Summer housing market trends toward balance after an active spring season
VANCOUVER, BC – Home sellers outpaced buyers on Greater Vancouver’s Multiple Listings Service® (MLS®) in June, drawing the market back toward balance this summer.
The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales of detached, attached and apartment properties reached 3,262 in June, a 9.8 per cent increase compared to the 2,972 sales in June 2010 and a 3.4 per cent decline compared to the 3,377 sales in May 2011.
New listings for detached, attached and apartment properties in Greater Vancouver totalled 5,793 in June. This represents a 4.5 per cent increase compared to June 2010 when 5,544 properties were listed for sale on the MLS® and a 2.3 per cent decline compared to the 5,931 new listings reported in May 2011.
Last month’s new listing total was 9.8 per cent higher than the 10-year average for June, while residential sales were 7.3 per cent below the ten-year average for sales in June.
“With sales below the 10-year average and home listings above what’s typical for the month, activity in June brought closer alignment between supply and demand in our marketplace,” Rosario Setticasi, REBGV president said. “With a sales-to-active-listings ratio of nearly 22 per cent, it looks like we’re in the upper end of a balanced market.”
At 15,106, the total number of residential property listings on the MLS® increased 3.1 per cent in June compared to last month and declined 14 per cent from this time last year.
The MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 8.7 per cent to $630,921 in June 2011 from $580,237 in June 2010.
“The largest price increases continue to be in the detached home market on the westside of Vancouver and in West Vancouver,” Setticasi said. “Since the end of May, the benchmark price of a detached home rose more than $147,000 on the westside of Vancouver and over $80,000 in West Vancouver. Detached home prices in Richmond, however, levelled off slightly, declining $25,000 in June.”
Sales of detached properties on the MLS® in June 2011 reached 1,471, an increase of 29.1 per cent from the 1,139 detached sales recorded in June 2010, and an 11.8 per cent decrease from the 1,667 units sold in June 2009. The benchmark price for detached properties increased 13.4 per cent from June 2010 to $901,680.
Sales of apartment properties reached 1,266 in June 2011, a 0.6 per cent increase compared to the 1,258 sales in June 2010, and a decrease of 29.3 per cent compared to the 1,790 sales in June 2009. The benchmark price of an apartment property increased 3.5 per cent from June 2010 to $405,200.
Attached property sales in June 2011 totalled 525, an 8.7 per cent decrease compared to the 575 sales in June 2010, and a 34.5 per cent decrease from the 802 attached properties sold in June 2009. The benchmark price of an attached unit increased 6 per cent between June 2010 and 2011 to $522,424.
Canadian sales of existing homes rose 4.5% in January, hitting their highest level since April last year, as buyers rushed to beat tighter mortgage regulations set to come into effect next month, according to Canadian Real Estate Association figures.
Vancouver and Toronto led the growth, with half of all local markets reporting seasonally adjusted gains in the month, CREA said. Sales activity improved over the second half of last year and is now 25% above its low in July, it said.
"We anticipated the recent announcement of tighter mortgage regulations, which will come into effect this March, would pull forward sales activity into the first quarter of 2011, particularly in some of Canada's more expensive housing markets," said Gregory Klump, CREA's chief economist. "The sharp rise in sales activity in Toronto following the announcement provides early evidence confirming this," said Klump.
CREA warned the government not to take any further action until the longer-term impact of the most recent changes is fully known.
Ottawa announced in January that it would tighten mortgage-lending rules for the second time in a year to stop borrowers taking on more debt than they can afford. The government is reducing the maximum amortization period on mortgages backed by government insurance to 30 years, from 35 years, which makes monthly payments higher.
The tightening is expected to primarily hit first-time homebuyers, or those with less available for a down payment.
BMO mortgage expert Laura Parsons said the changes are a good thing.
“People are like deer in the headlights when these things happen, but they need to be properly informed,” she said. “This is a good thing, it saves them money.”
Reducing the amortization period by five years to 30 years would save about $53,000 in interest payments over the life of the mortgage, she said.
Actual new listings through the MLS System posted their biggest month-over-month increase since 2007 in January, with more than double the listings from the previous month, CREA said.
