Thanks to Graham Connor (www.grahamconnor.com)

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Housing Forecast Update – Third Quarter 2010

BC housing markets are returning to typical post-recession demand patterns. The dramatic rebound in consumer demand during 2009 and subsequent decline during the first two quarters of 2010 has set the stage for a gradual increase in home sales during the fall and through 2011. Residential unit sales through the Multiple Listing Service® (MLS®) in BC are forecast to decrease 7 per cent to 79,500 units in 2010, before climbing 5 per cent to 83,400 units in 2011.

A slower than expected normalization of interest rates will temper erosion of affordability as economic output posts more moderate growth for the balance of this year and through 2011. Stronger corporate profits are triggering employment growth and a reduction in the unemployment rate is now underway.

A larger inventory of homes for sale has created the most favourable supply conditions for home buyers in more than a year. While tighter mortgage qualifications for low equity home buyers has negatively impacted demand, more borrowers are now channeling into 5-year fixed mortgages where discounted rates increase purchasing power.

The average MLS® residential price is forecast to increase 6 per cent to $492,800 this year and edge down 1 per cent to $489,500 in 2011. Some softness in home prices is expected through the summer months in most regional markets. However, inventory levels peaked in May and will likely edge lower in the coming months, leading to more balanced conditions in the fall with a commensurate firming of home prices.

“The volatility in consumer demand characteristic of the past 24 months is expected to give way to more gradual improvement through 2011,” said Cameron Muir, BCREA Chief Economist. “Housing demand has fallen back to earth from its break-neck pace at the end of 2009 and is expected to more closely match overall economic performance over the next 18 months.

“A larger inventory of homes for sale has created the most favourable conditions for home buyers in more than a year,” added Muir. “However, the buyers’ market is expected to be short-lived as total active listings peaked in May and are beginning to wane, with more balanced conditions set to emerge in the fall.”

After a sharp pull back in new home construction last year, home builders are gradually increasing production to meet demand. BC led the country in population growth over the last three quarters and with the inventory of complete and unoccupied units expected to decline, builders are adjusting production to match supply with household formation.

From the Real Estate Board of Greater Vancouver

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Latest Update from the BCREA:

The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province declined 42 per cent to 5,784 units in July compared to the same month last year. On a seasonally adjusted basis, MLS® residential unit sales in the province declined 19 per cent in July from June 2010. The average MLS® residential price climbed 6 per cent to $491,832 in July compared to the same month last year.

“A relatively large number of homes for sale have created the most favourable supply conditions for home buyers in more than a year,” said Cameron Muir, BCREA Chief Economist. MLS® active residential listings were 21 per cent higher in July than at the start of the year on a seasonally adjusted basis. However, with newly listed MLS® residential units now declining, tighter market conditions may emerge this fall.

Year-to-date, BC residential sales dollar volume increased 16 per cent to $24.2 billion, compared to the same period last year. Residential unit sales rose 4 per cent to 48,127 year-to-date, while the average MLS® residential price climbed 13 per cent to $504,281 over the same period.

for more info see the BCREA site’s newsroom

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I was impressed by the clear info in this recent newsletter from Graham Connor, of Centum Action Mortgage:

Variable Rates:
Variable rates move in line with changes to the overnight rate set by the Bank of Canada and reflect their inflation targeting policy.  July 20th saw the second increase taking Prime to 2.75%.  Here are the dates for the remaining meetings this year.  Consensus is for the possibility one or two further increases this year, but by no means guaranteed as the rate of recovery from the recession has already begun to cool off.

• September 8th
• October 19th
• December 7th

I reviewed the Big 5 banks’ rate forecasts back in May and compared those figures to the latest collective forecast on July 10th.  The latest aggregate Prime rate forecast for the end of 2011 was 4.57%.  Apply a 0.7% discount and that’s an effective rate of 3.87%.  That July average rate forecast is over 0.5% lower than the average figure for the end of 2011 predicted only three months ago.

The change in the predicted rates tells us two things.  Firstly, economic forecasts are subject to frequent change and are not to be taken as concrete numbers for planning so far in advance.  Variable rate clients should be checking my newsletter regularly and are advised to call in at 778-389-6210 to review each situation.

Secondly, the Banks’ forecasts for future rate gains reflect global data pointing to a slower recovery than expected some months ago.  For example, assuming a 0.7% discount and two further increases this year taking Prime to 3.25%, the effective rate would still be at 2.55% by the end of 2010.  Read on for commentary on fixed rates (below)  for those looking for the comfort blanket of guaranteed payments – now might be that time.

