Derrick Penner, The Vancouver Sun, May 20, 2009
British Columbia's real estate markets have reached a point where it is difficult to predict if they'll go down any further or begin a recovery -- or even when either might occur.
In its latest forecast released Tuesday, the Canada Mortgage and Housing Corp. reduced its expectations for new-home construction, sales and prices for this year and next.
Province-wide, the forecast calls for a 43-per-cent decline in housing starts compared with 2008. It estimates that builders will start work on 19,725 new housing units this year, with a 10-per-cent uptick to 21,000 new units in 2010 -- a far cry from the 34,321 built in 2008.
On home resales, the federal housing agency expects 2009 MLS-recorded sales to fall almost 16 per cent to 58,100 units before climbing again to 67,750 in 2010. Average prices are expected to hit $403,700 this year, an 11-per-cent dip, and increase a marginal 0.7 per cent in 2010.
In Metro Vancouver, the expectation is for housing starts to decline almost 44 per cent to 11,000 new units in 2009, then edge up slightly to 11,500 in 2010.
Metro housing resales are expected to drop almost 13 per cent this year to 22,000 transactions, then rise almost 14 per cent to 25,000 in 2010. Metro prices are expected to sink 13 per cent to $516,000 in 2009 and a further 2.3 per cent to $504,000 in 2010.
This is a downgrade from CMHC's first-quarter forecast. But Robyn Adamache, a senior agency analyst for Metro Vancouver, said Tuesday the new numbers are based on slow activity, both for housing starts and resales, in the opening months of the year.
However, the CMHC report follows the Canadian Real Estate Association's forecast last week that upgraded its expectations and said that 2009 price declines in B.C. will be shallower than first predicted.
"We're definitely seeing [a wider] range of forecasts than we were a couple of years ago," Adamache said in an interview.
Forecasting, she added, "is tricky because the economic times are so uncertain at this point. The best you can do is look at how factors are different than they were in the past."
There are also a lot of mixed signals in the economic data, said Tsur Somerville, director of the centre for urban economics and real estate at the University of B.C.'s Sauder School of Business.
"Canadian housing sales are up, but U.S. housing starts are down," Somerville said in an interview. "Stock markets are up, but retail sales are down. There are lots of different things [going on]."
Somerville added Canada's mortgage rates, currently at extremely low levels, also throw a wrench into forecasts. He said one model used to calculate home values suggests that, with mortgage rates where they are, "housing is affordable in Vancouver, and prices could rise." But with B.C.'s weaker economic conditions, he doesn't believe that will happen.
Economic forecasting, Somerville said, works better when conditions are in some kind of equilibrium, and doesn't do as well trying to figure out when things will change.
"Right now you're trying to figure out when a complex world economy is [going to turn] around, how fast it's turning around, and where it's turning around," he added. "It's just a very, very difficult environment to turn around."
Somerville said CMHC's figures for housing starts indicate that the recent uptick in sales, particularly in March and April, have not been enough to whittle inventories of unsold homes down enough to re-engage the interest of developers.
"Until that inventory is clear, it would be premature to think there would actually be a pickup in starts," he added.
Even the most optimistic forecasts acknowledge the uncertainties in the marketplace.
In his most recent quarterly report, Rudy Nielsen, president of the research firm Landcor Data Corp., noted that the recent trend of rising sales over the past few months could be signalling that the downturn is near its bottom and represents "a light at the end of the tunnel."
Or, the blip in sales "could be a grizzly bear with a flashlight. It's tough to guess right now where the hell we're heading," Nielsen said in an interview.
In the report, Landcor counted 13,786 residential real estate sales in the first quarter, about 51 per cent of the 26,860 properties that traded in the same quarter a year ago, the lowest level of quarterly sales since 1985.
First-quarter sales were down almost 30 per cent from the fourth quarter of 2008.
A BETTER STORY FOR SALES
Real estate transactions are beginning to pick up throughout B.C., according to researchers Landcor Data.
- TOTAL SALES IN GREATER VANCOUVER
+10% in February
+36% in March
- VANCOUVER ISLAND
+10% in February
+37% in March
+16% in February
+21% in March
- FRASER VALLEY
+16% in February
+41% in March
Source: Landcor Data Corp.