Vancover, BC – May 14, 2008. British Columbia Real Estate Association (BCREA) reports residential sales dollar volume on the Multiple Listing Service® (MLS®) in BC dipped 1.4 per cent to $4.1 billion in April, compared to April 2007. Residential unit sales declined 11 per cent to 8,623 units during the same period. The average MLS® residential price in the province reached $478,044, up 11 per cent from April 2007.
"Rising inventories are providing more choice for consumers and exerting less upward pressure on home prices," said Cameron Muir, BCREA Chief Economist. Active MLS® residential listings in the province were up 37 per cent to 47,923 units in April. "The combination of a slower pace of home sales and some profit taking by investors is contributing to a balance between housing demand and the supply of homes for sale."
"While homebuyers now face less competition for the homes available for sale," added Muir, "competition among home sellers means curb appeal, interior condition and prudent pricing are necessary for faster sale."
In the first four months of the year, MLS® residential sales volume in the province fell 1.8 per cent to $13.2 billion compared to the same period in 2007. Residential unit sales declined 13 per cent to 27,730 units, while the average MLS® residential price increased 13 per cent to $474,993.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Wednesday, May 28, 2008
Renovation Paybacks
Buying a home is only the tip of the iceberg when it comes to real estate investing. Once you've settled in and optimized your living space, you may realize it's time for a change.
Renovations around the house are a great way to expand and increase its value. However, not all renovations are beneficial in the long run. For instance, a new in-ground pool may sound like a good idea, but it may not attract buyers who are looking for a low-maintenance house when it's time to sell.
The return on your investment depends on several factors, including the current state of the real estate market, the scope of your renovation and how attractive the change is to potential buyers.
The following is a rundown of the smartest home renovations and their potential payback. In every case, remember to get more than one estimate for the work you want done and always keep your receipts for tax deduction purposes.
All costs and estimated payback figures are in Canadian dollars and can vary greatly depending on your house and budget.
Top “10” renovation paybacks:
1. Paint & decor, interior-100%
2. Heating system replace-100%
3. Kitchen renovation-94%
4. Family room addition-86%
5. Bathroom renovation-75%
6. Painting, exterior-65%
7. Flooring upgrades-62%
8. Fireplace addition-62%
9. Window/door replace-57%
10. Basement renovation-49%
Top “10” renovation trends:
1. Main floor laundry room
2. Home theatre room
3. Hardwood floor upgrade in kitchen
4. Ground floor home office
5. Whirlpool bath separate from shower
6. Built-in kitchen appliances
7. Addition of kitchen cooking island
8. Non-neutral interior paint colours
9. “Smart” house wiring
10. Skylights
Add a new bathroom
Though dealing with the new plumbing installation can be a pain, adding a second or third bathroom to your home is always a wise investment. It'll add convenience for as long as you live in the house and then pay off when you decide to sell. A new bathroom is a big project: it entails adding new plumbing, walls, tiles, counters, a toilet, and a shower. It is wise to put in a shower stall or bathtub (if your hot water tank can handle it) because this gives your a house another complete washroom.
Cost: $4,500 to $13,000Estimated Payback: 92%
Remodel your bathroom
If there is no space for a new bathroom, consider remodelling a current one instead. Simple things like cleaning up the floor tiles or adding a fresh coat of paint can go a long way. Of course, more drastic measures like installing a Jacuzzi, putting in new cabinets and mirrors or giving the bathroom a fresh new layout will also catch the eye of potential buyers.
Cost: $250 to $10,000Estimated Payback: 75%
Remodel your kitchen
As with bathrooms, kitchen renovations are also worthwhile. Both current and future owners reap the benefit of a more eye-catching and practical cooking space. Improvements can be minor (adding new linoleum, installing marble countertops) or major (adding an outdoor patio/eating area, changing the layout). In particular, installing built-in kitchen appliances, like a dishwasher, and an island benefit homeowners in the long run.
Minor Work Cost: $175 to $5,000Estimated Payback: 94% to 102%
Major Work Cost: $5,000 to $28,500Estimated Payback: 90%
Add a new family room
Many homeowners may be surprised to hear that the addition of a new family, living or sitting room is a rising trend. Older houses often have rooms that act as both a place to watch TV and entertain guests; this leaves no room to just sit and relax. To remedy this, renovators have hollowed out garages, extended the rears of houses and rearranged rooms in order to create a comfortable family room.
Depending on your home, the work involved can get quite serious. In some instances, you will need to knock down walls, extend the exterior walls of your house (laws permitting) or sacrifice current space, like storage rooms. The costs will be very high, but the payback can be quite rewarding.
Cost: $20,500 and upEstimated Payback: 86%
Remodel your home office
Dissatisfied with your small work area at home? Think about the possibilities of creating a dream home office. With proper planning, you can find enough space for a big oak desk, office electronics and all the trimmings. The result is a sanctuary for you and an added bonus for a potential home buyer in the future.
Those who have previously expanded their home offices have torn down adjoining walk-in closets and storage rooms. Since this room is more of an added luxury than a necessity to most however, don't sacrifice that all-important second bathroom for it. Instead, improve upon your current space with new flooring, light fixtures and maybe even a liquor cabinet.
Cost: $900 to $9,000Estimated Payback: 69%
Add a garage
The best thing about adding a garage to your home is that it can serve several purposes. Not only does it keep your car away from being battered by bad weather, it can also become a place to have a pantry or store tools. Unfortunately, not all homes are suited to have garages -- the driveway setup has to be just right.
