bc real estate association: gvhba trends 2010 presentation
DESCRIPTION
This is a copy of Cameron Muir, chief economist, BC Real Estate Association, presentation at GVHBA's Trends 2010 seminar on December 8, 2009. Please note all information shared in this presentation is the property of BCREA and usage of the information requires crediting BCREA as the information source.TRANSCRIPT
There and Back Again
Cameron MuirChief Economist
Greater Vancouver Home Builders’ Association
Coquitlam, BC
December 8, 2009
Housing Market
Rebound
Sales Rebound From Crisis Lows
Economic Expansion;Declining Mortgage Rates;
Pent-Up Demand
Residential MLS® Unit Sales (SAAR)Record Low Mortgage Rates;
Pent-up Demand; Lower Prices
Financial Crisis;Global Recession;
Low Confidence
Affordability Concerns;End of 40-Year Amortizations;
Declining Prices
Sources: BC Real Estate Boards, CREA, BCREASeasonally Adjusted at Annual Rates
Units Units
Source: BCREA Economics
Residential Supply & DemandBritish Columbia
Sales-to-Active Listings (seasonally adjusted)Per Cent
Balanced
Regional Differences Significant
Source: BCREA Economics
Large Urban Centres Rebound
Buyers’ Balanced Sellers’
3-month moving average
Sales-to-Active Listings
Sources: BC Real Estate Boards, BCREA
Units
Sources: CREA, BCREASeasonally Adjusted at Annual Rates
Sales Outpace Expectations
REBGV MLS® Unit Sales (SAAR)
Does this look sustainable to you?
Mortgage Payment* Mar-09 Mar-08 Change $ Change % Lowest Since
Victoria $2,166 $2,873 -$707 -25% Feb. 2006
Vancouver Island $1,483 $1,839 -$356 -19% Jan. 2007Powell River Sunshine Coast $1,221 $1,339 -$118 -9% Apr. 2007
Greater Vancouver $2,604 $3,512 -$908 -26% Mar. 2006
Fraser Valley $1,927 $2,527 -$600 -24% Feb. 2006
Chilliwack $1,426 $1,921 -$495 -26% Feb. 2006
Kamloops $1,308 $1,729 -$421 -24% Jan. 2007
Okanagan Mainline $1,692 $2,372 -$680 -29% Mar. 2006
South Okanagan $1,452 $2,037 -$585 -29% Apr. 2006
Kootenay $1,209 $1,582 -$373 -24% Jan. 2007
Northern Lights $1,063 $959 +$104 +11% -
BC Northern $960 $1,169 -$209 -18% Sept. 2006
BC Total $2,081 $2,754 -$673 -24% Mar. 2006*Based on the average MLS® residential sales price, 20% down-payment, 25 year amortization and the average posted 5-year fixed mortgage rate for the month.
Housing Affordability – Spring 2009
Sources:CREA, BCREA
Prices Reaching for Record Highs
• Single-Detached Home Sales Driving Price Growth
• Provincial Figure Reflects Rebound in Large Urban Areas
BC MLS® Average Price
Inflation Adjusted Dollars
Sources: Statistics Canada, CREA, BCREA
Per Cent
Mortgage Rate
Average Payment
Affordability Ceilings Tested
26%
Sources: VREB, BCREA
Prices Rebound on Demand, Low Supply
• All Product Types Share in Price Recovery
• Detached Market Rebounds Quickest
Vancouver MLS® Price
Inflation Adjusted Dollars
Sources: Statistics Canada, CREA, BCREA
Per Cent
Mortgage Rate
Average Payment
Affordability Ceilings Tested Van
26%
Sources: Bank of Canada, BCREA
How Close Are We Affordability Ceiling?
What Are the Risks?
