Higher home sales, smaller inventories for October
Lower Mainland home sales continued riding high in October, with prices continuing to rise, according to reports from the region’s major real estate boards Tuesday.
In Metro Vancouver, covered by the Real Estate Board of Vancouver, realtors recorded 3,704 sales through the Multiple Listing Service, up 172 per cent from the doldrums of October 2008 and 22 per cent above sales levels in October 2007.
The benchmark price, the average price for a typical home sold, hit $749,808 in October, which was almost eight-per-cent higher than the same month a year ago, though not quite up to the pre-correction peak.
In the Fraser Valley, including Surrey, realtors saw 1,704 sales through the Multiple Listing Service in October, a 122-per-cent increase from the same month a year ago.
The benchmark price for detached homes was $491,128 in October, 0.4-per-cent higher than the benchmark of October 2008.
“I still think low mortgage rates are the key to this that has really been driving [sales] activity,” Scott Russell, president of the Real Estate Board of Greater Vancouver, said in an interview.
Russell said he has heard anecdotal evidence that foreign investors are once again playing a larger role, but it is rising confidence among local buyers, coupled with low mortgage rates, that has driven sales and prices.
Inventories have shrunk in a relative sense. In Metro Vancouver, the number of new listings in October was higher than the same month a year ago. But the total number of active listings in inventory in October shrank by four per cent compared with September and by 37 per cent compared with the same month a year ago.
In the Fraser Valley, October’s new listings increased seven per cent compared with September, but overall inventory shrank to 8,807 units compared with 11,715 in the same month a year ago.
Russell said realtors in his board area don’t expect the unseasonably high level of sales to continue through November and December, when markets traditionally experience a seasonal slowdown.
However, Robyn Adamache, a market analyst with Canada Mortgage and Housing Corp. said she is forecasting that Metro Vancouver sales will remain relatively robust until the middle of 2010, depending on what happens to mortgage rates.
“I think we are going to see some increase in mortgage rates as the economy improves, which is a bit of a two-sided thing,” Adamache said in an interview.
“It’s a good sign that the economy is improving if [banks] start raising rates a bit, but on the other hand, that will have an impact on what happens in the real estate market.”
Adamache is not expecting a dramatic increase in mortgage rates. Her forecast is for the five-year-posted mortgage rate to climb to an average of 5.75 per cent over 2010 from 5.55 per cent over 2009.
Another factor will be rising prices. Adamache said many of the enthusiastic first-time buyers who were motivated by the combination of lower prices and record low interest rates have bought homes.
Now, “prices are rising, and a lot of those people have done their thing already.”
Tsur Somerville, director of the centre for urban economics and real estate, in the Sauder School of Business at the University of B.C., said there are already some slight signs that the frenzy of sales is beginning to slow.
Somerville said the pace of sales in October, compared with the pre-correction years of 2007 and 2006, slowed somewhat from September.
And the rate of month-to-month price growth in October from September was the lowest it had been since May.
“I’d say it does suggest things have taken a little bit of step back from where we were in September.”
Somerville said the rapid rebound in the Lower Mainland’s real estate markets may be a sign that the economic recession in the region was not as severe as in other regions.
The high level of sales is the result of putting “the low interest rate environment and renewed optimism on a base of a not particularly severe recession in terms of employment [losses].