June continues to be a much more brisk month for sales compared to last year. SFH sales are up 32% with 680 properties changing hands in the first two weeks of June compared to 515 during the same time period last year. Condo sales are up 18% with a total of 265 units selling.
Was my criticism of CREB’s aggressive sales forecast unfounded? Will I be eating humble pie at the end of the year? I suppose I could always take the cue from another blogger and delete the offending posts, claim hackers took down my site, and then change my forecast and pretend I was right all along Nah, it’s alright. I like pie.
The luxury segment continues to be active with 26 properties having been sold for a million dollars or more so far this month. It’s on pace to match May’s total of 52.
International luxury realty brand Sotheby’s has opened an office in Calgary — its first in Alberta — to take advantage of the growing demand for high-end homes (read more in the Calgary Herald)
I didn’t attend Calgary’s presentation, but reading through their BC housing reports it seems that they base a lot of their findings around 2006 census data which obviously isn’t the best source for measuring today’s housing affordability. The Urban Futures’ BC report concludes:
As such, in considering both the current housing aﬀordability context for BC and Canada, and the factors that could impact aﬀordability-related issues in the coming months and years—including trends in mortgage lending rates, mortgage ﬁnancing arrangements, and down payments—the exising data do not reveal the existence (or emergence) of a US-style aﬀ ordability crisis in the this (sic) province.
Given this body of evidence, there is no empirical basis on which to say that BC currently suﬀers from widespread owner-occupied housing aﬀordability problems, nor are there signs of impending doom on the horizon.
Only time will tell. But it’s odd that Urban Futures doesn’t see any problem with the nation’s most expensive and unaffordable city.
According to Coldwell Banker Real Estate Home Listing Report also released today, Vancouver topped the nation at $1.546 million for the average listing price of a four-bedroom, two-bathroom home. By comparison, Calgary ranked 9th with $534,912
Regarding Vancouver, banks such as RBC have already sounded the alarm.
We fear that the Vancouver market is becoming increasingly disconnected from local demand conditions and vulnerable to a painful correction, especially once interest rates resume their ascent.
The downside of sharp property appreciation, however, has been a worsening of affordability in the province. The RBC Affordability Measures for British Columbia, in fact, rose the most in the first
quarter (between 0.8 and 1.8 percentage points) among all the provinces. We believe that deteriorating affordability will weigh increasingly on housing demand by B.C. households and raise the risk that they may be forced to the sidelines in substantial numbers, potentially causing painful market disruptions.
No worries though. According to one Edmonton agent that attended the Urban Futures conference, when speaking of affordability, he (David Baxter) “discussed the studies that financial institutions put together don’t actually reflect reality.”
Just like that, entire studies with pesky findings are dismissed. I suppose my first clue regarding their objectivity in the BC report I linked should have been that Bob Rennie & CMHC helped provide data for it
Onto some other news that came out yesterday (but apparently doesn’t reflect reality) the federal government and the Bank of Canada are once again sounding alarm as household debt continues to rise:
Two new reports suggest the problem is worsening in the face of a weakening economy. (Read the CGA report here)
Finance Minister Jim Flaherty tabled a budget implementation bill Tuesday he says will formalize his powers to intervene in Canada’s hot housing market to restrain borrowing.
And on Wednesday, Bank of Canada governor Mark Carney is expected to warn Canadians against taking on too heavy a debt burden that they won’t be able to afford once interest rates start rising.
“We have very low interest rates in Canada,” Flaherty said. “We need to remind Canadians that historically low interest rates will not be there forever, that interest rates really only have one way to go and that’s up,” Flaherty said.
“So Canadians in terms of their most important — their largest debts, residential mortgages, need to be aware that their monthly payments are going to go up when interest rates go up over time.”
Flaherty has tightened mortgage requirements three times since 2008, but did not say whether he was considering another turn of the screw.
For now, many analysts believe what Flaherty and Carney are doing — issuing warnings — is likely the best approach, since action might be too strong medicine. Tightening mortgage rules further, or raising rates or both, could result in an overshoot and send the housing market crashing.
On the other side of the issue, however, is that many Canadians could be financially hurt if they proceed on the assumption interest rates and carrying costs, will remain at current levels for years.
However, as the TD report I referenced yesterday states, the Bank of Canada is not expected to raise rates anytime soon.
When I was looking up news articles referencing Urban Futures, I stumbled across this abstract from an article from the Toronto Star back in 1997. In light of it now being 2011, it highlights how long the baby-boom-bust housing crash scenario has been milked and regurgitated by some:
No price meltdown seen in housing market
Two economic studies refute theories of baby-bust slump
But those who decide to sell their homes in a panic may be doing so needlessly, according to two recent economic studies. The authors suggest the future is bright for real estate values wherever communities and incomes are growing, and that it’s not as bleak as [Garth] Turner and [David] Foot would claim.
Derek Holt, an economist at the Royal Bank of Canada, and David Baxter, executive director of the Urban Futures Institute in Vancouver, concluded separately that we should not experience a sharp drop in demand for houses due to shifting demographics.
On housing, the two concluded that demand will not inevitably drop in the first decade of the next century just because the baby-bust generation is 45 per cent smaller than the older baby-boom cohort.
I sure hope no one sold their home 14 years ago fearing that prices were about to plummet. It looks like Urban Futures & RBC were right back then. But with them now taking a different position on the BC market today, who will continue to have the most accurate prognostication?