Steepest housing gains

Metro Vancouver saw the steepest increase in home prices of Canada's major markets in the first quarter of this year in a sales rebound characterized as an "irrational" response to market conditions that won't be sustainable, according to national realtor Royal LePage.

The average price of a detached bungalow on Vancouver's east side hit $674,180 in the first quarter of 2010, a 25-per-cent jump from the first quarter of 2009, realtor Royal LePage reported Thursday in its quarterly survey of major-market housing prices.

A standard Vancouver east-side condominium saw an even steeper gain of 29 per cent to hit an average $402,000.

An average Vancouver west-side bungalow, which dipped as low as $950,000 in the first quarter of 2009, had roared back to an average $1.15 million, a 21-per-cent gain, in the first quarter of this year.

"Both the precipitous decline [in house prices] that occurred during the recession and the very sharp recovery have been steeper and happened quicker than expected," Royal LePage CEO Phil Soper said in an interview.

The concern now, Soper added, is whether or not the housing rebound, which was heavily influenced by the stimulus of low mortgage rates, will be matched by real economic growth and significant employment gains.

For Metro Vancouver, Soper added that "we know 20-per-cent year-over-year price increases aren't sustainable, particularly when we're not seeing significant increases in salaries and wages, nor an increasing number of jobs being created."

Broader economic growth will be important, Soper added, when higher mortgage interest rates and tighter qualifying rules for mortgages kick in later this year, which will act to cool the market.

If there is economic growth, Metro Vancouver's "exuberance" in the housing market will ease off gradually, Soper said. If not, activity will fall off more dramatically.

Regardless, Soper expects the region's rising home prices to slow to low single-digit numbers by the end of the year.

Nationally, Soper said that while growth in the housing markets has been unequal, "the first quarter of 2010 continued where 2009 left off, with more Canadians enthusiastically participating in a rejuvenated residential real estate market."

House prices were up across all key housing types surveyed by Royal LePage, with the average price of a detached bungalow in Canada rising 11 per cent to $329,209 in the first quarter compared to the first quarter a year earlier. Standard two-storey homes rose 10.3 per cent to $365,141 and standard condominiums increased 10.9 per cent to $228,963.

The survey, which looks at seven types of housing in more than 250 neighbourhoods, found there were three trends across the country.

In urban centres like Toronto, Vancouver and Victoria, there was a roller-coaster effect in which prices dropped then rose to levels that exceed pre-recessionary prices. The second trend saw non-stop growth in markets such as Halifax, Ottawa, Regina, Saint John, St. John's and Winnipeg. The third saw level markets, where prices are relatively unchanged in centres like Calgary, Moncton and Montreal.

However, the report notes that price increases in all markets are expected to ease in mid-to late-2010.

("Metro Vancouver posts steepest housing price gains" prepared by Derrick Penner/Vanouver Sun)