Up Rising Market!

The British Columbia Real Estate Association has recently explained that consumer demand in the province’s largest market has rebounded after declining for most of 2012. The impact of tighter credit conditions for low equity home buyers has dissipated and potential home buyers once concerned about market risk are now focused on locking in a low mortgage rates before the next uptick. While home sales were 64% higher in September than a year ago, consumer demand has simply returned to the long-term average and is a return to normalcy, rather than a signal of accelerating market conditions. However, strong as the recovery has been, consumer demand is expected to flatten out as weak economic growth and anaemic employment gains impact the market.

Market conditions in Vancouver have remained in relative balance over the past several months. Stronger consumer demand combined with a nearly 12% reduction in the number of homes for sale has contributed to relatively stable home prices. The average MLS® residential price is forecast to increase 4.8% to $765,000 this year. However, about half the increase will be due to a compositional change in the types of homes sold. Next year, the average MLS® residential price is forecast to edge up a further 0.9% to $772,000.

Although total housing starts are lagging behind 2012 construction activity, single detached starts have increased over last year, rising 13% year-to-date. We expect single detached starts to finish the year 11% higher than 2012 at 3,750 units, which will help to partially offset a forecast 8% decline in multiples to 14,500 units. Total housing starts are forecast to fall 4% in 2013 to 18,250 units. Stronger demand in the resale housing market, as well as a rebound in employment growth next year, should help to temper the drag from higher expected interest rates. Total housing starts are forecast to edge up 1% next year to 18,450 units.