B.C. Home Sales and Average Prices Rise in July

B.C. Real Estate News

This article appeared on the Vancouver Sun on August 11th, 2011 and was written by Brian Morton.

B.C. home sales rose 12.9 per cent to 6,533 units in July compared to July 2010, while the average price climbed 10 per cent to $541,000, the B.C. Real Estate Association reported Thursday.

However, there was a wide discrepancy in price increases around the province, with Metro Vancouver continuing to show the highest increase.

But price increases in Metro Vancouver are slowing down, and are expected to slow down even further in the coming months.

“In Metro Vancouver, the price numbers have been inflated over the past several months as higher end [single detached] properties selling in pricier neighbourhoods [pushed] the average price higher,” BCREA chief economist Cameron Muir said in an interview. “But this is unlikely to be sustained over the longer term.”

Muir expects the number of single detached homes sold in pricier neighbourhoods like West Vancouver and Vancouver’s west side won’t be as high a proportion as experienced in recent months.

“Three months ago, the average price [in Metro Vancouver] was growing 25 per cent year over year,” he said. “Now, it’s dropped to 16 per cent.”

According to the survey, Metro Vancouver saw a 15.9-per-cent increase in the average price of a residential property in July compared to July 2010, from $658,000 to $762,000. The Fraser Valley recorded a 9.7-per cent increase, from $459,000 to $504,000.

However, the Okanagan Mainline recorded a minuscule 0.5-per-cent increase, from $406,000 to $408,000, while Kamloops saw a 7.6-per-cent decline, from $311,000 to $287,000. Victoria recorded a six-per-cent decline, from $497,000 to $467,000.

Muir noted that housing demand in the near future could be bolstered by lower interest rates as investors flock to bonds and bank analysts predict the Bank of Canada will keep its overnight target rate steady in light of the U.S. Federal Reserve saying it expected that an increase in rates would not be warranted, given the state of the U.S. economy, until 2013.

He said that recent global economic uncertainty means that mortgage rates have the potential to reach record lows in the coming weeks as investors flock into bond markets. “This will mean added purchasing power and affordability for consumers.”

Year-to-date, B.C. residential sales dollar volume increased 16.5 per cent to $28.2 billion, compared to the same period last year. Residential unit sales increased one per cent to 48,628 units, while the average residential price for houses sold through the multiple listings service rose 15.3 per cent to $579,645, BCREA said.

Muir noted that home sales edged down four per cent from June to July on a seasonally adjusted basis. “Less frenetic buying activity in Vancouver operated to pull total provincial sales lower.”

BC Home Sales Edge Lower in July: BCREA

B.C. Real Estate News

Vancouver, BC – August 11, 2011. The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential unit sales in the province rose July 2011 MLS Residential Sales BC12.9 per cent to 6,533 units in July compared to the same month last year. The average MLS® residential price climbed 10 per cent to $540,877 last month compared to July 2010.

“BC home sales edged down 4 per cent from June to July, on a seasonally adjusted basis,” said Cameron Muir, BCREA Chief Economist. “Less frenetic buying activity in Vancouver operated to pull total provincial sales lower.”

“The silver lining in the recent global economic uncertainty is that mortgage rates have the potential to reach record lows in the coming weeks as investors flock into bond markets,” added Muir. “The increased affordability and added purchasing power from lower mortgage rates will help bolster housing demand.”

Year-to-date, BC residential sales dollar volume increased 16.5 per cent to $28.2 billion, compared to the same period last year. Residential unit sales increased 1 per cent to 48,628 units, while the average MLS® residential price rose 15.3 per cent to $579,645 over the same period.

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A 180 Degree Change in Mortgage Rate Views

Mortgage Information

Deb Fehr Dominion Lending Mortgage Broker

This article was provided by Deborah Fehr of Dominion Lending. She says that:  It is a great time to buy a home in Kamloops. Mortgage rates are at almost rock bottom levels and it looks like there may be a rate cut instead of increase in September.  Of course if you have a rate hold now and rates go down before you close your deal, you will get the lower rate. Read the article I included below.

46% probability of a rate cut Sept. 7.  100% probability of a rate cut by year-end.

That’s what prices of closely-followed overnight index swaps (OIS) were implying at the close of business on Monday. OIS trade on market expectations for Bank of Canada rate moves.