Most homeowners who attempt this addition already have an open carport and need only close it off with a garage door and create direct access to the interior of the house.
Others have a second entrance to their house at the head of a sloping driveway and thus can afford to change this entrance from a living space to a garage. Either way, it's one of the hardest and longest renovations to do, but for convenience's sake, many find it necessary. Those not lucky enough to have part of the work done for them, as mentioned above, can find prefabricated garages that literally sit on top of the driveway.
Cost: $125 per square foot and upEstimated Payback: 65%
Finish your basement
Nothing is as frustrating for a homeowner as having a basement and not putting it to good use. Covering the cement floors, redoing the walls and converting your dank underground into livable space reaps loads of possibilities.
You can turn the basement into a TV room, use it as storage space or add a kitchenette and bedroom, and then rent it out. Therefore, the work can go from minimal (i.e. installing some carpeting) to extensive (creating a self-supporting apartment). Basements with a lot of natural light and direct outdoor access generally bring in more return than ones that simply have a few dark rooms.
Cost: $175 to several thousand dollarsEstimated Payback: 15% to 25%
Add a pool
Surprisingly, the addition of a pool is not a great investment. In-ground pools and the surrounding walkway and deck usually bring current homeowners lots of pleasure but do not markedly increase the value of the home. The trade-off is "fun now, no return later" and many are satisfied with this. The one saving grace is that a well-constructed deck with ample seating room will often mature in value. So, hire the pool crew if you must, but don't fool yourself about a generous return on investment.
Cost: $2,300 to over $13,500Estimated Payback: 5% to 15%
Improve the landscaping
Just like dating, buying a home is all about first impressions. If you put in the effort and money to groom your lawn into perfect shape, potential buyers will notice.
Good curbside appearance is important and can be achieved with the help of a local grass and pesticide company or the addition of a rock garden, stone path, rose bushes, and anything else your creative mind can think of. In fact, a few small touches can increase your payback more than the installation of a pool can.
Cost: $250 to $17,000Estimated Payback: 30% to 60%
Add a new heating or air conditioning system
The changes you make to your house do not always have to be aesthetic. Functional upgrades, like installing a dual electronic/oil heating system or central air conditioning, can do wonders for the value of your home. If done only a few years before moving out, you can expect to see almost a full "refund" when the house is sold. Usually, furnaces and central air components last for decades, requiring only minor annual checkups.
Cost: $2,300 to $9,000Estimated Payback: 100% for heating system, 75% for air conditioning
money can grow
The beauty of proper home renovation is that you benefit twofold: first, from the initial improvements to a room or property; second, your home increases in value when placed on the market. Of course, not all renovations are profitable -- that's why we've clued you in on the ones that pay off.ying a home is only the tip of the iceberg when it comes to real estate investing. Once you've settled in and optimized your living space, you may realize it's time for a change
Steps for Successful Home Renovation
DETERMINE WHAT YOU WANT- Magazines and books are a great source for fresh and new house renovation ideas. Once the work has started, any renovation changes that you make may cost more that if you include them in the original agreement.
DEVELOP A BUDGET - Most people tend to leave this step to the contractor. It's a good idea to talk with your financial institution about a relative range for your home improvement project. This step can also help you get pre-qualified for your home improvement loan.
GET ESTIMATES - A good rule of thumb is to obtain at least three different bids. Make sure that you provide all the renovators with the same detailed information.
ASK FOR REFERENCES - Good references are your best guarantee that your renovator can and will perform as expected. Ask for references from the last three projects they worked on. (Contractors can "cherry pick" their good references). Don't hesitate to let the renovator know that you will check out the references provided.
ACCEPT OR REJECT THE RENOVATOR'S CONTRACT PROPOSAL - The contract the renovations provide you are not etched in stone. Take the time to review it line by line. If necessary seek the advise of an attorney. Don't accept the contract unless the whole document is agreeable to you. If portions are not acceptable, discuss alternatives with the renovator and ask for a revised version of the contract that you both can mutually agree on. Remember that if a contract is grossly lower or higher than others, it should be avoided unless the renovator can explain his deviations from your other contracts.
UNDERSTAND YOUR OBLIGATIONS - Often it is assumed that the only obligation expected is timely payments. However, you may need to make alternative living arrangements as the work, or portions thereof, are in progress. Careful planning can greatly minimize inconvenience of living during the construction phase.
MAINTAIN A GOOD WORKING RELATIONSHIP WITH YOUR RENOVATOR - Have the renovator update you on a regular basis or at specific interval during the performance of the contract. Be available to make decisions when they are needed so work is not held up.
M1 Design 2733 Masefielld Rd. North Vancouver, BC
Renovations around the house are a great way to expand and increase its value. However, not all renovations are beneficial in the long run. For instance, a new in-ground pool may sound like a good idea, but it may not attract buyers who are looking for a low-maintenance house when it's time to sell.
The return on your investment depends on several factors, including the current state of the real estate market, the scope of your renovation and how attractive the change is to potential buyers.
The following is a rundown of the smartest home renovations and their potential payback. In every case, remember to get more than one estimate for the work you want done and always keep your receipts for tax deduction purposes.
All costs and estimated payback figures are in Canadian dollars and can vary greatly depending on your house and budget.
