Richmond Condo News

There are more bad news on the housing market in the US. Inman News reported on Wednesday, February 27, 2008 that the inventory of single-family homes reached the highest level since October of 1981.

Inman News

The for-sale inventory of new single-family homes bloated to its highest level in 27 years in January, as sales of new single-family homes slipped to the lowest adjusted annual rate in about 13 years, the U.S. Census Bureau and the Department of Housing and Urban Development announced today.

The supply of new, single-family for-sale homes reached 9.9 months in January, which means it would take nearly 10 months to sell all of those homes at the January sales pace. It was the largest supply since October 1981, when there was an estimated 10.3 months' supply of single-family new homes for sale.

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One recent report said foreclosure filings soared by 57 per cent in January compared with the same month a year ago. Another report said home prices in 20 key markets had dropped by 9.1 per cent in 2007.

Most experts are projecting that house prices in the US will continue to adjust to supply-demand until a support level is reached. This is not likely to happen soon. Meanwhile, Canadian housing experts are expressing concerns that if US is already in a recession, Canada's economic growth and buoyant housing market will be affected. 

The current housing boom in Canada is the strongest and longest as reported by a recent RE/MAX Housing Report.

Some industry experts are optimistic that the housing market in Canada will not be seriously impacted by the US recession. You are welcome to post your thoughts and comments. 

Residential real estate markets across Canada

post solid gains over past decade, says RE/MAX

Pent-up demand, population growth, tight inventory levels, and the longest economic expansion since World War II collectively fueled one of the best decades on record for residential real estate in Canada , according to a report released by RE/MAX.

RE/MAX Decade in Review 1997 - 2007 found that major housing centres across the country experienced strong consecutive growth between 1997 and 2007. Average price spiraled upward while unit sales climbed in tandem as more and more Canadians bought into homeownership. Nationally, average price almost doubled in the 10-year period, rising from $154,606 in 1997 to $307,265 in 2007, for a 7.1 per cent annually compounded rate of return. Home sales across the country increased just over 57 per cent from 331,092 units in 1997 to more than half a million sales last year. Edmonton led the country in terms of percentage increase in average price. The city saw a 203 per cent upswing in housing values - or an 11.7 per cent increase annually - with average price rising from $111,587 a decade ago to $338,636 in 2007. Prince Edward Island experienced the highest percentage increase in unit sales, with the number of homes sold up 119 per cent in the 10-year period.

Immigration and in-migration have played a serious role in jumpstarting residential housing markets, particularly in British Columbia , Alberta , and to some extent, Saskatchewan over the past decade. At first, there was an influx of American buyers, especially in Canada ’s coastal regions and recreational hot spots, as our southern neighbours took advantage of the almighty US greenback. Then the European and Middle Eastern purchasers flooded the market, buying up real estate considered ‘cheap’ by international standards. In recent years, there have been a growing number of purchasers from Mainland China . From a global perspective, there’s no question that Canadian real estate brings good value to the table.

Percentage increases in home sales varied across the country, with Prince Edward Island experiencing the greatest upswing over the past decade, followed by St. John’s at 106 per cent, Kelowna at 84 per cent, and Saint John at 77 per cent. Most markets (12 of the 19 surveyed) reported increases between 40 and 60 per cent. Average price has also seen substantial escalation over the 10-year period, with posted gains ranging from a low of 54.4 per cent in London-St.Thomas to a high of 203 per cent in Edmonton . Appreciation in Western Canadian markets surpassed all others between 1997 and 2007, with Calgary ranking second in terms of price appreciation at 189 per cent, Kelowna at 179 per cent, Saskatoon at 137 per cent, Winnipeg at 118 per cent, Victoria at 114 per cent and Greater Vancouver at 99 per cent.

In 2006, homeownership rates in the country were the highest on record at 68.4 per cent. Population growth has contributed to heated market conditions – especially in Calgary (+31.4 per cent), Edmonton (+20 per cent), Toronto (+20 per cent), and Vancouver (+15 per cent) where percentage increases have hovered in the double-digit range. Overall, Canada ’s population rose to almost 33 million in the 2006 census, up approximately 10 per cent from 1996 figures.

