 per cent. All of those numbers show a recovery from the recession, with confidence in the housing market improving, and home sales rising again.

But the victory may be short-lived, with experts predicting the bubble will pop when the harmonized sales tax kicks in on July 1.

Home buyers will likely advance their demand for houses before the HST is implemented, meaning fewer purchases in late 2010 and early 2011.

This is forecast by the Canadian Real Estate Association itself, which says that not only the 12-per-cent HST, but also higher interest rates, which must inevitably rise after historically prolonged lows, will push real estate down in 2011.

B.C.’s housing resale market is forecast to jump 19.8 per cent for 2010, with average home prices going up by 4.2 per cent to $485,500. But the bulk of those sales will be before the HST and the Bank of Canada interest rate revisions.

Interest rate increases are likely to further dampen the housing market in 2011, with an expected decline of 7.1 per cent in the number of units sold. B.C.’s market is forecast to see the largest decline of 12.9 per cent to 88,800 units sold in 2011.

Even though the market is expected to fall in 2011, the prices of homes in B.C. are expected to decline only 1.8 per cent, meaning that investors will still be making a profit with the dip. That means there’s no relief for homebuyers who were hoping the astronomical prices of an average home in Vancouver would go down.

The median sale value of a home in Vancouver in 2009 was $540,900, while median household income was $58,200. According to The Demographia International report which calculates home affordability in an index that divides the price of a home by household income, Vancouver is the most expensive city among 272 metropolitan markets in Canada, the U.S., the U.K., Australia, New Zealand and Ireland.

The “Median Multiple” gives Vancouver an index of 9.3 in affordability, much higher, for instance, than Kamloops, where the median family income is $67,434 while the price of a home is $257,242, giving a Median Multiple of 3.8.


National Resale Activity Edges Down In January

OTTAWA – February 17th, 2010 – According to statistics released by The Canadian Real Estate Association, the number of homes sold through the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards declined in January 2010 from the previous month.

Seasonally adjusted national home sales dropped 2.8 per cent from near record levels reported in December. Ontario accounted for about half the national decline. Activity was also down in British Columbia, Alberta, and Manitoba, but reached new heights in Quebec.

Actual (not seasonally adjusted) residential sales activity in January 2010 was up 58 per cent from year ago levels, when national home sales activity reached the lowest level in a decade. Because activity began recovering in February last year, large year-over-year gains are expected to shrink over upcoming months.

The average price of all homes sold through the MLS® Systems of Canadian real estate Boards in January 2010 was $328,537, up 19.6 per cent from one year ago. In January 2009, the average residential sale price fell to the lowest level in almost three years. Year-over-year average price gains are being stretched by weakness one year ago, and are expected to shrink beginning next month.

The price trend is similar but less dramatic for the national weighted average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. It climbed 14.9 per cent year-over-year basis in January 2010.

The residential average price in Canada’s major markets also climbed 19.6 per cent year-over-year in January. As with the national counterpart, the price trend is similar but less dramatic for the major market weighted average price, which rose 13.1 from January 2009.

Across Canada, the seasonally adjusted number of new listings on Boards’ MLS® Systems edged up three tenths of one percent on a month-over-month basis in January to reach the highest level since November 2008. New listings rose in British Columbia, Alberta and Newfoundland, offsetting declines in other provinces. The actual (not seasonally adjusted) number of new residential listings was up 3.4 per cent from one year ago.

“The resale housing market is becoming more balanced in a number of provinces, including my own province of Saskatchewan,” said CREA President Dale Ripplinger. “A more balanced market is likely to result in smaller price increases going forward, with buyers in less of a rush due to an increase in supply. That said, market conditions vary across Canada, so buyers and sellers are wise to consult with a REALTOR® since they know current conditions in your local market.”

Strong demand for resale homes continues to draw down supply. There were 170,199 homes listed for sale on Boards’ MLS® Systems in Canada at the end of January 2010, a decline of 18 per cent from levels reported for the same month in 2009. Nationally, there were 4.4 months of inventory in January 2010 on a seasonally adjusted basis. This is up slightly from 4.2 months in December.

The actual (not seasonally adjusted) number of months of inventory in January 2010 stood at 6.6 months. This is well below where it stood one year ago (12.8 months), but slightly higher than it was in the month of January in the years 2004 through 2008. The number of months of inventory is the number of months it would take to sell current inventories at the current rate of sales activity.

