According to the BC Real Estate Association, after six years of elevated sales levels and rapidly rising home prices, the Vancouver housing market is expected to be more balanced over the next 24 months.
Home sales are trending lower and are forecast to decline 8 per cent to 35,900 units in 2008. Eroding affordability has been somewhat offset by a diverse housing stock and the popularity of 40-year amortized mortgages. However, some would-be homebuyers are being squeezed out of the market by high prices. In addition, investor activity is waning in light of more gradual appreciation of home prices and uncertainty around the impact of a weak US economy and its housing recession. Vancouver will remain a bright light of North American housing markets, despite reduced unit sales.
Average residential prices are forecast to increase 9 per cent to $621,000 this year, and a further 5 per cent to $651,000 in 2009. Less upward pressure on prices is the result of fewer home sales and an inventory that is 17 per cent higher in the first quarter compared to the previous year. This is good news for homebuyers who have had to compete in recent years for a limited number of homes for sale. Housing starts in the Vancouver CMA climbed 11 per cent to 20,736 units last year.
Low new home inventories are a signal for home builders. Yet, in addition to capacity constraints, builders are facing higher financing costs resulting from tightening credit. This causes them to pay increasing attention to market segmentation and depth of demand. While housing starts were up 19 per cent in the first quarter, they are forecast to remain near 2007 levels this year, albeit declining by 1 per cent to 20,500 units.
To read the BCREA Housing Forecast publication in its entirety, go to http://www.bcrea.bc.ca/economics/forecasts/2008-05Forecast.pdf
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