Top “10” renovation paybacks:
1. Paint & decor, interior-100%
2. Heating system replace-100%
3. Kitchen renovation-94%
4. Family room addition-86%
5. Bathroom renovation-75%
6. Painting, exterior-65%
7. Flooring upgrades-62%
8. Fireplace addition-62%
9. Window/door replace-57%
10. Basement renovation-49%
Top “10” renovation trends:
1. Main floor laundry room
2. Home theatre room
3. Hardwood floor upgrade in kitchen
4. Ground floor home office
5. Whirlpool bath separate from shower
6. Built-in kitchen appliances
7. Addition of kitchen cooking island
8. Non-neutral interior paint colours
9. “Smart” house wiring
10. Skylights
Add a new bathroom
Though dealing with the new plumbing installation can be a pain, adding a second or third bathroom to your home is always a wise investment. It'll add convenience for as long as you live in the house and then pay off when you decide to sell. A new bathroom is a big project: it entails adding new plumbing, walls, tiles, counters, a toilet, and a shower. It is wise to put in a shower stall or bathtub (if your hot water tank can handle it) because this gives your a house another complete washroom.
Cost: $4,500 to $13,000Estimated Payback: 92%
Remodel your bathroom
If there is no space for a new bathroom, consider remodelling a current one instead. Simple things like cleaning up the floor tiles or adding a fresh coat of paint can go a long way. Of course, more drastic measures like installing a Jacuzzi, putting in new cabinets and mirrors or giving the bathroom a fresh new layout will also catch the eye of potential buyers.
Cost: $250 to $10,000Estimated Payback: 75%
Remodel your kitchen
As with bathrooms, kitchen renovations are also worthwhile. Both current and future owners reap the benefit of a more eye-catching and practical cooking space. Improvements can be minor (adding new linoleum, installing marble countertops) or major (adding an outdoor patio/eating area, changing the layout). In particular, installing built-in kitchen appliances, like a dishwasher, and an island benefit homeowners in the long run.
Minor Work Cost: $175 to $5,000Estimated Payback: 94% to 102%
Major Work Cost: $5,000 to $28,500Estimated Payback: 90%
Add a new family room
Many homeowners may be surprised to hear that the addition of a new family, living or sitting room is a rising trend. Older houses often have rooms that act as both a place to watch TV and entertain guests; this leaves no room to just sit and relax. To remedy this, renovators have hollowed out garages, extended the rears of houses and rearranged rooms in order to create a comfortable family room.
Depending on your home, the work involved can get quite serious. In some instances, you will need to knock down walls, extend the exterior walls of your house (laws permitting) or sacrifice current space, like storage rooms. The costs will be very high, but the payback can be quite rewarding.
Cost: $20,500 and upEstimated Payback: 86%
Remodel your home office
Dissatisfied with your small work area at home? Think about the possibilities of creating a dream home office. With proper planning, you can find enough space for a big oak desk, office electronics and all the trimmings. The result is a sanctuary for you and an added bonus for a potential home buyer in the future.
Those who have previously expanded their home offices have torn down adjoining walk-in closets and storage rooms. Since this room is more of an added luxury than a necessity to most however, don't sacrifice that all-important second bathroom for it. Instead, improve upon your current space with new flooring, light fixtures and maybe even a liquor cabinet.
Cost: $900 to $9,000Estimated Payback: 69%
Add a garage
The best thing about adding a garage to your home is that it can serve several purposes. Not only does it keep your car away from being battered by bad weather, it can also become a place to have a pantry or store tools. Unfortunately, not all homes are suited to have garages -- the driveway setup has to be just right.
Most homeowners who attempt this addition already have an open carport and need only close it off with a garage door and create direct access to the interior of the house.
Others have a second entrance to their house at the head of a sloping driveway and thus can afford to change this entrance from a living space to a garage. Either way, it's one of the hardest and longest renovations to do, but for convenience's sake, many find it necessary. Those not lucky enough to have part of the work done for them, as mentioned above, can find prefabricated garages that literally sit on top of the driveway.
Cost: $125 per square foot and upEstimated Payback: 65%
Finish your basement
Nothing is as frustrating for a homeowner as having a basement and not putting it to good use. Covering the cement floors, redoing the walls and converting your dank underground into livable space reaps loads of possibilities.
You can turn the basement into a TV room, use it as storage space or add a kitchenette and bedroom, and then rent it out. Therefore, the work can go from minimal (i.e. installing some carpeting) to extensive (creating a self-supporting apartment). Basements with a lot of natural light and direct outdoor access generally bring in more return than ones that simply have a few dark rooms.
Cost: $175 to several thousand dollarsEstimated Payback: 15% to 25%
Add a pool
Surprisingly, the addition of a pool is not a great investment. In-ground pools and the surrounding walkway and deck usually bring current homeowners lots of pleasure but do not markedly increase the value of the home. The trade-off is "fun now, no return later" and many are satisfied with this. The one saving grace is that a well-constructed deck with ample seating room will often mature in value. So, hire the pool crew if you must, but don't fool yourself about a generous return on investment.
Cost: $2,300 to over $13,500Estimated Payback: 5% to 15%
Improve the landscaping
Just like dating, buying a home is all about first impressions. If you put in the effort and money to groom your lawn into perfect shape, potential buyers will notice.