As sales activity and new supply have risen in tandem, the national market remains balanced, CREA said. The national sale-to-new listings ratio stood at 55.7% in January, little changed from the previous two months.
Parsons said BMO expects the market to remain balanced throughout 2011.
“According to our survey, 61% of homeowners are confident their homes will hold their current values throughout the year,” she said.
The national average price was little changed from the previous three months at $343,675, an increase of 4.5% from January last year, CREA said.
The January year-over-year gain was distorted by a jump in the number of multi-million dollar homes sold in a couple of areas in Greater Vancouver, it said.
Realtor Bob Rennie dodged questions Thursday morning about whether taxpayers would even come close to breaking even on the Olympic Village development.
Hosting a media launch about sales that start Friday at what’s now branded The Village on False Creek, he said Rennie Marketing Systems was working to stabilize the city’s asset and to maximize revenue.
Rennie said he sees the downtown condo market stabilizing and the real estate market reviving from its recent slump.
Instead of aiming to sell approximately 480 unsold units like he did last May after the 2010 Winter Games ended and the property was returned to developer Millennium Water and the city, Rennie aims to sell 230 condos in two areas of the village. Of the 737 condos at the village, 263 have sold, most of them in 2007. Friday’s launch is the third time the units have gone on sale.
Receiver Ernst and Young has contracted with a company to rent approximately 114 units to get the “ghost town” populated fast. Those units don’t include the 119 rental units purpose-built by the developer or the city’s 252 market rental, co-op and below-market rental units in the village.
Rennie blamed slow sales after the Games on bad timing due to a sluggish economy.
“I do not believe we ever had a product problem,” Rennie said. “What I do have is a pricing problem, and that pricing problem on May 15 was compounded by the fact that there was 480 units for sale and people didn’t see any sense of urgency and everybody just moved to the sidelines and folded their arms.”
He’s confident the prices are appropriate now. He said market testing done before the latest sales launch attracted 31 offers in 10 days. They included 12 for units that cost more than $900,000, 11 offers for units priced from $600,000 to $900,000 and eight offers for units under $600,000.
Seven chairs sat outside the sales centre at 5 p.m. on Wednesday. Fourteen chairs labelled with people’s names were positioned outside the sales centre just before 11 a.m. Thursday morning. The sales centre was to open at noon Thursday with sales to begin Friday. Rennie said he was giving a tour to 1,058 realtors through the site yesterday starting at 2 p.m.
Prices for the unsold units have been reduced an average of 30 per cent from May 2010 rates. Rennie said rates on the lower priced units weren’t reduced much—a studio now goes for $349,500 to $354,900—but prices on larger units that were priced at $1.5 million saw greater reductions.
He aims to sell 60 units in 60 days.
He noted the receiver for the village, Ernst and Young, has been tackling building deficiencies and that regular new home warranties protect owners.
Only a bank and a private liquor store operate at the village. Rennie said London Drugs is eying population numbers, negotiations are underway with an unnamed grocery store—previously the grocery seller was meant to be Urban Fare—and a consultant has been hired to focus on leasing the other commercial spaces.
The city is owed $740 million for the development.
Tight market sparks bidding wars in hot neighborhoods Anticipated interest rate hikes and amortization changes help fuel the 'crazy market'
For a 100-year-old, the east Vancouver denizen doesn't look too bad.
The bone structure is solid, but the skin is sagging and more than a bit of plastic surgery is required. There are a few screws loose, too.
The house near East 5th and Victoria is a fixer-upper, but that didn't stop someone this week from paying $800,000 -$151,000 more than the list price -after a fierce bidding war for the property.
The scenario is playing out across Vancouver in hot neighborhoods such as Mount Pleasant, Commercial Drive and Strathcona as buyers contend with tight supply, as well as with looming amortization changes and interest rate hikes.
Throw into the mix homebuyers who held off purchasing last year and it's fuelling a "pretty crazy" market, said Rick Stonehouse, a realtor who specializes in east Vancouver.
"It's been a very unusual beginning to the year," said Stonehouse, whose clients -a young professional couple -offered $766,000 for the house.
There were 20 offers, according to the listing agent.
The ramshackle place has a garage that leans to one side, missing shingles, a decrepit kitchen and an untamed yard. On the plus side, it has nice views, large bedrooms and an original fir floor.
