Real estate sales in B.C. level out

British Columbia's real estate market eased into better balance over the first quarter of 2010, the B.C. Real Estate Association reported Tuesday.

Multiple Listing Service sales in March, at 7,110 units were 43-per-cent higher than in the same month a year ago when the market was just emerging from the downturn. But they were about 20-per-cent below December's sales levels when seasonal factors are considered. Over the entire first quarter, B.C. saw 18,284 MLS sales, about 64-per-cent higher than the first quarter of 2009, which marked the start of B.C.'s recovery of sales.

"Since the beginning of the year, we've seen home sales moderate," said Cameron Muir, B.C. Real Estate Association chief economist.

"That is largely the result of pent-up demand that has already been expended in the marketplace as well as eroded affordability as higher home prices and, more recently, higher mortgage interest rates are certainly squeezing some low-equity buyers out of the marketplace."

On Tuesday, the Royal Bank of Canada and Bank of Nova Scotia raised their rates on fixed-rate mortgages for the second time in two weeks, this time by one-quarter of a percentage point, pushing key posted five-year rates to 6.1 per cent.

Muir said that in April, Canada Mortgage and Housing's more stringent qualifying rules for mortgages will take hold, which should reduce the purchasing power of low-equity buyers and slow sales a bit more.

The overall B.C. real estate picture has been heavily influenced by the strong rebound in Metro Vancouver, the Fraser Valley and Victoria, Muir added, with prices bouncing back past previous record levels. Across B.C., the average home price hit $516,970, some 21-per-cent higher than in the same month a year ago.

In Metro Vancouver, the average price in March hit $693,482, a 31-percent jump from the same month a year ago. The Fraser Valley saw its average price reach $455,947 in March, about 16-per-cent higher than March 2009.

Muir said the overall economy is showing signs of growth which should underpin demand for housing. That will likely be offset by interest rates.

Andrey Pavlov, a finance professor at SFU, said lenders have to raise their rates because it is starting to cost more to raise capital to fund those mortgages within Canada's bond markets. "When you need to allow for interest rates going up, it's not surprising [higher mortgage rates] are already here," he said.

Pavlov said higher rates are the biggest risk to B.C.'s market, but the saving grace will be "interest rates are going to go up only if the economy is doing very well."

"In that case, people will have jobs, incomes will be rising, so people will be able to afford higher interest rates."

(prepared by Derrick Penner/Vancouver Sun)