Good curbside appearance is important and can be achieved with the help of a local grass and pesticide company or the addition of a rock garden, stone path, rose bushes, and anything else your creative mind can think of. In fact, a few small touches can increase your payback more than the installation of a pool can.
Cost: $250 to $17,000Estimated Payback: 30% to 60%
Add a new heating or air conditioning system
The changes you make to your house do not always have to be aesthetic. Functional upgrades, like installing a dual electronic/oil heating system or central air conditioning, can do wonders for the value of your home. If done only a few years before moving out, you can expect to see almost a full "refund" when the house is sold. Usually, furnaces and central air components last for decades, requiring only minor annual checkups.
Cost: $2,300 to $9,000Estimated Payback: 100% for heating system, 75% for air conditioning
money can grow
The beauty of proper home renovation is that you benefit twofold: first, from the initial improvements to a room or property; second, your home increases in value when placed on the market. Of course, not all renovations are profitable -- that's why we've clued you in on the ones that pay off.ying a home is only the tip of the iceberg when it comes to real estate investing. Once you've settled in and optimized your living space, you may realize it's time for a change
Steps for Successful Home Renovation
DETERMINE WHAT YOU WANT- Magazines and books are a great source for fresh and new house renovation ideas. Once the work has started, any renovation changes that you make may cost more that if you include them in the original agreement.
DEVELOP A BUDGET - Most people tend to leave this step to the contractor. It's a good idea to talk with your financial institution about a relative range for your home improvement project. This step can also help you get pre-qualified for your home improvement loan.
GET ESTIMATES - A good rule of thumb is to obtain at least three different bids. Make sure that you provide all the renovators with the same detailed information.
ASK FOR REFERENCES - Good references are your best guarantee that your renovator can and will perform as expected. Ask for references from the last three projects they worked on. (Contractors can "cherry pick" their good references). Don't hesitate to let the renovator know that you will check out the references provided.
ACCEPT OR REJECT THE RENOVATOR'S CONTRACT PROPOSAL - The contract the renovations provide you are not etched in stone. Take the time to review it line by line. If necessary seek the advise of an attorney. Don't accept the contract unless the whole document is agreeable to you. If portions are not acceptable, discuss alternatives with the renovator and ask for a revised version of the contract that you both can mutually agree on. Remember that if a contract is grossly lower or higher than others, it should be avoided unless the renovator can explain his deviations from your other contracts.
UNDERSTAND YOUR OBLIGATIONS - Often it is assumed that the only obligation expected is timely payments. However, you may need to make alternative living arrangements as the work, or portions thereof, are in progress. Careful planning can greatly minimize inconvenience of living during the construction phase.
MAINTAIN A GOOD WORKING RELATIONSHIP WITH YOUR RENOVATOR - Have the renovator update you on a regular basis or at specific interval during the performance of the contract. Be available to make decisions when they are needed so work is not held up.
M1 Design 2733 Masefielld Rd. North Vancouver, BC
Renovation Spending Across 10 Major Centres Up by $2 Billion in 2007
An estimated 1.5 million households in 10 major Canadian centres surveyed indicated they completed renovations last year that cost an average of more than $12,800, according to the Renovation and Home Purchase Survey released today by Canada Mortgage and Housing Corporation (CMHC).
“Close to $19.7 billion was spent on renovations in 2007 across the 10 major centres surveyed, an increase of more than $2 billion compared to 2006,” said Bob Dugan, Chief Economist at CMHC. “As well, when Canadian homeowners in these 10 centres surveyed were asked about their plans for this year, 40 per cent indicated that they intend to spend $1,000 or more on renovations by the end of 2008.”
The Renovation and Home Purchase Survey reports on actual renovation expenditures made in the previous year, as well as intentions to buy or renovate a home in 2008 in the following 10 major centres: St. John's, Halifax, Québec, Montréal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver1. The survey enables all market participants to benefit from timely information on renovation market trends.
Close to half — 46 per cent — of households reported that the cost of renovations was in line with what they had budgeted, while 37 per cent went over their planned budget for the renovation. More than a quarter — 26 per cent — of households that undertook a renovation project hired a contractor for a portion of the work, up slightly from 24 per cent that undertook renovations in 2006. ‘Do-it-yourselfers' accounted for 31 per cent of renovators in 2007, down slightly from 34 per cent in 2006. However, many households — 41 per cent — chose to contract out the entire renovation project.
The main reason given by households for renovating in 2007 was to update, add value or to prepare to sell — 59 per cent. Some 27 per cent of respondents stated that the main reason for renovating was that their home needed repairs. The top three renovations completed last year were: remodelling rooms — 31 per cent, — painting or wallpapering — 27 per cent, — and hard surface flooring and wall-to-wall carpeting — 26 per cent.
Of the 10 major centres surveyed, the percentage of households that spent $1,000 or more on renovations in 2007 was highest in Winnipeg at 36 per cent, followed by St. John's and Halifax at 35 per cent, while the centre with the least proportion of households that undertook renovations was in Québec at 28 per cent.
Similarly, renovation intentions for 2008 across the 10 major centres are strongest in Winnipeg and St. John's, where 50 and 48 per cent of consumers, respectively, indicated they plan to undertake renovations costing $1,000 or more. The proportion of potential renovators is lowest in Québec where 35 per cent of households indicated they intend to renovate in 2008.
