New home prices reduced to finalize sales

Metro Vancouver new-home prices have posted their biggest month-to-month gain in more than a year.

Contracted home prices for Metro Vancouver on Statistics Canada's new housing price index rose 1.2 per cent in July from June, the biggest increase among Canadian cities.

Year over year, however, Metro's new-home prices were still eight per cent below their level in July 2008.

The July increase beats the 0.4-per-cent rise in Metro's index score in May, which was the only other month in the last 15 in which the index score rose.

That appears to indicate homebuilders have stemmed the price-cutting they engaged in to make sales during the market downturn.

What is noticeable in the market now is a shrinking inventory of new homes on the market, said Neil Chrystal, president of builder Polygon Homes Ltd.

Chrystal thinks developers discounted more steeply than the eight per cent reported by Statistics Canada and buyers are jumping in because they perceive they are getting good deals, especially with current low mortgage rates.

"In the last few months prices, I think, have stabilized and there might be a small creep up," Chrystal said in an interview. "But they still represent really good value from where they were a year ago, whether that's eight per cent or 15 per cent [lower]. I would guess that it's more than eight per cent."

Nationally, prices rose unexpectedly in July, the first increase in 10 months, amid signs of recovery.

Statistics Canada said its overall new-house price index edged up 0.3 per cent during the month. Most economists had expected prices to decline 0.1 per cent after a 0.2-per-cent drop in June.

July saw the first increase since September 2008, the agency said.

Following Vancouver, Hamilton had the next biggest gain at 1.1 per cent. Windsor, Ont., and Calgary both gained 0.5 per cent. The biggest price decline was in Victoria, which fell 3.5 per cent. "In response to slow market conditions, some Victoria builders reduced their prices in order to finalize sales," Statistics Canada said.

Millan Mulraine, economic strategist at TD Securities, said it appears that "the buoyancy that has been seen in the Canadian existing homes market may finally be filtering through to the new homes markets."

"Vancouver leads new-home price rebound in July" prepared by Derrick Penner/Vancouver Sun)