MARKET CONDITIONS

The first two quarters of 2010 showed impressive growth, with 6.1% in the first quarter, and second quarter growth estimated between 3-4%.  However, we can expect to see a significant slow down as there are high levels of uncertainty and pessimism in financial markets due to fiscal crisis in many European countries.  In fact we have already seen retail sales fall considerably, and mortgage rates that were climbing earlier this year are starting to fall again.  Yet, there is speculation that the Bank of Canada (BOC) will attempt to bring low interest rates back to normal levels; in fact, the British Columbia Real Estate Association expects that by the end of 2010 the BOC will bring the overnight rate to between 1 and 1.25%.  The result will be an increased prime rate and a higher cost of borrowing for variable rate mortgages, and though we may see fixed rate mortgages varying in the short-run, with uncertainty in the financial markets, they will likely resume their upward trend by year-end.

With this recent decline in consumer spending, the federal government has implemented an infrastructure stimulus plan in hopes to support growth in the coming months, with impacts expected to peak in the third quarter.  Heading into 2011, however, we may see a drag on growth as the stimulus is withdrawn.  The slowdown may also be intensified by the weak US and global economic growth, and higher dollar that resulted from a rise in interest rates relative to the US.

LET’S LOOK AT HOUSING

Year to date BC residential sales dollar volume has increased by 16% to $24.2 billion, compared to the same period last year.  According to the British Columbia Real Estate Association (BCREA) the average price of a home listed on MLS has gone up by 13% during that time.  Astonishingly, if we break it down by area we can see that the one-year change in home prices in West Vancouver alone is 12%, while we have seen an increase of 29.3% in the past five years. 

With prices rising so quickly, we are now seeing a larger inventory of homes on the market and the supply conditions are more favorable for buyers than at anytime in the past year.  Active residential listings are 21% higher in July than at the start of the year.  An important implication?  Average time on market for homes is changing, and it is now taking an average of 45 days for sellers who work with Realtors to sell their property.  Though longer than what we have seen in recent times, this is a historically healthy timeframe for everyone involved in the transaction.

Yet despite the increase in active listings, home sales activity in Greater Vancouver last month was quieter than any July over the past decade.  In fact, BCREA reported that MLS residential sales in Vancouver declined 45.2% from the same time last year, and in the last month alone residential unit sales have declined 19%.  In West Vancouver June 2010 saw 66 residential sales, while July reports 56; in contrast 77 residential sales were reported in July 2009.  Given the number of listings to sales, we can quantify the decline in sales this year; in July 2009 67% of detached homes listed on MLS were sold while July 2010 reports only 54% of listed detached homes sold.  In the short term, BCREA expects to see sales continue to fall in the near future but we can look forward to seeing home sales rise toward the end of 2010 and through 2011.