“January results suggest that the national resale housing market may be past the recent peak,” said CREA Chief Economist Gregory Klump. “One car doesn’t make a parade, so a few more months of results showing a cooling trend will be required before talk of a Canadian housing bubble begins to fade. It could take until the second half of the year before a cooling trend becomes evident, since home buying activity may continue to be accelerated in the first half of 2010 by expected interest rate increases, and by the introduction of the HST in Ontario and British Columbia on Canada Day.”

Charts and statistics in pdf format can be found here.


Canadian Resale Housing Forecast Extended To 2011

OTTAWA – February 8, 2010 – The Canadian Real Estate Association has revised its forecast for home sales via the MLS® Systems of Canadian real estate boards in 2010, and extended the forecast to 2011.

With Canadian economic growth rebounding from the recession, the unusually severe decline in sales activity in early 2009 is not expected to recur in 2010.  Annual activity in 2010 is forecast to be well above the previous year’s level as a result.

CREA forecasts national activity will reach 527,300 units in 2010, up 13.3 per cent from 2009. This would represent a new annual record, standing 1.2 per cent above the previous peak in 2007. Low interest rates are expected to boost housing demand in the first half of the year, resulting in strong annual sales growth in nearly all provinces in 2010, led by British Columbia and Ontario.

National home sales activity is expected to remain strong in the first half of 2010, fuelled by low interest rates and homebuyers motivated to avoid the HST before it comes into effect in Ontario and British Columbia.  Over the second half of the year, national activity is expected to trend downward as the last of pent-up demand is exhausted, interest rates begin rising, and the HST comes into effect in Ontario and British Columbia.

Interest rate increases will contribute to weaker national sales activity in 2011.  National home sales activity is forecast to decline 7.1 per cent to 490,100 units in 2011, putting it on par with annual levels reported in 2005 and 2006.

“Although interest rates are expected to rise, they will still be low enough to keep affordability within reach for many homebuyers requiring mortgage financing, and support overall housing demand,” said CREA President Dale Ripplinger.

The national average home price is forecast to climb 5.4 per cent in 2010, reaching a record $337,500, with average price gains forecast in all provinces. The national average price increase will continue to reflect upward skewing from the rebound in activity among Canada’s priciest markets, particularly in British Columbia and Ontario.

The national average price is forecast to ease by 1.5 per cent in 2011. Modest average price gains are forecast for all provinces except British Columbia and Ontario, whose share of national activity is expected to ease. The shift in the contribution made by provinces toward national activity will continue skewing the annual comparison in the national average price in 2011.

The price trend is similar but less dramatic for the weighted national average price, which compensates for changes in provincial sales activity by taking into account provincial proportions of privately owned housing stock. The weighted national average price is forecast to climb 4.8 per cent in 2010, and remain stable in 2011.

“Improved financial market stability and recovering global economic growth mean that home sales activity in 2010 is unlikely to repeat the dive it experienced in late 2008 and early 2009,” said Chief Economist Gregory Klump.

“Fiscal restraint, a strong Canadian dollar and a subdued inflation outlook point to marginal interest rate increases over the next couple of years, especially if the U.S. economic recovery proves to be weak and protracted,” said Klump.

“The Bank of Canada will need time to gauge the effect of interest rate increases on Canadian economic growth,” Klump said.  “It recognizes that consumer debt burdens are running high, so it will want to gauge the impact of interest rate hikes on domestic demand and overall economic growth. Changes in interest rates impact the economy with a lag, so the timing and magnitude of interest rate hikes will be tricky, given that the Bank expects the private sector to lead economic growth once temporary government stimulus spending expires,” he added.

“The decline and subsequent rebound in sales activity for homes in the upper price spectrum in some of Canada’s priciest markets skewed average prices upward in the second half of 2009 and into 2010. This segment of housing activity in Ontario and British Columbia is expected to ease beginning in the second half of 2010, causing average prices to moderate in those provinces,” said Klump.

“A downward trend in national sales activity combined with an increase in listings will result in a more balanced market. Although builders are understandably more upbeat than they were during the depth of the recession, speculative building will likely continue to be held in check. As a result, while the real estate market will become more balanced, Canada will continue to avoid the massive realignment in housing supply and demand experienced in the U.S.”