On the home purchasing front, six per cent of households across the 10 major centres surveyed intend to purchase a home that will be used as a primary residence in 2008. This is down from eight per cent in 2007. Forty-two per cent of households that stated they intend to purchase a home in 2008 are first-time buyers. This percentage is identical to the share of actual first-time home buyers in 2007. The majority of first-time buyers are between the ages of 25 and 34, with a household income between $40,000 and $60,000 annually.
Home buying intentions are strongest in Calgary where 8 per cent of households reported that they are considering buying a home this year, down from 14 per cent in 2007. Purchase intentions are the lowest in Québec at four per cent.
CMHC OTTAWA, May 22, 2008
“Close to $19.7 billion was spent on renovations in 2007 across the 10 major centres surveyed, an increase of more than $2 billion compared to 2006,” said Bob Dugan, Chief Economist at CMHC. “As well, when Canadian homeowners in these 10 centres surveyed were asked about their plans for this year, 40 per cent indicated that they intend to spend $1,000 or more on renovations by the end of 2008.”
The Renovation and Home Purchase Survey reports on actual renovation expenditures made in the previous year, as well as intentions to buy or renovate a home in 2008 in the following 10 major centres: St. John's, Halifax, Québec, Montréal, Ottawa, Toronto, Winnipeg, Calgary, Edmonton, and Vancouver1. The survey enables all market participants to benefit from timely information on renovation market trends.
Close to half — 46 per cent — of households reported that the cost of renovations was in line with what they had budgeted, while 37 per cent went over their planned budget for the renovation. More than a quarter — 26 per cent — of households that undertook a renovation project hired a contractor for a portion of the work, up slightly from 24 per cent that undertook renovations in 2006. ‘Do-it-yourselfers' accounted for 31 per cent of renovators in 2007, down slightly from 34 per cent in 2006. However, many households — 41 per cent — chose to contract out the entire renovation project.
The main reason given by households for renovating in 2007 was to update, add value or to prepare to sell — 59 per cent. Some 27 per cent of respondents stated that the main reason for renovating was that their home needed repairs. The top three renovations completed last year were: remodelling rooms — 31 per cent, — painting or wallpapering — 27 per cent, — and hard surface flooring and wall-to-wall carpeting — 26 per cent.
Of the 10 major centres surveyed, the percentage of households that spent $1,000 or more on renovations in 2007 was highest in Winnipeg at 36 per cent, followed by St. John's and Halifax at 35 per cent, while the centre with the least proportion of households that undertook renovations was in Québec at 28 per cent.
Similarly, renovation intentions for 2008 across the 10 major centres are strongest in Winnipeg and St. John's, where 50 and 48 per cent of consumers, respectively, indicated they plan to undertake renovations costing $1,000 or more. The proportion of potential renovators is lowest in Québec where 35 per cent of households indicated they intend to renovate in 2008.
On the home purchasing front, six per cent of households across the 10 major centres surveyed intend to purchase a home that will be used as a primary residence in 2008. This is down from eight per cent in 2007. Forty-two per cent of households that stated they intend to purchase a home in 2008 are first-time buyers. This percentage is identical to the share of actual first-time home buyers in 2007. The majority of first-time buyers are between the ages of 25 and 34, with a household income between $40,000 and $60,000 annually.
Home buying intentions are strongest in Calgary where 8 per cent of households reported that they are considering buying a home this year, down from 14 per cent in 2007. Purchase intentions are the lowest in Québec at four per cent.
CMHC OTTAWA, May 22, 2008
Monday, May 12, 2008
MORTGAGE RATE FORECAST
At the end of April, the borrowing cost for a five-year fixed rate mortgage was 6.99 per cent, 55 basis points (bps) below year-end 2007. BCREA expects rates to remain stable over the second and third quarters of 2008 before rising modestly in Q4 2008 and into 2009.
US Weakness Impacts Canada
Lower interest rates are being driven by the faltering economy south of the border. The US is in the middle of a housing market-led economic downturn; housing starts are at the lowest levels since the early 1990s. Meanwhile, aggregate US resale home prices have dropped and unemployment rates have risen, contributing to lower consumer confidence, spending and greater economic uncertainty.
In response, the US Federal Reserve slashed its policy interest rate by 200 bps thus far in 2008, pushing it down to 2.25 per cent. Despite these efforts, US growth looks to remain weak for much of 2008 and into 2009.
A potential US recession will weigh on Canadian economic growth through various channels. Canada’s export sector, already reeling from the rapid ascent of the Canadian dollar in 2007, will be further challenged by reduced product demand. Undoubtedly, US weakness will flow through Canada’s economy, given that more than 78 per cent of Canadian goods exports are sent to the US.
Canada’s economy grew by only 0.8 per cent in Q4 2007, the lowest growth since Q2 of 2003. While domestic demand remained robust, export activity fell by 2.2 per cent over the previous quarter. Declines were mostly confined to the manufacturing, other goods and transport sectors, which depend more on cross-border trade.
Interest Rates to Fall
The Bank of Canada’s (BoC) mandate is to maintain price stability, rather than to explicitly target economic growth. That said, current and expected economic activity play critical roles in future inflation pressures and monetary policy. Core inflation was 1.3 per cent in March, marking the lowest growth since March 2004. The increased value of the Canadian dollar vis-à-vis the US has lowered import prices, and consumers have further benefited from the recent GST cut. Low inflation and a weak US economy point to further cuts in the BoC’s policy rate at future meetings this year.