Still, the high sale price had Stonehouse scratching his head. It didn't take long this year for the market to get overheated, either -one property that was listed at about $1.1 million sold for $1.6 million in early January.
It's quite a contrast to late last year, when "you could just feel the brakes coming on" starting in September, Stonehouse said.
Realtor Selina Jansen, who also had a client bidding on the house, says artificially low list prices are fuelling the bidding "frenzy."
"Some people are notorious for it, and I think other people are now copying them because they're having so much success with it," she said.
Jansen's client offered $711,000 for the East 5th house, one of three unsuccessful offers in the space of a week. In the others, her client -a professional woman -bid $811,000 for a house at East 14th and Knight that was listed at $789,000 and sold for $860,000. A home on Aubrey Place was listed at $749,000 and later taken off the market despite bids exceeding $800,000.
Mortgage broker Angela Calla of Dominion Lending Centre says bidding wars are dangerous because of the tendency for emotion to trump reason, resulting in the buyer paying more than what the lender determines its worth.
"Borrowers have got caught up in bidding wars like that when they focus too much on the emotional aspect and not really the fundamentals," she said.
Knowing the assessed value of the property is an important piece of research, Calla said.
People entering a bidding war should also set a ceiling of what they can comfortably afford -and be prepared to walk away if it's exceeded. Homes that are the subject of bidding wars often require work, so homebuyers should include renovation costs in their calculations, she advised.
Those bidding on a property also need to make sure the closing date falls within their preapproval window to ensure the lowest possible interest rate, she said.
Various studies have identified Vancouver as one of the most unaffordable housing markets in the world.
For some, particularly firsttime homebuyers, it gets worse on March 18. That's when new federal rules take effect setting the maximum mortgage amortization eligible for Canada Mortgage and Housing Corp. insurance at 30 years, down from 35. For a homeowner with a $600,000 mortgage at a fiveyear closed rate of four per cent, that works out to an extra $200 a month. Ottawa discontinued the 40-year amortization and no down payment options in October 2008.
Interest rates are also heading up. TD Economics projects the Bank of Canada will raise its key interest rate from the current one per cent to three per cent by the end of 2012, and some of the big banks hiked five-year mortgage rates this week.
For those already testing the outer limits of their financial comfort zone, the looming lending changes compound the sense of urgency.
But it's not only people rushing to beat the disappearing 35-year amortization period who are finding it a tough market to crack.
Miri Malkin and Gabi Kabazo, the parents of three children under 5, are living in a Yaletown condo while they look for a house in Vancouver in the $800,000 to $1-million range. The couple are pre-approved and plan a 40-or 50-per-cent down payment.
They've been looking since May, but have yet to put in a bid because all the houses they've looked at are either fixer-uppers or don't have enough space for their family. They would prefer to live in Vancouver rather than move to the suburbs.
"It's very frustrating," Malkin said. "We're willing to pay but we can't find anything."
The couple, who moved to Vancouver from Israel in 2004, were looking in 2008 but didn't buy because they thought prices might come down. One Arbutus townhouse they looked at was priced in the $700,000 range and is now listed for more than $1 million.
News of bidding wars in an overheating Vancouver market comes on the heels of a TD Economics report that identifies B.C. residents as most vulnerable to interest rate hikes, a housing correction or an economic downturn. The province's average household debtto-income ratio of 160 per cent is the highest in the country and matches levels reached in the U.S. just before the financial crisis and housing bust.
Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the Sauder School of Business at UBC, is watching the real estate activity "with concern."
"The only hopeful piece is that it's just sort of a mismatch between people looking and available product," Somerville said. Somerville, however, doesn't believe Vancouver is at risk of a U.S.-style housing meltdown. Two characteristics that were prevalent south of the border are missing here, he said: fast and loose credit, and a lot of speculative product.
"I'm always willing to believe in a market adjustment or a market correction, but I'm not willing to believe that Vancouver's going to be cheap," he said. "So it's just sort of what variant of expensive we're looking at."
CREA boosts annual resale housing forecast for 2011 (Video Clip)
The Canadian Real Estate Association (CREA) has revised its 2011 forecast for home sales activity via the Multiple Listing Service® (MLS®) Systems of Canadian real estate Boards and Associations, and extended it to 2012.
