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Housing market factors indicate stability in recent months September home sales in Greater Vancouver were consistent with activity experienced in the preceding two months across most categories.

The Real Estate Board of Greater Vancouver (REBGV) reports that the number of residential property sales in Greater Vancouver totalled 2,220 in September 2010. This represents a 0.8 per cent increase compared to August 2010 and 37.6 per cent decline from the 3,559 sales in September 2009.

In comparison, last month's residential sales represent a 40.1 per cent increase over the 1,585 residential sales in September 2008, a 20 per cent decline compared to September 2007's 2,776 sales, and an 11.9 per cent decline compared to September 2006's 2,519 sales.

"We've seen fewer properties coming on to the market over the last three months. This trend, combined with the continued attraction of low interest rates, is likely having the effect of less downward pressure on home prices," Jake Moldowan, REBGV president said.

Since spring, housing prices in the region have trended slightly downward, with a decrease of 2.7 per cent compared to the all-time high reached in April when the MLSLink® Housing Price Index (HPI) residential benchmark price was $593,419. The overall benchmark price for all residential properties in Greater Vancouver over the last 12 months has increased 5.5 per cent to $577,174 in September 2010 from $547,092 in September 2009. The current price remains consistent with last month, rising just 0.1 per cent between August and September 2010.

Total active property listings posted on the Multiple Listing Service® (MLS®) in Greater Vancouver currently sit at 15,401, basically unchanged compared to last month and a 22 per cent increase from September 2009. Over the last three months, active listings in the region have declined 12.3 per cent.

New residential property listings posted in September declined 17.6 per cent to 4,731 compared to September 2009 when 5,746 new units were listed.

"We saw signs of more stability in our marketplace last month than we have seen since spring based on a variety of indicators that we look at each month," Moldowan said. "At 56 days, it took, on average, three days less to sell a home in our region compared to August. This is the first month-over-month decline we've seen in this category since April."

Sales of detached properties in September 2010 reached 866, a decrease of 39.1 per cent from the 1,423 detached sales recorded in September 2009, and a 58.6 per cent increase from the 546 units sold in September 2008. The benchmark price for detached properties increased 6.7 per cent from September 2009 to $790,992.

Sales of apartment properties reached 971 in September 2010, a decline of 34.7 per cent compared to the 1,489 sales in September 2009, and an increase of 27.1 per cent compared to the 764 sales in September 2008.The benchmark price of an apartment property increased 3.7 per cent from September 2009 to $388,373.

Attached property sales in September 2010 totalled 383, a decline of 40.1 per cent compared to the 647 sales in September 2009, and a 39.3 per cent increase from the 275 attached properties sold in September 2008. The benchmark price of an attached unit increased 5.2 per cent between September 2009 and 2010 to $490,385.

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The global economy is feeling the lasting effects of the most serious financial crisis since the 1930s. As meticulously documented by economists Ken Rogoff and Carmen Reinhardt in their examination of eight centuries of data, recoveries from financial crises are characterized by sluggish growth in output and employment.

Although Canada’s relatively stodgy banking system ensured that we did not suffer a domestic financial crisis, our fundamental dependence on the United States, the epicenter of the global crisis, means that we are mired in the second-hand effects of the US’s economic lethargy.

However, as we detail below, there may be a silver lining for BC households in these cloudy skies.

Growth Outlook

Second quarter GDP growth fell well below expectations at just 2% (annualized). This represented a marked deceleration from first quarter growth of 5.8%. Flagging consumer spending and weaker residential investment resulting from the expiration of the home renovation tax credit tempered growth in the second quarter.

Economic growth in the remainder of 2010 and 2011 may continue to underwhelm due a cooling housing sector, sluggish economic growth in the United States and an end to Government fiscal stimulus. Moreover, unemployment that is projected to hover near 8% for several quarters may hinder consumption going forward.

In all, we see the Canadian economy growing at a 3.3% pace in 2010 before slowing to 2.5% in 2011.

Interest Rate Outlook

In the face of slowing growth and low inflation, the Bank of Canada raised rates for what we expect to be the final time in 2010 at its September 8 meeting. Although the Bank’s medium-run objective of returning rates to normal longrun levels is still intact, the Bank will take a very cautious approach to tightening monetary policy over the next 6 to 12 months and further rate tightening will be highly dependent on how solid the ground is underneath both the Canadian and US economies.

Given that inflation is projected to remain subdued and growth is expected to slow, we have trimmed our forecast for the overnight rate to 1% at the end of 2010 and 2 % by the end of 2011 (from 1 %- 1.25 and 2.5 % respectively).

In our July forecast, we noted that mortgage rates would continue to trend lower in the short-run and indeed downward pressure on interest rates has not only continued, but has in fact intensified.