Mortgage Rates
Cuts in the overnight rate directly impact variable mortgage rates, which are tied to prime rates. Prime rates adjust when the BoC adjusts its target for the overnight rate. In the fixed-rate mortgage market, rates are highly correlated to bond yields of similar maturity. While short-term rates partially filter into longer-term rates, future expectations for the economy, inflation and interest rates play larger roles. With the economy likely to remain weaker for much of 2008, inflation is likely to stay well anchored. As a result, the expectation of lower interest rates moving forward should dampen bond yields and lead to downward pressure on administered one and five year mortgage rates. However, continued volatility in financial markets has also translated into higher costs of credit for banks used for lending purposes. This should offset some of the downward pressure on mortgage rates.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
US Weakness Impacts Canada
Lower interest rates are being driven by the faltering economy south of the border. The US is in the middle of a housing market-led economic downturn; housing starts are at the lowest levels since the early 1990s. Meanwhile, aggregate US resale home prices have dropped and unemployment rates have risen, contributing to lower consumer confidence, spending and greater economic uncertainty.
In response, the US Federal Reserve slashed its policy interest rate by 200 bps thus far in 2008, pushing it down to 2.25 per cent. Despite these efforts, US growth looks to remain weak for much of 2008 and into 2009.
A potential US recession will weigh on Canadian economic growth through various channels. Canada’s export sector, already reeling from the rapid ascent of the Canadian dollar in 2007, will be further challenged by reduced product demand. Undoubtedly, US weakness will flow through Canada’s economy, given that more than 78 per cent of Canadian goods exports are sent to the US.
Canada’s economy grew by only 0.8 per cent in Q4 2007, the lowest growth since Q2 of 2003. While domestic demand remained robust, export activity fell by 2.2 per cent over the previous quarter. Declines were mostly confined to the manufacturing, other goods and transport sectors, which depend more on cross-border trade.
Interest Rates to Fall
The Bank of Canada’s (BoC) mandate is to maintain price stability, rather than to explicitly target economic growth. That said, current and expected economic activity play critical roles in future inflation pressures and monetary policy. Core inflation was 1.3 per cent in March, marking the lowest growth since March 2004. The increased value of the Canadian dollar vis-à-vis the US has lowered import prices, and consumers have further benefited from the recent GST cut. Low inflation and a weak US economy point to further cuts in the BoC’s policy rate at future meetings this year.
Mortgage Rates
Cuts in the overnight rate directly impact variable mortgage rates, which are tied to prime rates. Prime rates adjust when the BoC adjusts its target for the overnight rate. In the fixed-rate mortgage market, rates are highly correlated to bond yields of similar maturity. While short-term rates partially filter into longer-term rates, future expectations for the economy, inflation and interest rates play larger roles. With the economy likely to remain weaker for much of 2008, inflation is likely to stay well anchored. As a result, the expectation of lower interest rates moving forward should dampen bond yields and lead to downward pressure on administered one and five year mortgage rates. However, continued volatility in financial markets has also translated into higher costs of credit for banks used for lending purposes. This should offset some of the downward pressure on mortgage rates.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
BC Housing Starts 2008
Housing starts in the province climbed 8 per cent to 39,195 units last year. High-density housing gained a larger proportion of total housing starts as a result of land supply and affordability constraints and consumer preferences Multiple housing starts comprised 63 per cent of total housing starts in the province last year.
Housing starts in BC climbed 15 per cent in the first quarter of 2008 compared to the same period in 2007, but housing starts are not expected to reach last year’s total by year end. Capacity constraints in the province’s large urban centers will limit new construction activity this year. The tightening of credit will also negatively impact the availability of financing and the cost of borrowing. In addition, a marked increase in resale listings and fewer investors are slowing presales of new homes and causing developers to re-evaluate their market exposure.
While housing starts may be higher in the first half of 2008, they are expected to decline during the second half, resulting in a 3 per cent decline in total starts to 37,900 units by year end. Higher new home inventories and moderating demand is expected to pull housing starts back an additional 6 per cent to 35,500 units in 2009. Multiple housing starts are forecast to increase 1 per cent this year on the strength of projects currently planned or underway. However, rising inventories are expected to reduce multiple starts by 10 per cent to 22,500 units in 2009.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Housing starts in BC climbed 15 per cent in the first quarter of 2008 compared to the same period in 2007, but housing starts are not expected to reach last year’s total by year end. Capacity constraints in the province’s large urban centers will limit new construction activity this year. The tightening of credit will also negatively impact the availability of financing and the cost of borrowing. In addition, a marked increase in resale listings and fewer investors are slowing presales of new homes and causing developers to re-evaluate their market exposure.
While housing starts may be higher in the first half of 2008, they are expected to decline during the second half, resulting in a 3 per cent decline in total starts to 37,900 units by year end. Higher new home inventories and moderating demand is expected to pull housing starts back an additional 6 per cent to 35,500 units in 2009. Multiple housing starts are forecast to increase 1 per cent this year on the strength of projects currently planned or underway. However, rising inventories are expected to reduce multiple starts by 10 per cent to 22,500 units in 2009.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
ECONOMIC OUTLOOK 2008
Economic growth in the province is expected to slow this year. The higher Canada/US exchange rate and overall weakness in the US economy, especially in residential construction, will curtail BC exports again this year. The dollar value of softwood lumber exports to the US fell 22 per cent last year. Recovery in US housing starts is not expected this year. In addition, less consumer spending by Americans, combined with a high Canadian dollar, will also curb the number of US tourists to BC. Total US traveler entries to BC declined 6 per cent last year, and a marked improvement is unlikely this year.