Price Risk
Rate Risk
Inflation Adjusted Dollars
Sources: Bank of Canada, BC Real Estate Association
5-Year
1-Year
Mortgage Rates Rise Modestly in 2010
Fixed Rate Variable Rate
Global Economic Malaise
Per Cent
Sources: International Monetary Fund WEO (July 2009), BCREA GDP Growth at Constant Dollars
Global Recession Slow to End
Sources: Statistics Canada, BCREAChained 2002 Dollars
Canada GDP Dollars (Millions)
Slow and Choppy Canadian Recovery
June Trough?
Index
Sources: Statistics Canada, BCREA
Equities Rally, But Still Recouping Loss
45%
40%
SAAR Units (x 1,000)
Sources: Statistics Canada, BCREA
US Starts
BC Sawn LumberProduction (RHS)
% change
US Housing Bottoms Out, Slow Build
Sources: US Census Bureau, BCREA Estimates
Ratio of Vacant-to-Occupied Housing
1985 – 2002 Trend
1975 – 2008 Trend
US Housing Remains Oversupplied
Sources: FRED®, BCREA
Annualized Auto Sales (Millions)
Cash for Clunkers – Temporary Reprieve
Dollars (Millions) Inflation Adjusted
Sources: FRED®, BCREA
US ConsumersPer Cent
Retail Trade (LHS)
Unemployment Rate (RHS)
$(millions)
Sources: Statistics Canada, BCREASeasonally Adjusted
Exports Continue to Struggle
Sources: english.freemap.ca, BC Stats, BC Real Estate Association
-27% PRC:+22%
Japan:-28%
S. Korea:-12%
2009 YTD-28%
-53%
-51%
-18%
-51%Taiwan:
-26%
Exports Growth Negative, China Exception
Sources: english.freemap.ca, BC Stats, BC Real Estate Association
53.1% PRC:6.1%
Japan:15.1%
S. Korea:5.9%
2008
0.7%
1.6%
1.2%
0.5%
1.0%Taiwan:
1.8%
But US Still BC’s Key Market
Share of BC Exports
Export Revenue Per Capita
Source: Urban Futures – based on 2001 data
Sources: Statistics Canada, BCREA
$US/CDN
Loonie Rises, Greenback Weakens
Commodity Price Index
Exchange Rate
Index
Sources: Statistics Canada, BCREA
Confidence Improving, Buying Flat
Per CentConfidence Retail Sales Growth
Room Revenues (Dollars x1,000)
Sources: BC Stats, BCREA
Tourism Demand Wanes
Sources: Statistics Canada, BCREA
Unemployment Rate Employment (x 1,000)
• Unemployment Rate Stabilizes
• Full-Time Employment Down as Part-Time Gains – Hours Cut
• Healthcare Sector Strong Y/Y Growth
• Pressure on Public Administration
• Losses in Tourism and Discretionary Sectors
Labour Market Patterns StabilizingBC Province
BC Employment Forecast2007 - 2017
Source: COPS BC Unique Scenario
Units
Sources: CREA, BCREASeasonally Adjusted at Annual Rates
Projected Sales Range
Sales Outpace ExpectationsBC MLS® Unit Sales (SAAR)
Affordability InducedDecline
Financial Crisis
Units
Sources: CREA, BCREASeasonally Adjusted at Annual Rates
Vancouver Forecast Range
REBGV MLS® Unit Sales (SAAR)
Units
Sources: Statistics Canada, Urban Futures
BC Homeownership Rates
Per Cent
Sources: VIREB 2008 Buyer Profile, BCREA
• Parksville/Qualicum, Campbell River are Preferred Destinations for Albertans
• Alberta Personal Income Weaker on Income Growth and Depressed Investment Income
• Oil and Natural Gas Prices Impact Corporate Profits and Investment
Alberta Buyers Key Source of Demand
Building Permits (Residential)
Sources: CMHC, BCREA
Urban Housing Starts 45+ Year Low?