Although fear stemming from the European debt crisis has seemingly subsided, fresh concern has emerged about the United States’ economy where hopes of a “summer of recovery” have quickly faded into fear of a dreaded “doubledip” recession.

In response, cautious households and companies have increased savings, adding to the flood of demand for safe assets and forcing long-term Government bond yields to levels not seen since the height of the global financial crisis.

Yields on Canadian Government 5-year bonds, the benchmark for mortgage pricing, have fallen a remarkable 100 basis points since the spring to just 2.1 %. Although this decline in interest rates is likely overdone, it is difficult to say when bond markets may normalize.

A much discussed second round of quantitative easing by the Federal Reserve (so-called QE2) could mean that US and Canadian interest rates stay low for an extended period. On the other hand, unexpected good news on the US economy may translate to faster pace of interest rate normalization.

Mortgage Rate Forecast

The silver-lining in the lacklustre economic outlook is that the normalization of both short-term and long-term interest rates will be deferred. BC households with variable rate mortgages will therefore be facing lower payments than we would have originally predicted at the beginning of the year.

Moreover, new homebuyers or homeowners set to renew their mortgages will be offered a second chance at securing rates at levels last seen at the depths of the financial crisis.

The BCREA mortgage rate forecast is for a continuation of the current low-rate environment into early 2011, when prompted by a new round of tightening by the Bank of Canada and (hopefully) brighter economic prospects, interest rates will renew their ascendency to historical norms but at a measured pace.

The 1-year fixed mortgage rate is forecasted to finish 2010 at around 3.2 % and to reach 4.05% by the end of 2011. The 5-year fixed mortgage rate is forecasted to end the year at 5.35% and to reach 6.1 % by the end of 2011.

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The Greater Vancouver housing market experienced steady activity to begin the summer season.

The Real Estate Board of Greater Vancouver (REBGV) reports that residential property sales in Greater Vancouver totalled 2,972 in June 2010, a decline of 30.2 per cent compared to the 4,259 sales in June 2009, which was the second highest selling June on record.

“Activity in June marked a healthy balance between the near record setting pace of June 2009 and the considerably slower activity witnessed in June 2008, a period of recession as we all know,” Jake Moldowan, REBGV president said.

Compared to June 2008, last month’s sales represent a 22.6 per cent increase over the 2,425 sales recorded that month, but are 30 per cent less than the 4,244 sales in June 2007. June 2010 sales also represent a 5.8 per cent decline compared to the previous month’s sales totals.

“We didn’t experience any record-breaking activity in June, but we did see a stable summer market,” Moldowan said. “The number of new listings coming on the market is not as dramatic as we saw over the previous three months and demand remains at a healthy level for this traditionally quieter time of year.”

New listings for detached, attached and apartment properties totalled 5,544 in June 2010, a 3.2 per cent increase compared to June 2009 when 5,372 new units were listed, and a 21 per cent decline compared to May 2010 when 7,014 properties were added to the MLS®.

At 17,564, the total number of property listings on the MLS® increased 1.2 per cent in June compared to last month, and is up 32 per cent compared to this time last year.

“There has been less upward pressure on prices in our market the last few months, which has allowed prices to ease back from the record high numbers seen in April,” Moldowan said.

Over the last 12 months, the overall MLSLink® Housing Price Index (HPI) benchmark price for all residential properties in Greater Vancouver increased 11.8 per cent to $580,237 from $518,855 in June 2009.

Sales of detached properties in June 2010 reached 1,139, a decrease of 31.7 per cent from the 1,667 detached sales recorded in June 2009 and a 24.1 per cent increase from the 918 units sold in June 2008. The benchmark price for detached properties increased 13.4 per cent from June 2009 to $795,025.

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The British Columbia Real Estate Association (BCREA) reports that Multiple Listing Service® (MLS®) residential sales in the province climbed 21 per cent to 8,385 units in April compared to the same month last year.
On a seasonally adjusted basis, MLS® residential unit sales in the province declined 4 per cent from March 2010. The average MLS® residential price climbed 15 per cent to $514,820 in April compared to the same month last year.

"BC home sales have trended on an annual rate of 84,000 to 86,000 units over the past three months, down from the 108,000 unit pace recorded in the fourth quarter of last year," said Cameron Muir, BCREA Chief Economist.
A total of 85,028 MLS® residential unit sales were recorded in 2009. "Higher home prices, particularly in Vancouver, the Fraser Valley and Victoria as well as a recent lift in mortgage interest rates has eroded affordability and had an impact on overall housing demand," added Muir.

The BC residential sales dollar volume increased 73 per cent to $13.5 billion in the first four months of 2010, compared to the same period last year. Residential units sales rose 47 per cent to 26,669 units year-to-date, while the average MLS® residential price climbed 17 per cent to $507,616 over the same period.

For the complete news release, including detailed statistics, follow this link:
www.bcrea.bc.ca/news_room/2010-04.pdf.

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