Falling prices and interest rates attract first-time homeowners

First-time buyers are now the driving force behind a Metro Vancouver real estate market that's showing increasing signs of recovery, according to a report released Wednesday by Re/Max.

"This survey says that people are confident in their jobs and taking advantage of record low interest rates and the price depreciation that's occurred," Elton Ash, regional executive vice president, Re/Max of Western Canada, said in an interview. "In February, we've seen a significant increase in home sales. The Lower Mainland is seeing a resurgence in the real estate market."

The 2009 Re/Max First-Time Home Buyers Report, which highlights first-time buying activity in 32 residential housing markets across Canada, found that improved affordability is prompting many first-time buyers to get off the fence and into the market.

While there's still a sense of caution, the report states that increased inventory, lower rates and longer days on the market are presenting opportunities that haven't been seen in nearly a decade.

It notes that there are now more than 14,000 properties on the market in Vancouver, a figure that has dropped considerably since peaking in October 2008.

The report stated that although 2009 got off to a slow start, February home sales were well above those reported in January, a trend that's expected to continue in the weeks ahead.

Ash also said that the increased sales activity in the lower end could kick-start sales in the middle to upper end of the market, which have been more sluggish in recent months. "It's the domino effect. The move-up buyer can [also] get another home."

He said that, according to another survey, 38 per cent of Metro Vancouver's buyers last week were first-time buyers, compared to 17 per cent in December. "That's a significant increase."

Ash said that the numbers are impressive, with 2,200 homes sold in Metro Vancouver in January and February, a 17-per-cent increase over the same two months in 2008.

Despite the increase in sales activity, Ash cautions that the market still has a way to go to turn around.

"[The slowdown] is not over, but we're seeing confidence coming back to the consumer's mind. What we're seeing is a slow increase in real estate activity. Overall consumer confidence should increase in the last half of 2009."

The Re/Max survey contained several examples of price drops in Metro Vancouver, including Port Coquitlam which saw the median price for a detached house drop from $537,000 a year ago to $450,000 today.

Another example was east Vancouver, where the starting price for a detached home is now about $500,000, compared to $550,000 a year ago.

Kelowna's starting price for a detached home has dropped from $350,000 to $310,000 in a year.

Despite the increased interest, the report noted that buyers remain clearly in control in most Canadian markets, including Vancouver, Surrey, Port Coquitlam, Chilliwack, Kelowna and Victoria.

A separate survey shows that housing sales in Richmond more than doubled in the first two weeks of February, compared to a month earlier.

An average of 77 sales were recorded each day during this period, compared to 35 in January.

"The market today has finally reached a point with a decrease in interest rates and home prices that makes it possible for first-time home buyers to really get their foot in the door," Chris Stylianou, realtor for Macdonald Realty Westmar, said in a statement.

Meanwhile, a report out of Ottawa suggests that declining housing starts in Canada will cut home builders' profits by almost 20 per cent this year, with residential construction profits dropping to $3.2 billion in 2009 and $3 billion in 2010.

(prepared by Brian Morton/Vancouver Sun)