20 Year Average
Individuals
Sources: Statistics Canada, BCREA
Risk of Multi-Decade Low Starts
Units
Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets
Inventory Tops Below Previous Cycles
Under Construction (RHS)
Inventory (LHS)
Individuals
Sources: Statistics Canada, BCREA
Migration Still Strong Despite Recession
Total (RHS)
Net Change
Sources: BC Stats P.E.O.P.L.E Model
Per Cent Growth
55+ = 36% of Population
BC Population Distribution - 2028
MLS® Prices to Plateau
Price
Forecast
Per Cent Change
BC Average MLS® Price
Sources: CREA, BCREA
• Current market strength fuelled by pent-up demand and low mortgage rates
• Pull-back in sales activity from current high expected, but demand remains elevated
• Prices to remain firm on attractive mortgage rates, population growth, and lack of new home construction
• Underlying economy recovering, but slowly
Final Thoughts:
Per Cent
Sources: Canadian Bankers Association, Statistics CanadaBCREA
*Annualized, Population denotes those aged 15+
Mortgages in Arrears BC Bankruptcies Per Capita*
Financial Balancing Act for Consumers
Sources: CFIB Business Barometer®, BCREA
MonthlyQuarterly
Business Outlook Improves
-22%
Per Cent
Sources: Bank of Canada, BCREA
Core Inflation
Target Inflation BandTotal Consumer Inflation
Low Inflation Dampens Rate Pressure
• Negative Inflation Signals Continuation of Low Rates
• Continued Slack and Tepid Growth to Keep Inflation Pressures Low in Short Term
Per Cent
Sources: BC Stats, BC Government September Update Budget and Fiscal Plan,, BCREA, NBER
US Recessions
BC Economy To Improve in 2010
Sources: Bank of Canada, BC Real Estate Association
5-Year
1-Year
Mortgage Rates to Rise Modestly in 2010
Fixed Rate Variable Rate
Units
Sources:CREA, BCREA
Sales To Remain at Healthy Levels
Building Permits (Residential)
Sources: Statistics Canada, BCREA
Residential Building Low but Improving
YTD July: -64%Singles : - 50%Multiples: -71%
Units
Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets
Inventory Tops Below Previous Cycles
Under Construction (RHS)
Inventory (LHS)
Ratio (3m moving average)Sources: VIREB, BCREA
Buyers’ Balanced Sellers’
All Markets Show Improvement
Mar Sept
Sources: CHBA-BC, Altus Group, BCREA
Ready or Not – Harmonized Sales Tax
Home Price (x 1,000)
Additional Tax CHBA-BC/Altus Group Report
2006 Censal Data42.8 % of New Homes < $400K
18.1% of New Homes $400-$500K23.9% of New Homes $500-$750K15.2% of New Homes > $750K
57% of New Homes Above Threshold
BC a Population Growth Leader
Sources: Statistics Canada, BCREAPer Cent
Building Permits (Residential)
Sources: Statistics Canada, CREA, BCREA
Residential Building Intentions Low
YTD JulyBC: - 64%
Victoria : - 67%
Sources: CMHC, BC Real Estate AssociationYTD August
New Housing Starts
-80%-71%
-11%
-65%-63%
Units
Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets
Nanaimo New Home Supply Swells
Under Construction(RHS)
Inventory
Capital Region Price Distribution - 2008Units
Sources: BC Assessment Authority, BCREA
35% Below $275K
Sources: Statistics Canada, BCREA
Unemployment Rate Employment (x 1,000)
• Unemployment Rate Remains Low
• Full-Time Employment Down as Part-Time Gains – Hours Cut
• Healthcare Sector Still Stable
• Pressure on Public Administration
• Losses in Tourism and Discretionary Sectors
Labour Market Moderately WeakensVictoria CMA
Units
Sources: VREB. CREA, BC Real Estate AssociationSeasonally Adjusted at Annual Rates
Projected Sales Range
Sales Outpace ExpectationsVictoria MLS® Unit Sales (SAAR)
Affordability InducedDecline
Financial Crisis
Units
Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets
Victoria CMA New Home Inventory
Under Construction (RHS)
Inventory (LHS)