That amounts to a 180 degree swing in market psychology. Just a few weeks ago traders were pricing in a rate hike by January.

“As we’ve seen, markets can swing and perception can swing quite aggressively, and we could well be back to a fall expectation [of a rate hike] in a month’s time,” said RBC economist Eric Lascelles to the Globe & Mail.

Lascelles counterpart at Scotiabank, Derek Holt, says: “Any talk of the Bank of Canada hiking this year is just foolish in my opinion.”

Peter Gibson, chief portfolio strategist at CIBC World Markets notes: “I think it’s clear that there are a lot of serious problems still in the world and it’s more likely that we’re setting the stage for a sustainably low level of interest rates for a very long time.”

And that is the takeaway here.

Despite the roller coaster of emotions as of late, this about-face in rate assumptions reminds us of the necessity to focus on long-term trends. Long-term, North America’s prognosis still seems compatible with low-growth and low-inflation. That’s an environment where fixed mortgage rates typically underperform.

Link to article.

Deborah Fehr, Mortgage Consultant, Dominion Lending
P. 250-571-2472 E. ac.gnidnelnoinimodnull@rhefd W. www.dfehr.ca

Mortgage Rates Could Fall on Market Slump: Globe and Mail

Mortgage Information, National Real Estate News

This article appeared on the Globe and Mail on August 9th, 2011 and was written by Richard Blackwell.

Canadian fixed-term mortgage rates could fall to even more affordable levels after roiling financial markets pushed the yield on five-year government bonds to record lows on Tuesday.

As investors fled equities in recent days, money poured into the haven of Canadian government bonds, pushing prices up and yields down sharply. Because banks borrow government bonds to help finance their fixed-rate mortgages, there is a tight link between five-year bond yields and five-year mortgage rates.

“We have seen a precipitous drop in five-year bond yields,” said Toronto-Dominion Bank chief economist Craig Alexander, mainly because Canadian bonds look so attractive because of the country’s positive fiscal situation.

Since July 21 the yield on those bonds has dropped a remarkable three-quarters of a percentage point, Mr. Alexander said, hitting an all-time low of about 1.5 per cent on Tuesday.

Five-year mortgage rates tend to move in lock-step with that yield, but about 1.1 to 1.4 percentage points higher, and with a lag of up to several weeks before major lending institutions react with their changes.

“The lag is really about financial institutions assessing whether the movement is going to be sustained,” Mr. Alexander said, noting that the time for them to react varies. In the current volatile market, financial institutions won’t likely move until they see whether bond yields stabilize for a period of time, he said. “There is a distinct possibility of a decline in five-year mortgage rates, but it is not clear [yet] how much of a decline there will be.”

He expects to see a drop in mortgage rates, but perhaps not as dramatic as current bond yield numbers would suggest.

For home buyers, or those looking to renew their mortgages, the prospect of lower five-year mortgage rates is very positive, said Alyssa Richard, founder of the mortgage-rate tracking website RateHub.ca. Five-year mortgage rates, on average, have been at about 3.5 per cent in recent weeks, she said, but if current bond yields are maintained those rates could drop to below 3 per cent, a level not seen before in Canada.

Such a drop would save a home buyer almost $1,200 a year on a $360,000 mortgage amortized over 30 years, Ms. Richard noted.

People holding variable-rate mortgages will also likely get a break, she said. Variable rates – which are linked to the Bank of Canada’s prime rate – will rise after the central bank’s next rate increase. But with U.S. Federal Reserve Board Chairman Ben Bernanke having said Tuesday that he will hold U.S. rates steady for two years, and the Canadian economy growing only marginally, Bank of Canada Governor Mark Carney is not expected to hike rates until next year at the earliest.

For Canada’s real estate market, which has shown some signs of softening, the prospect of even cheaper mortgages could provide a welcome shot in the arm.

“The Canadian real estate market has nine lives,” said Benjamin Tal, deputy chief economist at CIBC World Markets Inc. “Every time it looks like it’s going to slow down, something happens somewhere else in the world and interest rates stay low. The market could have been a lot weaker if not for such things.”

Still, low interest rates can also send the wrong signal to some people, said Louis Gagnon, finance professor at Queen’s University in Kingston, Ont. “Many will enter the [real estate] market at prices that are too high, with very little equity, and they will run into trouble later when rates begin to go higher.”

With a file from Steve Ladurantaye

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