Kerry Gold, The Globe & Mail, May 22, 2009
It was a mere seven months ago that economists and newspaper headlines had declared a real estate downturn tantamount to the sky falling in on Vancouver homeowners.
But recent reports suggest the downturn wasn't nearly as severe as previously imagined. According to the most recent statistics from the Real Estate Board of Greater Vancouver, residential property sales in Greater Vancouver are up 31 per cent from March to April, which some believe is the sign of a market rebound. A report released this week by Landcor Data Corp. concludes: “Property sales indicators confirm the market may be nearing bottom given the clear upswing in residential sales…this sales rebound is forecast to continue into the summer months.”
If the market hasn't hit bottom yet, no one has told the crop of hungry house hunters looking to buy now.
Anyone who's attempted to purchase a home on Vancouver's east side has already seen signs of a turnaround. A three-bedroom home near busy Kingsway with an asking price of $699,000 sold in April for $806,000.
This month, a house near Fraser Street that was a former marijuana grow-op sold for $725,000, after multiple offers. The asking price was $599,000.
Economist Helmut Pastrick was one of the forecasters from last fall who thought the situation would be more dire. Back in October, the outlook was a 30-per-cent decline in prices by the end of 2008, followed by another 17-per-cent decline in 2009. It was the kind of forecast that sent consumer confidence plummeting.
“I thought it would be more severe than it appears to be,” says Mr. Pastrick, who is Chief Economist for Central 1 Credit Union, the umbrella organization for credit unions in B.C. and Ontario. Mr. Pastrick also analyzed the housing market for the Canada Mortgage and Housing Corporation for many years.
“Certainly on the prices side, I thought it would be more severe,” he adds. “In Vancouver, the housing price index went up for first time in April after declining for over 12 months.
“One is always hesitant to say this is the turning point based on a one-month performance, however it does look like sales are going to continue to pick up, and that bodes well.”
“If you use the housing price index as a benchmark, the decline thus far from top to bottom is in the order of 12 or 13 per cent,” says Mr. Pastrick. “And I thought it would be initially about a 20-per-cent decline.
“April marks the beginning of the turnaround and we are going to see prices rise from hereon up.”
The B.C. Real Estate Board of Greater Vancouver released a report last October that forecast house sales would decline by 28 per cent in 2008 with only a slight 4-per-cent increase in 2009. However, the Board is singing a happier tune this month, and it's got nothing to do with traditional springtime purchasing habits. It appears to be a revitalized market buoyed by record low interest rates and a reduction in house prices that have pulled in the all-important first-time home buyer. It's stimulation of that particular market that sparks other home buyers to join in, says Mr. Pastrick.
There is stability coming back to the market, says B.C. Real Estate Board of Greater Vancouver president Scott Russell. It's not a seasonal adjustment either, he says.
“We're beyond that,” says Mr. Russell. “The biggest effect is we're seeing historic low interest rates that have been a huge boost for the market. We have seen some price declines from a year ago. Combined with those two items, the affordability is about 25 per cent better from a year ago.”
Unlike the sellers' market of the last few years, this buyers' market is less volatile and allows for better decision-making for buyers, says Mr. Russell.
“It is exciting news for us and as we say, we are watching it. I think most realtors would agree that stability and balance is where we want to end up.”
Rudy Nielsen, president of the Niho Group, which puts out the Landcor report, doesn't believe the true turnaround will happen until the end of the year. He believes the growth will be slow because it's linked to the world market, and he cites the difficulty in obtaining business loans as a major setback in this recession.
Over all, property sales in B.C. dropped 48.7 per cent compared to this time last year, according to the Landcor report. Total sales value dropped 52.8 per cent.
“In the fourth quarter we're going to see a turnaround. I don't think it's going to happen until then,” says Mr. Nielsen. “I'm not an economist. I look at history, when the last crashes took place, and I just can't see it yet.
“The consumer drives everything. If the consumer is buckling down and not spending money we are in trouble. And the consumer is buckling down right now.”
Mr. Nielsen's company maintains the most comprehensive database of real estate data in B.C., but he also is one of the largest private landowners. It's routine for Mr. Nielsen to snap up five-acre parcels for $50,000 in northern B.C. and “always make money.” However, sales have slowed, he says.
“I think it's the worst recession we have ever had,” says Mr. Nielsen. “I lost a lot of money in 1981. One day I was worth $7-million – a year later I owed $2-million. It was a rough recession. But with this one, people are saying it's worse than ‘81 or ‘82.”
It took another five to six years for property values to climb after the crash of 1982, according to Mr. Nielsen's numbers. In 1982, sales value totalled $4.3-billion. By 1988, total value had climbed to $12-billion.