The non-cyclical nature of the decade comes as some surprise. Never before have we seen such a continuous run up in Canadian real estate. Clearly, strength in all markets has been directly linked to solid growth in local, provincial and national economies. Low interest rates, job security, and consumer confidence have all served to further bolster home-buying activity across the nation.

Robust economic performance in Western Canada has also drawn job seekers from across the country, looking to capitalize on employment opportunities.

As demand for housing increased across the country, the supply of homes listed for sale began to contract. Multiple offers were commonplace in many areas, some with sales-to-listings ratios as tight as 80 to 90 per cent. Nationally, 1997 marked the first year since 1988 that the sales-to-listings ratio hit 50 per cent. The sales-to-listings ratio would remain above 60 per cent from 2001 onward – rising to as high as 68 per cent in 2002.

The decade was not without its obstacles – the high-tech meltdown, a US recession, 9/11, SARS, Mad Cow, a blackout that affected the entire Northeastern seaboard, natural disasters such as ice storms, hurricanes, and forest fires and more recently, the credit crunch south of the border. Given the continuation of sound economic fundamentals, it’s expected that residential real estate markets across the country will continue to experience healthy activity, albeit at a more moderate pace.

RE/MAX of Western Canada (1998) Inc. Decade in Review issued February 21, 2008.

For an update on the local real estate market in Richmond, Vancouver and Burnaby of British Columbia, you can contact James Wong  604-721-4817.

 

After 5 years of surge in housing demand and price gains, experts are projecting a more moderate housing market for 2008. The following article was published on Tuesday, February 12, 2008 by Alia McMullen, Financial Post.

Housing affordability is likely to improve this year as house-price growth eases and falling interest rates make mortgages cheaper, economists say.

Michael Gregory, senior economist at BMO Capital Markets, said housing affordability was becoming an increasingly important issue in some Canadian cities, with house prices jumping at "unsustainable" levels amid a surge in population-driven demand, a strong jobs market and relatively low mortgage costs.

Rishi Sondhi, economist at RBC Capital Markets, said housing should become more affordable as house-price gains ease and interest rates fall, with the Bank of Canada expected to cut interest rates again in March following a 25-basis-point cut to 4% in January.

Read the full report here…

Greater Vancouver has the highest high prices in Canada, and the less affordable. One of the biggest culprits to the problem is "lack of land" for housing! This is an irony as Canada has plenty of land, but artificially "frozen" and not available to be used for housing.  There are many housing critics arguing for the "freeing up" of more land for housing developments and better-planned high-density developments along the transit lines.  Consumers are paying for the "Agricultural Land Reserve" policy (obsolete? or urgently needed to be revamp?) freezing land parcels that are presently designated as "agricultural land".

To many critics this is a mis-allocation of valuable resources resulting in artificially high land costs. The failure of the Governments to take bold action and lack of leadership to solve the housing affordability problem will exert economic toll on the future growth of Greater Vancouver. 

You are welcomed to post your thoughts and comments on how the housing affortability problem can be solved.

Vancouver West and West Vancouver have the most number of homes assessed at more than $1 million.

Other cities are gaining at a faster clip. Richmond, B.C. now has 1,781 million-dollar homes, up 1,036 from the previous year.

Landcor Data Corp. prepared the analysis for Black Press using newly released property assessments.

In total, 17,446 additional homes joined the million-dollar ranks in the Lower Mainland in 2008. Vancouver accounts for more than half of the 53,256 homes region-wide now with millionaire status.

Landcor president Rudy Nielsen said the growing number of homes worth $1-million-plus is no surprise.

“It’s going to keep increasing,” he said.

Nielsen notes Greater Vancouver is wedged between mountains, ocean and protected agricultural land and the region’s constraints on growth have driven prices steadily up.

“The land values are the key,” he said. “Over the next while you’re going to see a lot of teardowns where the land value exceeds the improvements.”

The trend will continue towards smaller lot sizes and building up, he said.

“Whatever land is available for development, you’re going to see developers going in there and developing it.”

Nielsen predicts there will be no collapse of housing prices here, as is happening in many U.S. markets as a result of the sub-prime mortgage crisis there.

