Cautious real estate consumers

Cautious consumers across the province caused real estate sales to drop to their lowest level in July since the start of the decade, the B.C. Real Estate Association reported Friday.

Sales through the Multiple Listing Service (MLS) were down 37 per cent to 6,541 units compared to July a year ago. The total value of those sales dropped 38 per cent to $2.9 billion compared with July 2007.

Cameron Muir, the B.C. Real Estate Association chief economist, said the rising number of new listings being added to inventories of unsold homes also put a slight downward pressure on prices.

Although provincial inventory was up 63 per cent in July to 60,008 units, the average price of a B.C. home in July was $444,358, down only 0.5 per cent from the same month a year ago.

"We're seeing consumer demand fall off the high levels we saw last year," Muir said in an interview, "and a lot of that is being brought on by low consumer confidence."

There are weak spots in the economy, Muir added, but generally employment and income growth are still continuing at a healthier pace than in other parts of the country, which he believes will hold up demand for housing.

Still, Muir said uncertainty, brought about by the shock of rising fuel prices and other factors are weighing on the minds of buyers.

Besides the falling home sales, Muir said automobile sales have come down and retail sales have slowed.

"That's a signal that the consumer is re-evaluating their financial position or household budget," he added, "and that has an impact on the overall economy."

Carol Frketich, regional economist for the Canada Mortgage and Housing Corp., said that flagging consumer confidence might swing back if people see the overall economy still performing well.

"B.C. was one of the few provinces to add jobs [to its economy in July]," Frketich said. "We've got an unemployment rate of 4.4 per cent and job growth of 2.7 per cent. It's not like we're in a recession. We're not shedding jobs."

Canada Mortgage and Housing, also on Friday, released its revised forecast for new-housing construction.

For B.C., Frketich's estimate is for fewer new-home starts this year; however, she raised her expectations from the forecast CMHC published in February because of higher than expected levels of multi-unit housing construction so far this year. The revised CMHC forecast estimates builders will have started work on 35,800 new homes by the end of 2008, up from February's forecast of 33,250.

Next year, Frketich still forecasts a decline in new-home construction to 31,700 units, partly driven by rising inventories in real estate's resale markets.

"The resale market is much better supplied," Frketich said, "and there will be less spillover [of demand] into the new housing markets."

She added that the 31,700 level is much closer to the level of new-housing construction that would be suggested by provincial population growth alone, which she estimates to be in the 29,000 to 30,000 range per year.

Muir added that he expects inventory levels to decline over the next several months, but "most B.C. regions will remain in buyers'-market territory for the remainder of 2008."

To the end of July, the B.C. Real Estate Association said MLS sales across the province were down 24 per cent compared with the same period in 2007.

The total value of residential real estate sold through MLS was $23.2 billion, down 18 per cent from the first seven months of 2007.

(prepared by Derrick Penner/Vancouver Sun)