OTTAWA, February 8, 2011 — The seasonally adjusted annual rate1 of housing starts was 170,400 units in January, according to Canada Mortgage and Housing Corporation (CMHC). This is up from 169,000 units in December 2010. According to final figures, actual housing starts for 2010 totalled 189,930 units, with activity moderating towards demographic fundamentals by the final quarter of 2010.
“Housing starts moved slightly higher in January because of an increase in rural starts,” said Bob Dugan, Chief Economist at CMHC’s Market Analysis Centre. “Single-detached and multiple starts showed a moderate decline.”
The seasonally adjusted annual rate of urban starts decreased by 1.7 per cent to 146,900 units in January. Urban multiple starts moderated by 1.5 per cent in January to 82,900 units, while single urban starts moved lower by 2.0 per cent to 64,000 units.
January’s seasonally adjusted annual rate of urban starts decreased by 19.0 per cent in the Prairie Region, by 7.9 per cent in British Columbia, and by 1.0 per cent in Québec. Urban starts increased by 13.3 per cent in Atlantic Canada and by 10.3 per cent in Ontario.
Rural starts2 were estimated at a seasonally adjusted annual rate of 23,500 units in January.
As Canada's national housing agency, CMHC draws on 65 years of experience to help Canadians access a variety of high quality, environmentally sustainable and affordable homes. CMHC also provides reliable, impartial and up-to-date housing market reports, analysis and knowledge to support and assist consumers and the housing industry in making informed decisions.
More Canadians were on move in 2010 and they were mostly headed West
TORONTO - A new report from the TD Bank suggests that Canadians are taking the phrase "Go West, young man" seriously.
More Canadians were on the move last year as a percentage of the population than any year since 1998, the bank says.
And most were headed West to take advantage of better job prospects and higher standards of living.
The analysis shows 337,000 Canadians migrated within the country's border's last year, 45,000 more than in 2009. The level represents about one per cent of the total population, the highest since 1998.
Except for New Brunswick, only Saskatchewan, Alberta and British Columbia experienced a net inflow of people last year.
And the report predicts that westward bound migration will continue over the next two years, although not up to the levels seen during the resource boom prior to the recession.
In relative terms, Manitoba and Prince Edward Island are losing the most people. Ontario and Quebec will continue to keep shedding numbers, but by a tiny fraction relative to their populations, the bank said.
Real estate market calm expected to follow hectic 2010 in Metro Vancouver
Home sales forecast to increase modestly across B.C. as prices stabilize
VANCOUVER - If there's one sentence to sum up B.C.'s real estate picture in 2011, it's probably "Let's take a breather."
While Metro Vancouver prices rose fairly sharply over the past year, the same wasn't true in the Interior and other parts of the province where prices were flat and sales stalled.
A combination of low interest rates, relatively stable prices throughout the province and a gradually improving economy helped by the 2010 Winter Olympics brought buyers -- especially first-time buyers -- back into the market after a recessionary slump.
Those conditions are expected to continue in 2011, although interest rates are predicted to gradually rise.
That may keep a lid on housing prices, which are also expected to rise a bit, although less than in 2010.
However, there will be no repeat of 2010's price bump.
"When you look at 2010, we saw fewer sales than 2009 [across B.C.]," Cameron Muir, chief economist for the B.C. Real Estate Association, said in an interview. "Since [July], we've seen a modest increase in consumer demand."
Muir said he expects the province will see that continue into 2011, although the sales numbers aren't expected to post any records or rise above the 10-year average.
"I'd expect housing sales to be around 80,000 to 82,000 units in 2011. We're likely to see a six-to seven-per-cent increase in housing sales this year compared to last year."
Muir said job growth and rising incomes will underpin demand, although higher interest rates in the second half of the year will partly offset the benefits of more economic activity.
"There will be a much more gradual increase in consumer demand and less volatility. There will be more stable market conditions this year."
Robyn Adamache, senior market analyst for Metro Vancouver with Canada Mortgage and Housing Corp., said in an interview that she doesn't see any huge changes this year over 2010.