“As a whole, I think western Canada is going to be pretty sound,” he said.

In spite of the optimism, many experts cautioned that the slow down in the US economy may dampen the housing market in Canada, especially the major city centers in Western Canada.

An international study of housing affordability done by Demographia places Vancouver as 13th worst in the world for affordability. Homes in Vancouver, Abbotsford, Victoria and Kelowna are "severely unaffordable" and among the top most expensive housing markets among six countries surveyed.

The high housing prices are not because they're desirable places to live, but because urban planners and governments limit urban sprawl, according to the fourth annual report by a U.S. public policy firm called Demographia.

There's "one clear conclusion: The affordability of housing is overwhelmingly a function of just one thing, the extent to which government place artificial restrictions on the supply of residential land," Donald Brash, a former governor of the Reserve Bank of New Zealand, wrote in the 2008 report.

Philip Hochstein, president of the Independent Contractors and Businesses Association, says it's time to rethink B.C.'s Agricultural Land Reserve, which restricts development near urban areas such as at Garden City and Westminster Highway in Richmond.

"The pathway to affordable housing is abundantly clear: Remove urban growth boundaries."

In Metro Vancouver, that means the Agricultural Land Reserve. Developers say it's time to reopen the debate on whether the ALR still makes sense, decades after it was brought in.

The Demographia report ranked affordability in Canada, the U.S., the U.K., Ireland, Australia and New Zealand based on how expensive housing is in relation to incomes, with a rating of three the cutoff for affordability.

Canada overall was rated at 3.1, which means it takes three years of median household income to buy a house at the median price, the midpoint between the highest and lowest.

Vancouver's 8.4 rating means it would take 8.4 years of median income to buy a house at the median price.

That news comes on the heels of an RBC housing affordability forecast that found Vancouverites would need 70 per cent of their net income to buy a house.

The numbers are painfully real for Carl Larouche, 44, a Vancouver teacher who recently bought a one-bedroom apartment on Great Northern Way for $265,000 after discovering 400-square-foot bachelors were fetching $300,000 in the West End.

But Larouche, who is from Saguenay, Quebec, the second-cheapest place in Canada to live, where houses cost about $100,000, said, "I would never go back there. Those are the sacrifices you make to live in Vancouver. I would be happy in a tent here."

Even though Vancouver's rating is up from 7.7 last year, Vancouver moved down to 15th spot overall. And Victoria, with a rating of 7.3, inched up one spot to 22nd.

Kelowna was ranked for the first time this year and vaulted ahead of Vancouver into 13th spot worldwide, with a rating of 8.5. Abbotsford, at No. 59 worldwide, was also ranked for the first time. Both are less affordable than Toronto.

Report author Wendell Cox argued that scarcity drives up prices and limiting growth limits supply.

For instance, housing is affordable in the large, vibrant cities of Atlanta and Houston because city planners don't inhibit growth.

In Vancouver, Philip Hochstein of the Independent Contractors and Businesses Association said it's time to rethink the ALR, which makes up 20 per cent of Metro Vancouver's so-called Green Zone. It includes parks and public spaces and accounts for 70 per cent of Metro Vancouver.

"It's one of the things driving up the cost of housing," he said.

"Supply is being restricted by the land use policy."

The ALR has become a "sacred cow," he said. "Meanwhile, my kids can't afford to buy a house."

Hochstein said 60,000 hectares set aside for agricultural use isn't being used for agriculture. He said it may be unrealistic to anticipate that the Lower Mainland could be fed by food grown on that land, a goal when ALR was born.

"We shouldn't be afraid to have the debate over whether it makes sense anymore," he said.

But urban planner Bob Ransford said, "If we develop all of the Agricultural Land Reserve, what would we do then?"

He said Demographia is an advocate of urban sprawl.

The report doesn't factor in other costs, he said, the largest of which is commuting, and intangibles, such as quality of life.

He also said Vancouver is more restricted by geographical factors than public policy. "They've got it quite backwards. By containing growth, we can lower house prices."

So the debate is on. Should restrictive land use policy like the Agricultural Land Reserve in B.C. be abolished? Will better land use policy and urban planning help solve the housing affordability problem in Vancouver?