While I suspect we'd all like to think we're immune from the problems with the US economy. that would be naive.  We may avoid a full out "consumer led" recession as described in this clip but surely some moderating effects will be felt, don't you think?  I think your question about what we will do to position ourselves is a key one going into this new year.

I anticipate that first time home buyers will be leading the charge in 2008.  They do not have a house to sell, there are still great mortgage programs out there and they are not scared by what is happening around them.  They still want to buy a home of their own.  We need to be there to help.  Back to the basics is the way I see it.

I think we'll see a few less sales, still increasing prices and yes, first-time buyers as well as more self-employed people and new immigrants.  I also think we'll see some regional variations in our markets; certainly BC's experience will be different from Ontario's.  It seems buyers have embraced 40 year amortizations which must be a blessing in your activie market.

I expect that in 2008 the economy south of the border will have no effect whatsoever on the Canadian real estate market.

Furthermore, depending on where you are in Canada, position yourself for another good year, maybe not a record breaker, but a good 2008 nontheless.

In BC especially in the major city centers and the surrounding suburbs in Greater Vancouver, price escalation for all types of residential homes started in early 2002. Recent months listing and sale ratios appeared to be in balance. At this time it is difficult to say whether we have reached a market top in Vancouver.

The list to sale ratio for condos in November is showing a slight increase over the previous 2 months in September and October. The current building boom in BC especially multi-family developments are expected to add to the housing market thousands of new condos and townhouses. Any sense of market weakness or change in consumer sentiment will drastically curtail sales. If speculators and investors are sensing the housing market has reached the top, they will unload their real estate holdings. Many of these properties bought by speculators are presale condos. Some of these properties may be rented out, but there are a large number of them that are vacant.

By tracking the monthly sale and inventory number we can have a better sense as to the strength/weakness in the housing market.  

Good day...The Victoria Real estate market is still projected to see a 4% increase with averages home prices near $600,000 at the end of November.

Last night I watched an interview on TV with Donald Trump, he was telling us all... that now is the time to buy real estate in the USA and within 6 months they will bottom out. He also prodicted their commercial real estate inventory will sort itself out as builders and investors are not able to get finding commercial projects.

Cheers, HAPPY NEW YEAR!

According to Professor Robert Shiller “It’s Not Implausible that Prices Wont Bottom Out for Another 5 Years”

and Dr. Irwin Kellner of MarketWatch "How low must housing prices go?" US house prices are not expected to hit bottom in 2008.   

Here is another article reported in Wall Street Journal "Pace of decline in home prices sets a record" citing the cycle low on US house prices could be dragged out to the middle of 2009.

James,

Regarding your BC comment, it sure would be helpful to have compiled supply and demand information available so I am really interested to learn how you are "tracking the monthly sale and inventory number"?

Please let me know.

Here's something you might find interesting: http://activerain.com/blogsview/302586/9-1-price-increase

John

www.johngrasty.ca

Hi John,

There are a few sources I follow to keep myself informed on the housing market situation in Greater Vancouver. I follow Brian Ripley's charts that are informative showing moving 6-month average price trend. Calgary and Edmonton prices may have already past the top!. 

CMHC's "Housin Now" has a chart on page 2 of 23 showing the "sales-new-listings" ratio chart. CMHC designates "seller market - above 50%", "balance market - 35% to 50%' and "buyer market - below 35%". In 1994-1995, the ratio dropped from 50% to 30% and the Canadian housing prices dropped slightly according to the chart. But, in Richmond (my area) the price for an average older detached house dropped 30%-35%(from the top at around $380,000 to the bottom at around $250,000).

We are presently still in the "seller market" as the sales-to-new-listings ratio is well above 50%. You can check the numbers through the REBGV monthly statistics or at a glance at RealtyLink's "listed -vs-sold" chart. I can see that in your area, Port Moody, there are more detached house listings available for sale the last 3 months and the sold unit at around 20 a month against total active listings around 100 is showing an absorption rate around 5 months. The townhouse market is very tight. Multiple offers can be expected and sellers can expect to get higher prices for their listings. The condo market is showing an absorption rate around 3.5 to 3.8 months. This I thing is healthy and more balanced.

I am more mindful of the price escalation over the past 5 years for Greater Vancouver house prices. My Nov 23/07 blog showed that Greater Vancouver prices were around 35% above the trend lines for detached houses, townhouses and condos.

It will take a major housing market shake-out to see prices dropping down to the trend line levels. As for 2008, I think the Greater Vancouver housing market may not be as bullish as forecasted (9.1% price increase). The condo market may see some inventory build up and price pressure.

Hi James,

I appreciate all of your time and information preparing a response.

While I realize we must do the best with what we have got, as you most certainly do, I don't believe the availability and absorption of new home sales is being compiled with MLS resale data yet. The result is that a true supply and demand measurement remains somewhat illusive.

Perhaps CMHC, REBGV, or some other stakeholder, can compile this in the future so we will have more accurate and reliable supply and demand data to start tracking.

Thanks,

John

James - You have provided a great deal of resources for the consumer to utilize I am sure it is appreciated

Thanks Kathy. I wish you a great new year for 2008. The real estate market are still good here in Greater Vancouver area of British Columbia, and I believe your market should be doing well too.

BC's market is a tricky one to try and call. Being raised in BC and having left only recently, I'm well aware of the problems younger couples trying to buy their first home are having, but at the same time the economy is in such a good way that it's hard to imagine a decrease in home prices at all, or even anything more than a moderate slowdown of the current phenomenal increase.

Regardless of what may happen, I do wish you luck this year! 

Canadiana Property - Thanks for your posting. Over the long term real estate like any other investments, is subject to the law of supply and demand. The demand for real estate is still good in Canada for now. In order to sustain current house prices, the return-on-investment for real estate has to make sense. Right now, it is the price appreciation (capital gain) in property value that sustain the demand for properties and high house prices in Canada.

Over the past years, real estate demand world-wide was driven by too much liquidity resulting in real estate as an asset class doing well due to strong demand and rapid price appreciation. A self-fulfilling cycle of strong demand fueling higher prices, follows by even more demand bidding up home prices even higher. 

In the US, house prices are unwinding and prices are declining. Real estate prices in the US will eventually reach a stable price level decdicted by supply and demand. In Canada, prices are holding or even increasing inspite the housing problems south of the boarder. The low Canadian lumber prices due to the weak demand in the US is affecting the Canadian's forestry sector, but this is not a major problem for the Canadian economy.

It is the market sentiment that Canadian consumers, especially home buyers and real estate investors should be looking out for. In the major Canadian cities (Ottawa and Montreal may be the exception), present rental income only covers 50% of mortgage expenses, property taxes, etc making real estate  economically a poor investment choice.   

Yes, you're definitely right James. Our doubling of prices in ten years is all the proof required to show the capital gains is what people are looking for. Especially since rent prices are still more or less normal to the point where I know of some investors who are currently facing a negative cash flow on their investment properties, with the hopes that the value increases for a sale in a couple of years.

The reason our market is still stable is the lack of subprime mortgages here. The closest thing we have in terms of a non-traditional mortgage is the 40 year one, which is really only an option in BC, and doesn't have the fluctuating interest rate, or really any of the problematic parts of a sub-prime mortgage. As such, I highly doubt the US market will impact ours more than perhaps a tiny little bit.