Category: B.C. Real Estate News

This article appeared in the Vancouver Sun on February 15th, 2011 and was written by Brian Morton.

B.C.’s real estate market appears to be morphing into two categories: Metro Vancouver and the rest of the province.

While Metro Vancouver saw a strong increase in the average home price over the past year – up 19.6 per cent in January compared to January 2010, from $638,000 to $763,000 — that’s not the case for most other regions of B.C., according to a survey released Monday by the B.C. Real Estate Association, which represents 11 real estate board across the province and 18,000 realtors.

Except for Metro Vancouver, the Fraser Valley and – for this month, at least – the Kootenays, the province has seen average prices fall, in some cases substantially, in every region in January compared to the same month last year.

“There’s certainly a divergence in the market [between] the south coast and the rest of the province,” BCREA chief economist Cameron Muir said in an interview Monday. “There’s very strong market activity in parts of Vancouver. And that’s skewing the average price higher.”

Despite the difference between Metro Vancouver and the rest of the province, Muir said the numbers can be misleading because the huge increase in Metro Vancouver’s average price was largely because of a surge in purchases of luxury, executive homes in Richmond and the west side of Vancouver.

He said the “benchmark” price — the price of a typical home in Vancouver — actually rose just a bit more than two per cent over the year. He did not have information on benchmark prices for elsewhere in the province.

According to the BCREA survey, the average price of a home in B.C. rose 11.5 per cent, to $548,183, in January compared to January, 2010.

The BCREA also said that Multiple Listing Service sales climbed seven per cent in January from December 2010, on a seasonally adjusted basis.

Compared to January of last year, home sales were down 10 per cent, to 4,137 units.

The survey noted that the inventory of homes for sale remained below 47,000 units for the third consecutive month in January, down 14 per cent from the spring of last year.

While the south Okanagan saw prices drop 8.9 per cent, from $310,000 to $283,000, the Okanagan Mainline (from Kelowna north) saw prices drop 2.9 per cent, from $387,000 to $376,000.

Vancouver Island prices dropped 5.7 per cent, from $328,000 to $309,000, while Victoria prices fell 4.5 per cent, from $510,000 to $486,000.

B.C. Northern prices fell 4.6 per cent, from $215,000 to $205,000, Chilliwack dropped five per cent, from $289,000 to $275,000, and Kamloops prices dropped 1.5 per cent from $314,000 to $309,000.

Powell River saw the steepest drop in the province, 29.6 per cent, from $301,000 to $212,000, while Kootenay bucked the trend in January with a 4.7-per-cent increase, from $264,000 to $276,000.

Muir said Vancouver is doing better because its economy is more diversified that the rest of B.C. and also has the advantage of significantly more immigrants, many of whom are in the investor class and typically buy a house upon arrival.

Muir noted that the Okanagan is in buyers’ market conditions, with 22 months of housing supply, meaning that it would normally take 22 months to use up the existing inventory.

“In Vancouver, it’s 6.1 months of supply. A balanced market is typically five to seven months.”

As well, he noted, one of the Okanagan’s main source of buyers – Alberta investors – has dried up, with many looking south of the border for cheaper recreational properties.

Carol Frketich, B.C. regional economist for Canada Mortgage and Housing Corp., said in an interview that while a one-month snapshot doesn’t tell the whole story, Metro Vancouver has generally done better than the rest of the province. “And Vancouver’s employment has been stronger than the provincial average. That provides a solid basis for the housing demand.”

Frketich noted that housing starts in the Vancouver CMA (census metropolitan area) saw a 57-per-cent hike in January to 1,436 from 917 in January 2010, with the Abbotsford and Kamloops CMAs also saw increases.

On average, urban centres saw a 15-per-cent rise over that period, although Frketich cautioned that one month doesn’t indicate a trend.

Meanwhile, Muir said he expects home sales to moderate this year as higher interest rates push mortgages up, impacting affordability.

He said there should be a “moderate improvement” in interior home prices in 2011.

The Greater Vancouver Real Estate Board has created a short video outlining the market activity in the Greater Vancouver Region for the past decade. Even though the Kamloops Real Estate Board does not comprise a part of Greater Vancouver’s sales statistics we do follow a very similar trend. Here is the link to the YouTube video.

December 2010 Housing Market Update

This is the latest report released by the BC Real Estate Association. Click on the images to enlarge. The link to the full PDF is at the bottom of this page.

Vancouver, BC – January 13, 2011. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province declined 12 per cent to 74,640 units in 2010. The annual average MLS® residential price rose 8.5 per cent to a record $505,178 in 2010.

“Tighter credit conditions and expended pent-up demand curbed home sales during the first half of 2010,” said Cameron Muir, BCREA Chief Economist. “However, low mortgage interest rates and improved economic conditions buoyed home sales in the latter half of the year.” MLS® residential unit sales declined 40 per cent January through July before climbing 43 per cent by the end of the year, on a seasonally adjusted basis.

