Prices will remain below 2008 levels before edging up in 2010
Spurred by record-low mortgage rates, provincial real estate sales should continue to rise through the remainder of 2009 from last year's market fall, according to the B.C. Real Estate Association's latest forecast.
Home sales have doubled since January's near collapse in sales, association chief economist Cameron Muir said in a news release.
He expects transactions recorded through the Multiple Listing Service to climb some 15 per cent from 2008 to 79,400 units.
Prices, although edging up from their declines through the last half of 2008, will remain below last year's levels before showing slight gains again in 2010, according to Muir's forecast.
The provincial average price for a home of $451,200 will be one per cent below the 2008 level, and should show a one-per-cent gain to $457,600 in 2010.
"When we look at the economy itself, we're coming out of the recession, albeit slowly," Muir said in an interview. "And the amount of demand we've obviously seen -- year-to-date and going forward -- [justifies] sales around or below the 10-year-
B.C.'s 10-year average for housing resales is about 83,000 units.
Economic forecasts continue to indicate that the province's recovery from recession will be slow, however. Central 1 Credit Union was the latest with its forecast that B.C. will experience below-average growth until 2012.
Muir's expectation is for provincial unemployment to average 7.7 per cent this year, and go down only marginally next year.
However, he does expect the slow recovery from recession to start creating jobs that will help support demand for housing at that 10-year-average level.
Muir sees housing as a brighter spot in the economy, which will likely spill over into other areas, such as retail sales.
However, economist Helmut Pastrick, with Central 1 Credit Union, believes Muir's forecasts are somewhat conservative given the pace of sales in recent months.
In answer to the question why, Pastrick replied, "Interest rates. It's amazing the power of those low mortgage rates."
Over the short term, with the Bank of Canada vowing to keep its trend-setting overnight rate at 0.25 per cent until the middle of next year, there seems to be little risk of mortgage rates rising.
Muir noted that most first-time homebuyers lock in mortgages for five-year fixed-rate terms, so they should be insulated from rising rates.
However, "if interest rates climb higher than expected, that's going to pull demand out of the market as [a buyer's ability to pay mortgage costs] is eroded."
In a recent report, Scotiabank Economics senior economist Adrienne Warren noted that the average new mortgage payment in Canada in 2009 declined 26 per cent from its peak in 2007, due almost entirely to the reduction in mortgage interest rates.
Pastrick said the increase in interest rates should "be a self-correcting mechanism," and if the province does not fall into the dreaded double-dip recession, they should rise as the overall economy improves.
"In a broader sense, at some point [low rates] run their course," Pastrick said. "We know there will be a rate-
normalization phase when economic growth does pick up."
The recovery of sales, however, hasn't been shared equally across the province.
Metro Vancouver, Victoria and the Fraser Valley have seen relatively sharp rebounds, while the South Okanagan, the Kelowna to Vernon region and Kamloops are forecast to see much slower recoveries.
Muir expects housing starts to remain depressed for the remainder of this year, and not recover by a lot next year.
His forecast is for 14,800 new home starts by the end of 2009, which is only slightly higher than the most recent low of 2000.
Muir added that if some of those starts do not materialize and they fall below 14,400, that will be the lowest level of new home construction in the province since 1962.