CREA Residential Market Forecast:

Residential unit sales forecast20092009 Annual percentage change2010 Forecast2010 Annual percentage change2011 Forecast2011 Annual percentage change
British Columbia85,02823.4101,90019.888,800-12.9
New Brunswick7,003-7.37,5507.87,7002.0
Nova Scotia10,021-7.811,40013.811,5000.9
Prince Edward Island1,404-0.61,4503.31,4500.0
Residential average price forecast20092009 Annual percentage change2010 Forecast2010 Annual percentage change2011 Forecast2011 Annual percentage change
British Columbia465,7252.4485,5004.2476,600-1.8
New Brunswick154,9066.3159,4002.9164,2003.0
Nova Scotia196,6903.6200,9002.1204,7001.9
Prince Edward Island146,0444.4149,9002.6153,2002.2

NOTE: All statistics contained in this release are obtained through analysis of the MLS® Systems of real estate Boards across Canada.


Kamloops Construction Continues, Single-Family and Commercial Building Permits Are Up In 2010

This article appeared in the Kamloops This Week on Friday, February 12, 2010 and was written by Jeremy Deutsch.

The building train in the River City kept a-rollin’ all month long. Construction in the city for the beginning of 2010 is keeping pace with the strong finish that marked the end of the previous calendar year.

The number of single-family building permits issued by the city in January hit 13, compared to just two in January 2009. That helped spur the overall construction value for the month to top $13 million, compared to just $3 million the previous January. The city also handed out $8 million in commercial-building permits for the month.

The positive numbers are a surprise, said David Trawin, the city’s director of engineering and development. “It’s gearing up to be a good spring.” he said noting another 13 projects worth more than $1 million are already being reviewed at city hall for February. Trawin said the flurry of activity is a result of the warm winter, which kicked off the construction season early. He expects permits to drop off as spring turns into summer.

Last year, the city recorded $160 million in construction activity, surpassing expectations. This year, it’s forecast to issue $120 to $130 million in permits.

The strong month is mirroring the number of housing starts in Kamloops.

According to the Canadian Mortgage and Housing Corporation, 21 new single-family homes started construction in January, up from six the previous year.


Open House Weekend: Sunday, February 7, 2010: Brocklehurst, Kamloops

This Sunday’s open houses will be held in Brocklehurst.

Brocklehurst Kamloops Home For Sale 1805 Hycrest PlaceSunday February 7, 2010: 1805 Hycrest Place, Brocklehurst: 1:00 pm – 3:00 pm

Great family home in a quiet Brock neighbourhood. 3 bedrooms on the main floor and 1 large bedroom down. Two bathrooms, two fireplaces, covered parking, newer furnace and hot water tank, large yard. Close to shopping, schools and transportation. $319,900

Click here to view more pictures of this home.

To view all homes for sale in Kamloops click here.

Price Gains To Crimp B.C. Real Estate Growth In 2010, 2011

From the Vancouver Sun.

The mortgage-rate fuelled bounce back of British Columbia real estate in 2009 has probably used up most of the market’s growth for 2010 and 2011, according to a new estimate from the B.C. Real Estate Association.

Association chief economist Cameron Muir is forecasting province-wide sales in 2010 to increase only three per cent above the hot 2009 results to 90,100 sales in 2010, then slip back three per cent to 87,500 units in 2011.

The provincial average price, Muir is forecasting, will advance five per cent to $490,900 in 2010 then eke out just one-per-cent growth to $494,800 in 2011.

Muir characterized his forecast as 2009 ending with a “gold medal finish, [which] will give way to a silver medal performance in 2010.”

“Affordability is the biggest factor over the longer term,” Muir added in an interview, “because home prices in markets such as Victoria and Vancouver are trending on record levels, and mortgage rates are likely to edge higher at the end of this year and through 2011.

“That’s going to increase the carrying cost of housing, and by extension, overall housing demand.”

Home carrying costs, the monthly mortgage payment, taxes and other fees, saw a dramatic trim during the downturn that lasted through the last half of 2008 and first part of 2009, but Muir noted that that advantage is rapidly disappearing.

In his forecast, Muir estimates that the markets that roared back the most in 2009 — Metro Vancouver, the Fraser Valley and Victoria — will be among those with the most muted results in 2010 and 2011.