“The inventory of homes for sale peaked at 53,375 units in May before declining 14 per cent to 46,000 units by December,” added Muir. “The combination of fewer active listings and increased consumer demand has improved market conditions in many areas.” MLS® residential sales declined 25 per cent to 4,258 units in December from a near record level of 5,703 units in December 2009. After a 15 per cent increase in unit sales between October and November, a further 1 per cent increase was recorded in December on a seasonally adjusted basis. The average MLS® residential sales price was a record $523,990 in December, up 6 per cent from December 2009.

Click on the images to enlarge.

 

The B.C. Real Estate Association published their mortgage rate outlook in December 2010 looking forward into 2011. I have included the full PDF link at the bottom of this article. The full PDF includes charts and graphics that are not included in this post.

Following a period of relative calm, global financial markets have again been unsettled by fiscal instability in Europe and uncertainty regarding the Federal Reserves’ ability to spur the US economy out of its current doldrums. Amidst this economic backdrop, key government bond yields have reversed their downward trend, moving sharply higher. In our final mortgage rate forecast of 2010, we discuss what these trends mean for mortgage rates over the coming year.

Growth and Inflation Outlook

The Canadian economy has slowed sharply following a blistering start to the year. Real GDP growth was just 1% in the third quarter, down from the 2% growth posted in the second quarter. Much of the drag in Canadian economic activity is due to continued weakness in the United States and other export markets, though domestic demand has also begun to soften. We expect these trends to hamper growth for the remainder of 2010 and into 2011. A sharper than expected slowing of the economy has prompted us to trim our forecast of real GDP growth to 2.9% this year and 2.1% in 2011.

Moderate economic growth in 2011 will translate to continued slack in Canadian product and labour markets. This slack, along with a strong loonie, will provide a bulwark against inflation and therefore a continuation of accommodative monetary policy by the Bank of Canada.

Interest Rate Outlook

In the face of slowing growth, muted inflation and lingering global financial instability, the Bank of Canada has held its overnight rate at 1.00% since September. Although the Bank’s medium-term objective of returning rates to normal long-run levels is still intact, the Bank will take a very cautious approach to tightening monetary policy over the next 6 to 12 months. Given that inflation is projected to remain subdued and growth is expected to slow, we do not expect any action from the Bank of Canada until the second quarter of 2011, if not later.

Our current forecast is for the Bank of Canada’s target overnight rate to rise from its current level of 1.00% to between 1.75% – 2.00% by the end of 2011. Moving down the yield curve there are a number of factors muddying the outlook for interest rates important to mortgage pricing.

First and foremost is the impact of the US Federal Reserve’s implementation of further quantitative easing, or so called “QE2”. In early November the Federal Reserve announced that its new quantitative easing program would expend up to $600 billion by the end of June 2011 in order to help spur the flagging US economy. Federal Reserve Chairman Ben Bernanke outlined three explicit goals of this policy:
• Lower mortgage rates for US homebuyers to increase affordability and promote refinancing
• Lower corporate bond rates to encourage private investment and boost economic growth
• Increase asset prices to boost consumer wealth and increase confidence.

To that list, we would add two further unstated, but not unwelcome, goals. The first being the engineering of a lower US dollar to spur American exports, and the second, a much needed change in the path of inflation from its current and potentially devastating “Japan-like” disinflationary trend. However, a curious thing has happened since the official announcement of QE2, the yield on 5-year US Government Bonds – along with its Canadian counterpart – has risen substantially. This reversal in yields has erased a large portion of the beneficial fall in rates since QE2 was first hinted at in August. It isn’t immediately clear what is driving the sudden change in the direction of interest rates.

Analysts have pointed to culprits ranging from a foreign backlash against QE2 to a welcome increase in future inflation expectations. Given that QE2 is only in its beginning stages, it is likely too early to say with any certainty how rates will evolve in coming months. What is certain is that volatility in bond markets is likely to be around a while longer.

Mortgage Rate Forecast

The unexpected rise in yields prompted a fairly dramatic repricing of mortgages in November. After falling to an all-time low of 5.19%, the 5-year mortgage rate has leapt 25bps to 5.44% while the 1-year rate increased from 3.20% to 3.35%. Heightened volatility in bond markets could mean a re-testing of mortgage rates lows, particularly if a deepening Euro-crisis prompts a flight to safety in US and Canadian treasuries. A more likely outcome is that mortgage rates will stay flat for the next quarter as investors re-evaluate growth and inflation expectations in the context of a QE2 world.

Our expectation for 2011 is that rates will begin a slow march upwards, hovering slightly higher than current levels for the first half of 2011. Rates will then be prompted higher by expectations of renewed, but cautious, rate tightening by the Bank of Canada in the second half of next year. The BCREA forecast for the 1-year mortgage rate to average 3.3% in 4th quarter of 2010 and to reach 4.4% by the end of 2011. The 5-year fixed mortgage rate will average 5.30% for the 4th quarter of 2010 before increasing to 5.90% in 2011.