Despite some weakness in BC exports, the economy is forecast to grow by 2.5 per cent this year and 2.7 per cent in 2009. Construction is underway on $57 billion worth of capital projects and a further $75 billion in capital projects are proposed. Retail sales are expected to remain brisk, growing a further 6.5 per cent this year and 6.7 per cent in 2009.
Besides the bright lights of capital projects and retail sales, labour market conditions are favorable to BC households and housing demand. The unemployment rate in BC fell from 4.8 per cent in 2006 to 4.2 per cent last year. In the last five years, the unemployment rate has decreased by more than 50 per cent. Strong labour demand is expected to continue this year, with employment increasing by 2.5 per cent in 2008 and 2.6 per cent in 2009. Robust employment growth and low unemployment puts upward pressure on wages and salaries, a positive side effect for BC households. Both personal disposable income and workers wages are expected to be higher again this year.
Employment in wood manufacturing fell by 8,400 jobs during the first quarter, with total manufacturing employment down by 18,200 jobs. However, a gain of 25,400 construction jobs during the same period more than offsets the job losses in manufacturing, and illustrates that the goods sector in the province remains on a solid footing. In the service sector, finance and related employment is showing little growth, no doubt due to tightening credit conditions. Nevertheless, strong employment growth in transportation and warehousing, commercial and personal services, and public administration is expected to propel service sector employment upward by more than 38,000 jobs this year.
BC’s robust economy contributed to a 31 per cent increase in net inter-provincial migration last year. The population was bolstered by an additional 13,385 individuals who migrated from other provinces in 2007. While economic growth is expected to slow in 2008, BC will remain one of the strongest economies and continue to attract Canadians searching for employment and lifestyle opportunities. Net inter-provincial migration is forecast to rise a further 5 per cent to 14,100 this year before dipping 2 per cent to 13,800 in 2009.
International migration is continuing on an upward trend. Total net international migration is forecast to reach 41,000 individuals this year, an increase of 3 per cent. International migration is not as susceptible to the ebbs and flows of the business cycle and appears limited only by federal government policy. Efforts to address the sizable backlog of international applicants is expected to increase the number of immigrants to the province over the next five years. Skilled workers are the largest segment of BC immigrants.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Despite some weakness in BC exports, the economy is forecast to grow by 2.5 per cent this year and 2.7 per cent in 2009. Construction is underway on $57 billion worth of capital projects and a further $75 billion in capital projects are proposed. Retail sales are expected to remain brisk, growing a further 6.5 per cent this year and 6.7 per cent in 2009.
Besides the bright lights of capital projects and retail sales, labour market conditions are favorable to BC households and housing demand. The unemployment rate in BC fell from 4.8 per cent in 2006 to 4.2 per cent last year. In the last five years, the unemployment rate has decreased by more than 50 per cent. Strong labour demand is expected to continue this year, with employment increasing by 2.5 per cent in 2008 and 2.6 per cent in 2009. Robust employment growth and low unemployment puts upward pressure on wages and salaries, a positive side effect for BC households. Both personal disposable income and workers wages are expected to be higher again this year.
Employment in wood manufacturing fell by 8,400 jobs during the first quarter, with total manufacturing employment down by 18,200 jobs. However, a gain of 25,400 construction jobs during the same period more than offsets the job losses in manufacturing, and illustrates that the goods sector in the province remains on a solid footing. In the service sector, finance and related employment is showing little growth, no doubt due to tightening credit conditions. Nevertheless, strong employment growth in transportation and warehousing, commercial and personal services, and public administration is expected to propel service sector employment upward by more than 38,000 jobs this year.
BC’s robust economy contributed to a 31 per cent increase in net inter-provincial migration last year. The population was bolstered by an additional 13,385 individuals who migrated from other provinces in 2007. While economic growth is expected to slow in 2008, BC will remain one of the strongest economies and continue to attract Canadians searching for employment and lifestyle opportunities. Net inter-provincial migration is forecast to rise a further 5 per cent to 14,100 this year before dipping 2 per cent to 13,800 in 2009.
International migration is continuing on an upward trend. Total net international migration is forecast to reach 41,000 individuals this year, an increase of 3 per cent. International migration is not as susceptible to the ebbs and flows of the business cycle and appears limited only by federal government policy. Efforts to address the sizable backlog of international applicants is expected to increase the number of immigrants to the province over the next five years. Skilled workers are the largest segment of BC immigrants.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Housing Market Moderating 2008
Residential unit sales on the Multiple Listing Service® (MLS®) in BC are forecast to dip 9 per cent to 93,800 units this year, and a further 2 per cent to 92,000 in 2009. The combination of eroding affordability and weaker economic growth are trending home sales away from historically high levels.
The housing recession in the US and belt tightening by US consumers is negatively impacting the forestry and tourism. As a result, economic growth in the province is forecast to decline from 3.1 per cent in 2007 to 2.5 per cent in 2008. However, BC economic growth is expected to exceed the national average by a wide margin, contributing to elevated inter-provincial migration and relatively robust employment growth.