I recently read mortgage advice posted in an article which promoted the idea that if you think the variable rates will be higher in two years’ time than the fixed rate today, then consider locking in now.  If anybody knew where rates will be in two years’ time with any degree of accuracy, that premise would be worthy of consideration.  We don’t know where rates will be then, so my advice is rates should be monitored as often as once a month in the current climate.

Variable rate discounts continue to offer savings for existing clients, but fixed rates have fallen to start to close the gap.  Existing variable rate clients should watch the fixed rate numbers for an indication of what they would be locking into – no need to make a move this month!

My advice to those contemplating a new variable rate mortgage:

• set payments as if you are paying rates at 5% or higher so pre-adjust to the inevitable rate increases.  Increased payment all go to reduce the loan balance.
• plan your budget to see if you can manage rates above 5%
• watch my rate bulletins not only for the Prime rate increases, but for the  fixed rate increases to see what you may be locking into.  Set a tolerance level – I’m happy to assist in any mortgage reviews and payment plans
• variable rates best suit those with more equity in their home and those who easily qualify by the strict debt service guidelines set by mortgage lenders
• consider the hybrid mortgages to mitigate the effect of interest rate shock
• Since April 19th, expect to qualify for less on a variable rate if you have less than 20% down payment compared to a five year fixed rate

Fixed Rates
Early summer was a good reference point for fixed rates.  Some lenders discounted the five year fixed rate back then to as much as 4.79%.  Today, a special offer rate can be accessed at 3.89%.  So, why the rate drop in so short a time?

Fixed rates don’t move directly in line with central bank rate changes.  Instead, fixed rates move broadly with yields on bonds for the corresponding terms.  Unimpressive data from the US and sovereign debt concerns in Europe contributed to a dampening on views for a global recovery.  The Bond market reacts to the news accordingly.  While Canada has out-performed other G7 countries, there’s only so far to go if other countries, especially the US, do not progress.  It has to be said, the extent of the slow growth outside of Canada was not anticipated.  news prompted some to look out for a ‘double-dip’ recession.  More recently, consensus is for a protracted period of slower growth but no ‘double-dip’.

Lenders generally look for a buffer above the bond yields.  The 5 year Canada was at 2.25 yesterday.  While the lenders may not collectively pull back rates any further, there is certainly no evidence of upward pressure on fixed rates today.  Five year fixed rates should only be considered under 4% unless specific circumstances dictated best rates could not be achieved.

For variable rate holders who feel they missed a chance to lock in close to 4% back in April/May, an opportunity is here.  The rate difference between 2.05% variable and 3.89% fixed represents the premium paid for safety and the spread may reduce further in the coming weeks.  From an historical perspective, nobody would criticize a risk averse mortgage client opting for a five year fixed rate today below 4%.
Best Rates

www.GrahamConnor.com

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New Report from the Real Estate Board of Greater Vancouver:

Home sales activity in Greater Vancouver was quieter last month than most Julys over the past decade, with residential sales, prices, and the number of homes listed for sale trending downward in recent months.

The Real Estate Board of Greater Vancouver (REBGV) reports that the number of residential property sales in Greater Vancouver totalled 2,255 in July 2010. This represents a 45.2 per cent decline from the 4,114 sales in July 2009, the highest selling July ever recorded, and a 24.1 per cent decline compared to June 2010.

Looking back further, last month’s residential sales represent a 3.7 per cent increase over the 2,174 residential sales in July 2008, a 41.8 per cent decline compared to July 2007’s 3,873 sales, and a 17.5 per cent decline compared to July 2006’s 2,732 sales.

“With the pace of home sales and listings easing off in our market, we’ve begun to see a levelling of home prices from the record highs seen in the spring, creating greater affordability,” Jake Moldowan, REBGV president said. “Activity in today’s marketplace is clearly trending in favour of buyers.”

The number of properties listed for sale on the market has been trending downward since spring, with 4,138 new listings in July compared to April’s peak of 7,648. New listings for detached, attached and apartment properties in Greater Vancouver on the Multiple Listing Service® (MLS®) declined 17.9 per cent in July 2010 compared to July 2009, when 5,041 properties were listed for sale.

At 16,431, the total number of property listings on the MLS® in July declined 6.5 per cent compared to last month and increased 33 per cent compared to July 2009.

