Demand expected to fall as first-time buyers bow out

Metro Vancouver real estate sales will drop in 2010 compared to last year and flatten out in 2011 because new buyers who would have been in the market were enticed to buy in 2009, Canada Mortgage and Housing Corp. said Wednesday.

CMHC is forecasting that Metro Vancouver will see 35,000 property sales cleared through the realtor-controlled Multiple Listing Service, a 3.5-per-cent decline from 2009 and will slip another three per cent to 34,000 transactions in 2011.

"Certainly the market recovery we saw over the past year, at least anecdotally, a lot of that seems to have been first-time homebuyers taking advantage of the lower [mortgage] rates combined with lower prices," Robyn Adamache, a market analyst with CMHC said in an interview.

And with prices rebounding past their previous peaks and with mortgage rates having begun to creep up, Adamache added that it makes sense 2010 and 2011 sales will be dominated by move-up buyers.

On prices, CMHC is forecasting that Metro Vancouver's average price to top $655,000 in 2010, up 10.6 per cent from 2009. In 2011, however, the federal mortgage insurer estimates price growth will edge up 3.1 per cent to $675,000.

Adamache added that an improving economy, which has shown a steady trend of job growth in recent months, along with anticipated strong population migration, should support steady housing sales.

Nationally, CMHC said tougher mortgage rules, higher borrowing costs and rising inventories will help cool what has been a red-hot market.

CMHC forecast housing resales in 2010 to hit 497,300 units, up by seven per cent from last year, then easing 4.8 per cent to 473,500 in 2011. Sales were up 7.7 per cent to 464,730 last year after plunging 17.1 per cent in 2008.

Bob Dugan, CMHC's chief economist, said the existing-home market will move toward balanced conditions over the next two years as inventory increases. Figures released Monday by the Canadian Real Estate Association showed April inventories at record levels.

(prepared by Derrick Penner/Vancouver Sun)