A marked increase in the inventory of homes for sale is providing more choice for homebuyers and reducing the chances of multiple bids on the same property, providing less upward pressure on home prices. After climbing 12 per cent to $438,975 in 2007, the average MLS® residential price is forecast to increase 9 per cent to $479,000 this year, and a further 4 per cent to $499,000 in 2009.
Regional housing market differences will persist; however, the gap is expected to narrow. Average home prices in the Okanagan, Kootenays and Kamloops are forecast to climb a more modest 8-14 per cent this year as weaker demand from Albertans and investors is expected. In addition, a strong Canadian dollar and falling home prices south of the border are drawing the attention of some recreation homebuyers away from BC.
Most housing markets in the province will enter balanced conditions this year. After six years of a strong sellers’ market, it is welcome relief for many homebuyers. BC’s housing markets continue to be underpinned by robust employment growth, elevated net immigration and strong consumer spending. In addition, mortgage rates are stable, with some downward pressure expected before year end.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
The housing recession in the US and belt tightening by US consumers is negatively impacting the forestry and tourism. As a result, economic growth in the province is forecast to decline from 3.1 per cent in 2007 to 2.5 per cent in 2008. However, BC economic growth is expected to exceed the national average by a wide margin, contributing to elevated inter-provincial migration and relatively robust employment growth.
A marked increase in the inventory of homes for sale is providing more choice for homebuyers and reducing the chances of multiple bids on the same property, providing less upward pressure on home prices. After climbing 12 per cent to $438,975 in 2007, the average MLS® residential price is forecast to increase 9 per cent to $479,000 this year, and a further 4 per cent to $499,000 in 2009.
Regional housing market differences will persist; however, the gap is expected to narrow. Average home prices in the Okanagan, Kootenays and Kamloops are forecast to climb a more modest 8-14 per cent this year as weaker demand from Albertans and investors is expected. In addition, a strong Canadian dollar and falling home prices south of the border are drawing the attention of some recreation homebuyers away from BC.
Most housing markets in the province will enter balanced conditions this year. After six years of a strong sellers’ market, it is welcome relief for many homebuyers. BC’s housing markets continue to be underpinned by robust employment growth, elevated net immigration and strong consumer spending. In addition, mortgage rates are stable, with some downward pressure expected before year end.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
Tuesday, May 6, 2008
Housing Forcast KREB 2008
The Kootenay economy has posted a strong performance in recent years. Employment increased 11 per cent in 2007, and the unemployment rate is at its lowest in more than a decade. The labour force participation rate increased from 59 per cent in 1997 to 67 per cent last year. Robust employment growth is expected to continue in construction, agriculture and metals manufacturing, as well as accommodation and food services, retail and wholesale trade and high technology. Strong labour market conditions are underpinning local housing demand.
The Kootenay real estate market also benefits from homebuyers originating from outside the region, particularly Alberta. With Calgary’s economy falling from its lofty heights and its housing market firmly in buyers’ market conditions, reduced demand from Alberta buyers will impact Kootenay home sales in 2008 and 2009.
MLS® residential sales climbed 22 per cent to 3,476 units last year, the highest level ever recorded. The combination of eroding affordability and reduced demand from Alberta buyers will contribute to a decline in home sales this year. A total of 3,080 homes are forecast to trade hands in 2008, a decline of 11 per cent. This level of activity is expected to continue through 2009, though home sales will edge down 2 per cent to 3,020 units.
Kootenay home prices posted the largest year-over-year gains in the province in 2007. The average price of a home climbed 30 per cent to $272,138. Home prices are forecast to rise a further 13 per cent to $308,000 this year and 6 per cent to $327,000 in 2009. The Kootenays have not experienced a sizable increase in active listings like other BC markets; however, reduced demand is expected to sustain balanced market conditions this year.
Housing starts in the Cranbook CA are forecast to remain at nearly 195 units per year over the forecast horizon. Nearly 90 per cent of housing starts in the Cranbrook CA are single detached homes, though a marked increase in condominium development is expected over the medium term.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
The Kootenay real estate market also benefits from homebuyers originating from outside the region, particularly Alberta. With Calgary’s economy falling from its lofty heights and its housing market firmly in buyers’ market conditions, reduced demand from Alberta buyers will impact Kootenay home sales in 2008 and 2009.
MLS® residential sales climbed 22 per cent to 3,476 units last year, the highest level ever recorded. The combination of eroding affordability and reduced demand from Alberta buyers will contribute to a decline in home sales this year. A total of 3,080 homes are forecast to trade hands in 2008, a decline of 11 per cent. This level of activity is expected to continue through 2009, though home sales will edge down 2 per cent to 3,020 units.
Kootenay home prices posted the largest year-over-year gains in the province in 2007. The average price of a home climbed 30 per cent to $272,138. Home prices are forecast to rise a further 13 per cent to $308,000 this year and 6 per cent to $327,000 in 2009. The Kootenays have not experienced a sizable increase in active listings like other BC markets; however, reduced demand is expected to sustain balanced market conditions this year.
Housing starts in the Cranbook CA are forecast to remain at nearly 195 units per year over the forecast horizon. Nearly 90 per cent of housing starts in the Cranbrook CA are single detached homes, though a marked increase in condominium development is expected over the medium term.
“Copyright British Columbia Real Estate Association. Reprinted with permission.”
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