BC housing prices still under pressure to fall: Scotia economics

While British Columbia real estate sales have lifted from dismal lows of last fall, market oversupply and deteriorating economic conditions will still put pressure on prices to fall, according to Scotia Economics.

March and April saw "pretty strong sales volumes" across the country, Adrienne Warren, a senior economist with Scotia Economics, said in an interview Tuesday.

However, "prices are not really firming up [in B.C.] as we've seen in some other parts of the country."

"There is still a bit of correction going on in a lot of western markets: Vancouver, Calgary and Edmonton where they are still working through some overshooting of prices and excess supply."

The Bank of Nova Scotia’s economic-research division said existing-home sales strengthened in February and March, and preliminary reports indicate this trend continued in April.

The report said a rise in demand and drop in new listings has resulted in the housing market moving closer to being “balanced.” The listings-to-sales ratio averaged 2.2 in March, Scotia said, down from its peak of 2.7 in November. A ratio of 2 is considered balanced.

Scotia said home prices “steadied” in February and March, but still remain down almost eight per cent from a year earlier, or about five per cent when adjusting for heavy sales fluctuations in certain regions.

Nationally, Warren said it now seems that housing prices will not fall the full 10 per cent this year she had anticipated, and the drop in resales should be at the low end of her forecast for a 15 to 20 per cent decline.

“Nonetheless, we still feel there is more downside than upside risk to home sales and prices,” she said, in a statement. “The significant deterioration in domestic labour markets in recent months suggests little prospect for a major resurgence in demand near-term.”

In contrast to the resale market, Scotia said in its report Tuesday that the retrenchment in the housing-construction industry is happening quicker than anticipated. It said builders are adjusting to the lower-pricing environment and rising inventories.

Scotia said there was an annualized rate of 139,000 housing starts in this year’s first quarter, the lowest in a decade. It downgraded its overall forecast for this year to 140,000 housing starts from 155,000.

(prepared by Derrick Penner/Vancouver Sun)