Economic Uncertainty Drives Real Estate Plunge Across Lower Mainland

I found this article on the Vancouver Sun’s website today. Provincially the real estate market is feeling the squeeze. The Sun reported that real estate sales are down 58% in the Lower Mainland. In Kamloops, the Kamloops and District Real Estate Association released it’s January statistics and our board is reporting 64% drop in residential sales for the month of January. Read below for the full story, it is focused more on the Lower Mainland, but keep in mind our market is not so different here in Kamloops. We are affected by some of the same economic factors that the Lower Mainland is affected by.

Home sales at lowest point since early 1980s, according to reports

Real estate sales across the Lower Mainland crawled along in January, real estate boards reported Tuesday, with consumers reluctant to buy during recessionary times and with expectations that prices will continue to decline.

In Metro Vancouver, Realtors recorded 762 Multiple-Listing-Service sales in January, down 58 per cent from the same month a year ago, and the so-called benchmark price for a typical detached home down 11 per cent to $659,638 compared with January of 2008.

In the Fraser Valley, Realtors booked a similar 59-per-cent decline in sales at 359, and the so-called benchmark for a typical single-family home down 9.6 per cent from the same month a year ago.

Both the Real Estate Board of Greater Vancouver, which covers most of Metro except Surrey, and the Fraser Valley Real Estate Board, which takes in Surrey and White Rock, said sales were at levels not seen since the early 1980s.

“We’re seeing the same factors at play: uncertainty in people’s minds about where the economy is going and where their jobs are going,” Robyn Adamache, a market analyst with Canada Mortgage and Housing Corp. said in an interview.

“As well, I think at lease some people are expecting further price reductions and perhaps are holding off on buying waiting for that to happen.”

The B.C. Real Estate Association on Monday released its latest forecast that predicted prices will decline 16 per cent in Metro Vancouver over 2009.

Adamache added that January is traditionally a slow sales month and not a month that can be used to gauge how the year will go, but “we’re sort of well below [sales levels] we’ve seen in previous Januarys.”

Both real estate boards also saw inventories of unsold homes decline in January. In Metro Vancouver, covered by the Greater Vancouver board, January new listings were down 30 per cent to 3,700, and current active listings of 13,966 are down 6,000 from October.

However, Adamache said that sales have slowed so much that the months of supply in unsold inventory has crept up to 11 months, the highest it has been in 10 years.

She added that the ratio of sales to new listings has dropped to a level that has not been seen since at least 1984, the first year for which she has records.

In the Fraser Valley, total inventory of unsold homes in January stood at 8,630 units, 26 per cent higher than January 2008, but 30 per cent lower than the record high inventory recorded last September.

Tsur Somerville, director of the centre for urban economics and real estate at the Sauder School of Business at the University of B.C., said it will be later in the year before we know how much the market is still declining, or whether there has been any stabilization.

The reason, Somerville said, is because the year-over-year comparison is with a month that had relatively high sales, and the dramatic drop-off in Vancouver’s markets did not begin until later in the year.

“I think we’re still declining just because the [sale decline] is 60 per cent versus 40 to 50 per cent,” Somerville said in an interview, “but we won’t get a sense of how much and at what rate until later.”

Dave Watt, president of the Real Estate Board of Greater Vancouver, said the last 10 days of January did see realtor showings and sales pick up relative to the beginning of the month.

Watt said the buyers in the market are “back to looking for a home to purchase and are very much thinking long term.”

The News Keeps Getting Better…

The Bank of Canada cut its key interest rate to the lowest point in history on Tuesday. Why?

“The outlook for the global economy has deteriorated since the bank’s December interest rate announcement, with the intensifying financial crisis spilling over into real economic activity,” the bank said in its gloomiest statement yet.

As a result, the dollar plunged to the 78-cent level. It’s now expected inflation will soon be less than zero – which, of course, isn’t inflation any more. It’s deflation. Geez, was it only six months ago economists were saying that was impossible?

On Tuesday Bell said it would dump 1,500 workers, Bank of America sliced 4,000 and stock market traders drove markets hundreds of points lower as they watched the spectacle in Washington and worried about the global banking system.

On Monday came word real estate sales in Toronto have crashed by 50% this month. Last week Nortel went chips up. On the weekend the US bailed out its big banks once again. On Monday Britain did the same – after the mighty Royal Bank of Scotland announced a stunning $41-billion loss. Only a matter of time now before the UK nationalizes its banks. Then Washington.