"We're expecting a slight increase in sales, about five to six per cent, for 2011.
"For 2010, we were around 31,000 sales.
"For 2011, we're expecting 33,000 sales."
However, Adamache said Metro Vancouver should see much less price growth in 2011.
"In 2010, we saw a 14-percent increase in prices.
"We're calling for a three-percent increase in 2011."
Adamache said she expects that mortgage rates will creep up later in 2011, although not dramatically. "So, that will put a bit of a damper on sales."
Tsur Somerville, director of the centre for urban economics and real estate at the University of B.C.'s Sauder School of Business, said he doesn't like forecasting the future, but nevertheless believes that 2011's real estate picture will be largely determined by the speed of the recovery and the Bank of Canada's action on interest rates -- and how that reflects on mortgage rates.
Ron Antalek, a realtor with ReMax Ridge Meadows Realty, said in an interview that he's seeing an uptick in buyers who believe interest rates are heading north.
He believes there will be a modest increase in both pricing and demand this year.
"The vast majority of buyers are convinced that prices won't decline and that interest rates will rise.
"So, they feel their investment is safe.
"Sales are picking up." Mike McDougall recently took possession of a new detached home in Maple Ridge after moving to B.C. from Alberta.
"Hopefully, it was a good time to purchase," McDougall said in an interview.
"From what I hear, it was. I think there's still potential for rates to go up."
McDougall, who moved into his new home on Jan. 12 with his wife and two small children, said he was also comfortable with the price he paid.
B.C. cities, including Victoria, are world-class in their lack of affordability, story and photos
Homes are "severely unaffordable" in all four of the B.C. cities that were included in a 325-city international survey of housing costs, and Vancouver's affordability score was the third-worst of all. The average home in Vancouver, according to data from the third quarter of last year, cost $602,000 -- or 9.5. times the $63,100 median income of households in the city, according to the survey results released Monday by the Winnipeg-based Frontier Centre of Public Policy. Only Sydney, Australia, at 9.6 times the median income, and Hong Kong, at 11.4 times, scored worse.
With their housing prices quite a bit lower but their incomes a little lower, too, Victoria, Abbotsford and Kelowna were -- in that order -- uncomfortably close to Vancouver's 323rd-place finish in the international rankings.
Victoria's average price of $430,000 was 7.1 times the median household income of $60,900, resulting in a ranking of 297th out of 325. Abbotsford's $402,000 average price made it 6.5 times the median household income of $62,300 and 297th in the rankings. And Kelowna finished 283rd with a median income of $57,500 that was 5.9 times the median price of $57,500.
The study pins the "severely unaffordable" label on any city with a multiplier of more than five -- about 75 of the 325 studied, including Montreal and Toronto, but nowhere else in any part of Canada except B.C.
For a housing market to be rated as "affordable" the ratio of price to income can't exceed three times. And in nearly half the 35 Canadian cities surveyed, it is either lower or very close to that mark. In Edmonton, for example, the multiplier is just 3.5, although its low figure is in part thanks to the very high median income of $88,800. And in Winnipeg, where people earn just a little less than in Vancouver, it's 3.2.
The researchers who conducted the survey point out that you can't blame things such as interest rates, or the federal mortgage rules that have recently been in the news for B.C.'s worrisomely high score. These factors are the same everywhere across Canada, yet many other Canadian cities remain affordable. For example, it costs just 2.3 times the median income to buy an average home in Fredericton, a small government-dependent provincial capital where incomes are nearly equal to those in unaffordable Victoria.
So the policy factors that drive prices too high in relation to residents' incomes must be closer to home. David Seymour, a senior policy analyst for the Frontier Centre, and his collaborator on the study, consulting demographer Wendell Cox of St. Louis, finger "politically inflated land costs."
"These land prices include the cost increasing influence of land supply restrictions (such as urban growth boundaries), excessive infrastructure fees and other overly strict land use regulations," they write.
In other words, the problem is not only in Vancouver, where everybody knows housing costs too much, but also in Victoria, Abbotsford, Kelowna and, almost certainly, in all of the other Lower Mainland cities that weren't surveyed. And this problem is world-class, worse here than in most cities in many other developed countries.
But the solution, we ought not forget, can only be local.
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