“It’s currently taking home sellers who work with a REALTOR®, on average, 45 days to sell their property, which is a historically healthy timeframe for people on both sides of a transaction,” Moldowan said.

Since spring, housing prices have decreased 2.8 per cent compared to the all-time high reached in April when the residential benchmark price was $593,419. Over the last 12 months, the MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 9.1 per cent to $577,074 in July 2010 from $528,821 in July 2009.

Sales of detached properties in July 2010 reached 908, a decrease of 43.7 per cent from the 1,614 detached sales recorded in July 2009 and a 9.8 per cent increase from the 827 units sold in July 2008. The benchmark price for detached properties increased 11.5 per cent from July 2009 to $793,193.

Sales of apartment properties reached 979 in July 2010, a decline of 42.7 per cent compared to the 1,708 sales in July 2009 and an increase of 1.3 per cent compared to the 966 sales in July 2008.The benchmark price of an apartment property increased 6.2 per cent from July 2009 to $387,879.

Attached property sales in July 2010 totalled 368, a decline of 53.5 per cent compared to the 792 sales in July 2009 and a 3.4 per cent decline from the 381 attached properties sold in July 2008. The benchmark price of an attached unit increased 8.6 per cent between July 2009 and 2010 to $490,995.

For full info, go to the REBGV website

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More Timely Predictions from the BC Real Estate Association

By Cameron Muir, Chief Economist and Brendon Ogmundson, Economist, British Columbia Real Estate Association

The Canadian economy grew at the exceptional pace of 6.1% in the first quarter of 2010, propelled by a booming housing market, strong consumer spending and the rebuilding of private sector inventories. Moreover, growth in the second quarter of 2010, while not expected to register the sizzling pace of the previous six months, should be a robust 3%-4%.

However there are signs that the economy, if not stalling out, may be slowing down. April’s monthly GDP print was disappointingly flat as consumers moved to the sidelines, sending retail sales lower by almost 2%.

Even if Canadian consumers are beginning to tire out, economic growth should be supported in coming months by projects initiated under the federal government’s infrastructure stimulus plan. This stimulus will provide a needed boost to the economy through the remainder of 2010, with projected impacts peaking in the third quarter, but will create a drag on growth in 2011 as the stimulus is withdrawn from government expenditure.

The strength of the Canadian economic recovery over the past six months is evidenced by the over 300,000 jobs created in the Canadian economy since the beginning of the year. While this exceptional rate of job creation stands in stark contrast to the gloomy employment situation of our southern neighbour, it also re-affirms the need for the Bank of Canada to begin withdrawing its emergency level of monetary stimulus by raising interest rates, particularly given the proximity of core inflation to its 2% target rate.

The withdrawal of monetary and fiscal stimulus from the Canadian economy in coming months will result in slower growth in both the second half of 2010 and into 2011. This growth slowdown may be further exacerbated by weaker than currently anticipated US and global economic growth as well as a higher Canadian dollar resulting from a rise in Canadian interest rates relative to the United States.

In all, slower economic growth and inflation that is within the Bank of Canada’s comfort zone should mean that, while interest rates are certain to rise, the pace of interest rate increases should be orderly and the level of interest rates will remain near historic lows through the remainder of the year.

See more at BCREA Realtor Link here.

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This just in from the BC Real Estate Association:

The British Columbia Real Estate Association (BCREA) released its Housing Forecast Update for the third quarter of 2010 today.

BC Multiple Listing Service® (MLS®) residential sales are forecast to decline 7 per cent from 85,028 units in 2009 to 79,500 units this year, before increasing 5 per cent to 83,400 units in 2011.

“The volatility in consumer demand characteristic of the past 24 months is expected to give way to more gradual improvement through 2011,” said Cameron Muir, BCREA Chief Economist. “Housing demand has fallen back to earth from its break-neck pace at the end of 2009 and is expected to more closely match overall economic performance over the next 18 months.”

“A larger inventory of homes for sale has created the most favourable conditions for home buyers in more than a year,” added Muir. “However, the buyers’ market is expected to be short-lived as total active listings peaked in May and are beginning to wane, with more balanced conditions set to emerge in the fall.”

The average MLS® residential price is forecast to climb 6 per cent to $492,800 this year and remain relatively unchanged in 2011, albeit declining by 1 per cent to $489,500.

For a PDF version of this news release, including data table, follow this link:
www.bcrea.bc.ca/news_room/2010-07-30Forecast.pdf.