Last week the Vancouver Sun stated that “B.C. to lose more than 42,000 jobs in ’09” and the Province wrote “Office vacancies on the rise. There will be a crisis of confidence in the big markets”

However, Royal LePage did predict that housing values will fall 3% this year but price and activity gains are anticipated in some provinces. Hopefully they are right, all the job losses, business failures and economic uncertainty will definitely affect the the market, but 3% is much easier to take than other predictions I have seen out there.

Kamloops is not immune to layoffs, as Highland Valley Copper recently announced it would lay off 70 regular employee positions and 14 full time contract positions. Highland Valley currently employs over 1,000 people. Recently Teck Cominco announced it will lay off 1,400 workers globally. The Vancouver-based miner said the move is part of a broader strategy to cut costs, and is expected to save the company about $85-million.

If these were normal times, any one of these events would freak people out. But, this is a developing crisis, so our media puts a positive spin on it or ignores it outright, as do many citizens. I meet property owners who need to sell their homes believing this is a minor blip in the real estate and global markets. Sometimes we need to look at the larger picture because ignorance is not bliss.

The media is overwhelmed with this Obama euphoria.  I am not trying to take anything away from this historic event, but to believe one man will be able to reverse the damage done to the world economy over the past decade would be presumptuous.

I hate to be the bearer of bad news, but I like to live in reality and prepare for what is coming instead of being surprised once it arrives.  I hope I am wrong, but too many facts lead me to believe otherwise.

Kamloops And District Real Estate MLS Average Price Forecast For 2008 And 2009.

According to British Columbia Real Estate Association’s Housing Forecast Table. The Multiple Listing Service (MLS) average price for Kamloops and District for 2007 was $275,690. The forecast for the MLS 2008 average price is $306,000 and $270,000 for 2009. Don’t feel too bad. It’s just a forecast after all.

Vancouver, BC – October 29, 2008. The British Columbia Real Estate Association (BCREA) released its fall 2008 Housing Forecast today.

BC Multiple Listing Service (MLS) residential sales are forecast to decline 28 per cent from 102,805 units in 2007 to 73,700 units this year. A modest 4 per cent increase to 76,500 units is forecast for 2009.

“The erosion of consumer confidence that began with rising fuel prices earlier in the year is continuing, as the global financial crisis and volatile equity marketshave BC households concerned about their own finances,” said Cameron Muir, Chief Economist.

A weaker provincial economy is expected to increasethe jobless rate from 4.4 per cent this year to 4.9 percent in 2009. “While some job losses will occur next year, BC households will remain on a relatively solid financial footing,” added Muir.

The average MLS residential price is forecast toincrease 3 per cent to $453,000 this year. However, home prices peaked in the first quarter and have been edging lower for several months. For 2009, the average price is forecast to decline 9 per cent to $413,000, with most of the decrease having already occurred by the end this year.

Downward pressure on home prices is expected to ease by the second quarter of 2009, as an increase in affordability and consumer confidence induces a modest growth in sales. The inventory of homes for sale is also expected to decline in the coming months as potential home sellers delay putting their homes on the market until conditions improve.

You can find the pdf here:

The British Columbia Real Estate Association fall 2008 Housing Forecast

Home Prices Down. Affordability Improves.

Vancouver, BC – October 15, 2008. British Columbia Real Estate Association (BCREA) reports residential sales dollar volume on the Multiple Listing Service (MLS) in BC declined 39 per cent to $2.1 billion in September, compared to September 2007. Residential unit sales were down 34 per cent to 5,107 units during the same period. The average MLS residential price in the province was $412,149, down 7 per cent from September 2007.

“Weaker consumer demand and a large number of homes for sale are having an impact on home prices in the province,” said Cameron Muir, BCREA Chief Economist. “Despite relatively strong fundamentals, consumer confidence is low.

The global liquidity crisis and volatile equity markets are intensifying this sentiment, causing many households to pull back spending on major purchases.”

“However, affordability is improving,” added Muir. “The carrying cost of the average home in the province is now lower than at any time since the end of 2006.”

Year-to-date MLS residential sales dollar volume in the province declined 24 per cent to $27.5 billion compared to the same period last year. Provincial MLS sales declined 28 per cent to 59,742 units, while the average residential price increased 6 per cent to $460,621 over the same period.

Full story and graphs in the pdf link below.

home-prices-down-affordability-improves-british-columbia-real-estate-association

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