CMHC Cautiously Optimistic about Local Housing Market

Vancouver Courier
November 16, 2012


I attended Canada Mortgage and Housing's 18th annual Housing Outlook Conference in Vancouver in mid-November. My impression was that the presenters were optimistic about the housing market in B.C.

The conference presenters are seasoned analysts who objectively interpret the numbers from the real estate boards and the Census, as well as their own surveys and other sources of data.

Their analysis takes the hysteria out of the statistics that are so broadly interpreted and spun as to make them virtually useless to the average home buyer or seller.

Robyn Lake, a senior market analyst with CMHC described the outlook as cautiously optimistic. The optimism springs from three important indicators of economic stability: low mortgage rates, improving employment numbers and increasing migration to BC from across Canada and abroad:
  • With economic uncertainty a certainty these days, mortgage rates aren't expected to change much this year, though CMHC does expect a small uptick in the latter half of 2013 as a result of higher employment and economic growth in 2013.
  • On the employment front, Vancouver has added more than 35,000 jobs this year and is expected to continue to grow at a rate of 2.9 per cent in 2012 and at about 2.2 per cent in 2013. Over the past 18 months most of the gain has been in full-time jobs. All good news for the local economy.
  • Our population growth has tailed off from its recent high of 42,826 new immigrants in 2010.
  • In 2011, immigration levels dropped to about 26,000 but those numbers are rebounding and slowly heading back to 2010 levels with about 34,000 new immigrants in 2012 and 40,000 expected in 2013. According to Citizenship and Immigration Canada, 17 per cent of new immigrants become homeowners within six months of arrival and more than half are homeowners within four years.
The cautious part of the forecast is not based on the usual gloom and doom stuff such as Canadians' reliance on credit or overpriced markets. CMHC posits that the biggest risks to our economy and the cause of our real estate market slowdown comes from concerns about inflation pressures out of the U.S. and a global economic slowdown. They expect consumer confidence to improve as those situations stabilize.

Lake sees us in a buyers' market until mid-year when the housing supply has normalized. We currently have about nine months' supply on the market.

She expects that to hit between seven and eight per cent by mid 2013 as favourable conditions increase sales and draw down inventories moving us back into a balanced market.

The sales-to-new-listings ratio has recently started to move from buyer's market levels back to balanced market levels as well.

So if you're planning to buy, this may be your opportunity. But don't expect to find any super bargains. While the volume of sales is down 18.9 per cent year over year, housing prices only appear to have come down.

Most of the downward trend in average prices in Vancouver is a result of a shift in the market from high-end homes on the West Side towards lower-priced real estate in every area of the city. Simply put, a smaller percentage of buyers are buying big expensive houses and a larger percentage are buying lower-priced houses, condos and townhouses. And that leads to lower average prices but not lower prices in each category.

For instance, on the West Side, housing prices have gone up if you factor out the high-end properties that are still skewing the year-over-year average prices. On the east side, a trend towards lower-priced houses, condos and townhouses has had the same impact.

CMHC sees a modest increase in housing prices going forward with half a per cent growth in each of the first two quarters and one per cent in the last two quarters of 2013.

And prices are sticky, meaning that sellers aren't in any hurry to drop prices for a quick sale. CMHC reported that in 2012, sellers who didn't get offers that were close to their list prices, opted to take their properties off the market rather than sell at a discount.

Be very cautious. And very optimistic!

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