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We now have a mobile version of our site including all listings!

Wherever you are, you can view available apartments and condos for rent through Downtown Suites.

Check it out, and we’d love to have some feedback. So far we’ve only tested on the iPhone here in Vancouver, so if you could try it on your mobile device wherever you might be in the world, that would be really helpful to us!

Just go to our normal site: http://www.downtownsuites.com and you’ll be automatically redirected to the mobile site at m.downtownsuites.com.

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We recently saw this great list of square footage prices throughout the world, placing Vancouver in an extremely positive position.

An ‘affordable’ riad in Marrakech

Two years of global recession have made villas and apartments in some of the world’s most desirable locations dramatically more affordable – but still way higher than Vancouver’s comparable sales – according to figures researched by UK estate agency, Savills, and published in the Daily Telegraph.

[To provide a comparison with Vancouver, I have converted all sterling figures into CAD and changed the price per square metre (the preferred calculation in Europe) to a price per square foot. According to the May 2010 figures from the Real Estate Board of Greater Vancouver (REBGV), the average apartment price in Vancouver Westside is $510,885. If the average apartment size is approximately 600 square feet, that equates to $851 per square foot.]

The results of Savills’ survey shows Marrakesh as the best-value location with riads and apartments in prime parts of the Moroccan city costing $588 per square foot thanks to the city’s low land and construction costs. In central Europe, Montenegro offers beautiful countryside and some of the world’s most unspoilt coastlines and costs $1,507 per square foot with recent improvements to its air links with Britain and its own transport infrastructure.

Likewise in the Middle East, the Sultanate of Oman, which has avoided the blingy excesses of Dubai and is regarded as an elegant low-rise location, costs $776 per square foot. Also good value is the Seychelles, where prime property is $993 per square foot.

The league table also shows which locations have held their values well, despite the recession. Italy, the Balearics and parts of France stand out in this regard. “Majorca has a large gene pool of buyers. This gives it a very resilient market,” says Charles Weston-Baker, director of Savills’ international department, who adds that purchasers come from Britain, northern Europe and the USA. He contrasts that with mainland Spain, which is these days almost wholly reliant on British buyers, who are now stepping back. The country also has a serious oversupply of new homes.

The data also shows that some of the world’s most expensive international hot spots have been relatively recession-proof. “It’s not a surprise that key financial hubs such as Paris, Moscow, Hong Kong or Shanghai generate high values. But it’s clear that traditional world-renowned ‘lifestyle’ destinations such as Cannes and Courchevel continue to attract high-spenders, as does Monaco,” says Savills’ researcher Rebecca Gill, the author of the survey.

The agency sold an apartment in Hong Kong for $29,763 per square foot late last year, about 20 per cent above the top-price London property it sold, while Monaco and Manhattan have seen sales at or above $24,650 per square foot. Paris, the Cote d’Azur and Sydney had one-off top-dollar sales that were close behind.

What costs what, where – Prime apartment property, price per square foot
* Monaco $20,649
* Cannes $10,325
* Courchevel, France $8,262
* Moscow $7,534
* Hong Kong $6,003
* Sydney $5,348
* Paris $4,649
* Manhattan $4,521
* Shanghai $4,470
* Singapore $4,219
* Milan, Italy $4,128
* Sardinia $3,714
* Majorca $3,300
* Geneva $3,195
* Auckland $2,928
* Cape Town $2,528
* Nice $2,478
* Lisbon $2,064
* Warsaw $1,883
* Dubrovnik, Croatia $1,859
* Istanbul $1,813
* Zell am See, Austria $1,650
* Ho Chi Minh City, Vietnam $1,580
* Budva, Montenegro $1,507
* Dubai $1,390
* Algarve, Portugal $1,239
* Sotogrande, Spain $1,239
* Nevis, Caribbean $1,197
* Sarasota, Florida $1,148
* St Lucia, Caribbean $1,083
* Seychelles $1,105
* Hanoi, Vietnam $904
** Vancouver Westside $851
* Muscat, Oman $776
* Cairo $604
* Marrakesh $588

Thanks to BestHomesBC’s blog for sharing this!

Additional note:  Re-reading this article, I think they were actually comparing apples with oranges. They were quoting highest prices for the other places but quoting average prices for Vancouver ($851 psf I think they said.)
But if we take our highest prices for condos over $2m dollars for the past 60 days there have been 14 sales and the average price was $1325 psf with the highest  being approx $1700 psf.

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