Busy BC housing market

Consumer-driven momentum in British Columbia’s real estate markets rolled through September and into October, but analysts think sales may slow to the pace of the province’s sluggishly recovering economy.

The B.C. Real Estate Association on Thursday reported 8,576 sales through the realtor-controlled Multiple Listing Service across B.C. in September, a 68per-cent increase from the same month a year ago, the busiest September since 2005 and the third busiest on record.

For the first nine months of 2009, 63,521 MLS sales were recorded, 6.3 per cent higher than in the first nine months of 2008.

“There is still enough momentum in the marketplace to continue elevated sales for a number of months yet,” Cameron Muir, chief economist for the B.C. Real Estate Association said in an interview.

“[However] by the time we get into the new year, home sales in [Metro Vancouver] will start to ebb and reflect more the underlying fundamentals of the economy around wage growth, job growth, that kind of thing.”

Muir said the surge in home sales that B.C. has seen over the past few months was heavily influenced by a strong rebound in coastal markets, primarily Metro Vancouver, which is the province’s biggest market.

Sales in that market collapsed last winter, Muir said, and a large part of the sharp rebound it has experienced has come from the buyers who sat out a year ago but are eager to jump back in now.

Their interest was driven by sliding prices and falling mortgage rates, which Muir said had the effect of reducing average monthly mortgage payments some 26 per cent by the spring.

However, Muir said average prices have also bounced back since spring, eroding much of the improvement in buyers’ ability to carry mortgage payments.

The average B.C. home price in September, at $474,169, was some 15 per cent higher than in the same month a year ago, driven largely by price gains in Metro Vancouver.
Muir said rising prices, coupled with “an economy that’s gaining in fits and starts, [will] moderate home sales.” B.C. saw its highest level of real estate sales in September since 2005 as buyers who sat out on the market last year scramble to do deals with low mortgage rates. Below are figures for September sales and average prices from B.C.’s 12 real estate boards, as well as year-over-year changes:

Stan Hamilton, a professor in the Sauder School of Business at the University of B. C., said homebuyers in B.C. are “walking a thin line of what’s the best price, what’s the best interest rate.”

“Nobody wants the market to get away from them,” Hamilton said, “ and yet again, nobody wants to pay that extra nickel.”

The five-year fixed mortgage rates jumped by slightly more than one-third of a percentage point this week at all five of Canada’s major banks, to 5.84 per cent.

Hamilton said the rise will likely push “a few nervous people” back onto the market’s sideline, but overall, rates remain historically low, so one increase is unlikely to seriously dampen demand.

National home sales soared 18 per cent year over year in the third quarter to a total of 135,182 units, on an unadjusted basis, the Canadian Real Estate Association reported. Average prices across Canada rose 13.6 per cent in September from a year earlier to $331,602.

Seasonally adjusted home sales activity now stands 48 per cent above the low reached in the fourth quarter of 2008.

The report presents a quandary for homebuyers, who must decide whether to purchase in the current seller’s market or wait until home listings rise in the months ahead.

It also presents a dilemma for the Bank of Canada, whose ratesetting decision next week must somehow balance the needs of exporters squeezed by a higher dollar and an overly buoyant housing market.

("Demand propels busy housing market into fall' prepared by Derrick Penner/Vancouver Sun)