The main factors tempering homebuyer demand will be high home prices and softening consumer sentiment. With the average resale home price in Metro
Vancouver at more than $600,000 and still rising, some potential buyers will opt to delay their purchase. Some low equity and first time home buyers could find it difficult to negotiate a mortgage with achievable monthly carrying costs, in spite of low mortgage rates. First time homebuyers are an important source of homeownership demand, particularly for apartment condominium units, making up more than one-third of people who bought a home in Metro Vancouver over the past year. The housing market collapse in some parts of the US has added uncertainty in consumers’ minds. This unease, combined with slowing economic growth in Central Canada and layoffs in the BC forest industry have contributed to lower levels of consumer confidence. Combined with mortgage rates above year-ago levels, these factors led to a decline in home sales in the first quarter of 2008 and will keep sales flat in the near term.
The supply of resale homes on the market will grow as homeowners look to capitalize on the home equity build-up resulting from four straight years of double-digit home price increases. The decision to sell may take on added urgency in light of the housing market downturn in the US. In the first quarter of 2008, the average number of active MLS® listings for sale in Metro Vancouver increased nine per cent compared to the same period last year, with the supply of apartment condominiums for sale increasing more than other home types. At the end of the first quarter there was a five month supply of homes on the market, up from four months one year ago. This level of supply is still shy of the seven to eight months supply that has characterized balanced market conditions historically in Metro Vancouver. Look for this trend of increasing listings to continue through the remainder of this year and into next.
The combination of moderating sales and more homes on the market will bring demand and supply conditions closer to balance and slow home price growth. Moderating sales and more homes on the market will mean fewer multiple-offers per property and more choice for homebuyers. Homes will take longer to sell as the market cools from the red hot pace of the past few years, and reflect a more normal pace. Home price growth will slow into the single digit range this year, with eight per cent appreciation in values forecast, and a further five per cent growth expected in 2009.
This is an article from CMHC's Housing Market Outlook - Vancouver and Abbotsford CMAs Second Quarter 2008. To read this report in its entirety, go to http://www.cmhc-schl.gc.ca/odpub/esub/64363/64363_2008_B01.pdf
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