New home prices still falling

Homebuilder Dale Barron says major price reductions earlier this year have translated into his Coquitlam-based company's best sales months on record.

But now the owner of Morningstar Homes is raising prices on those single-family houses -- although not nearly as high as 2008 levels.

"Three of the first four months [of 2009] were the best sales months in the history of our company," Barron said Monday. "In January, we sold 21. In February, we sold 13. In March, 21. And in April, 20. In the last quarter of last year, we sold about 12 homes.

"I now have no finished, unsold inventory. We're selling faster than I can build them. I'm selling homes that will be occupied next March."

Statistics Canada reported Monday that Metro Vancouver saw a 1.1-per-cent decline in prices for new homes in March from the previous month, and a 7.8-per-cent decline since March 2008.

The declines were far greater than the national average, which saw prices for new homes fall 0.5 per cent for the month and 2.4 per cent in the year.

Barron said that when the real estate market went flat in 2008, he got together with partners and associates to work out ways to reduce costs at his current housing sites in Coquitlam and Delta.

He believes that the StatsCan survey is largely a reflection that many other developers were slow to drop prices earlier this year, and are only now starting to do so.

"We talked to our trades, suppliers, bankers, lawyers and partners in terms of having to lower our prices significantly," added Barron. "We said we can either make bread-and-butter wages and push through this, or hold back, lay everybody off, and wait. We renegotiated contracts and went back to the manufacturers, who reduced prices for [such things as] siding and carpeting."

Reducing travel distances and idling times for construction trucks alone saved the company a total of about $5,000 on each home, he added.

Barron said cost-cutting measures and efficiencies allowed Morningstar to drop the price of their homes by about $100,000 -- enough to bring buyers back into the market.

Since then, he added, prices have gone up about $30,000, "to allow our trades and suppliers to make a modest profit."

Greater Vancouver Home Builders' Association [GVHBA] chief executive officer Peter Simpson said that the StatsCan survey results are not surprising, but that things are starting to turn around.

He noted that prices for all homes in the Lower Mainland area rose 45 per cent between 2005 and 2007.

"Prices went up pretty heavily here, so to drop [eight per cent] isn't surprising. And builders have standing inventory, so it makes sense to reduce prices, sell homes and get them off the books. It's creating some pretty sweet deals for people looking for a home."

Simpson also said that many builders are already starting to plan their next projects.

According to the survey, the drop in new home prices was led by declines in Western Canada, with the biggest declines in Calgary and Edmonton.

"In Vancouver and Victoria, builders reported lower prices due to competition and slow market conditions." the report stated.

Victoria prices dropped 0.9 per cent from February to March and 6.6 per cent since March 2008.

Tsur Somerville, director of the Centre for Urban Economics and Real Estate at the University of B.C.'s Sauder School of Business, said in an interview that he is not surprised at Vancouver's new home price drop.

"We had a much larger price runup and had prices that got more out of line with fundamentals."

Jennifer Podmore Russell, managing director of MPC Intelligence, a research firm for new home construction, said in an interview that there are now 7,081 homes in Metro Vancouver either under construction or completed and unsold.

She said the 1,500 that are completed and unsold are far more than the 500 homes completed and unsold at the end of 2006, but far less than the 4,500 completed and unsold at the end of 1999.

"The inventory is absolutely up from the height of the market in 2004, 2005 and 2006, but still well below what we experienced in the '80s and '90s.

"And the most significant decline in prices, I believe, is over."

Podmore Russell said there's now about a 20-month supply of available new housing, meaning that if homes keep selling at today's pace they will all be sold in 20 months. "That 20-month [supply] is not that much in historical terms."

Meanwhile, builders started work on 483 new homes across Metro Vancouver in April, down almost 70 per cent from the same period last year.

(prepared by Brian Morton/Vancouver Sun)