It's a buyer's market

The headlines in recent months have said it all: “Housing boom officially over”; “Home sales plunge”; “Eroding consumer confidence puts a pause in B.C. housing market”.

The message is clear: the Greater Vancouver real estate scene just ain’t what it used to be.

And yet, despite drooping sales and a growing glut of active listings over the past six months, Fraser Valley real estate analysts had stopped short of declaring it a buyer’s market.

Instead they preferred to characterize it as a once red-hot market that’s balancing itself out – a return to more “normal” conditions.

But with May sales plunging 26 per cent compared to the same period in 2007, and active listings rising nearly 40 per cent, Fraser Valley Real Estate Board president Kelvin Neufeld is ready to take that big leap.

“To be honest with you, we’re coming out of the bottom end of the balanced market and into the top end of the buyer’s market,” he said in a recent interview. “And we’ve been there probably for a month now.”

A leading indicator, Neufeld says, is when sales fall below 16 per cent of active listings on a monthly basis. In May, when FVREB reported 1,600 sales out of 11,000 total listings, that ratio came in at around 14 per cent.

“We’re sliding into a bit more of a buyer’s market rather than a balanced market,” Neufeld says.

However, it’s too early to say whether a downturn is looming, he notes, pointing out that conditions remain healthy.

People are still looking to buy. The 1,600 sales recorded by FVREB in May is “not shabby,” Neufeld says.

And property values continue to increase. The average price of a detached home in the Fraser Valley in May was $549,600, up 5.4 per cent from the year before; apartments were up by a similar amount; townhomes, slightly less.

The way Neufeld sees it, things are just calming down after a frenzied period. “It was an awfully strong market for the last four or five years,” he says. “I’ve been doing this for the last 30 years and I haven’t seen anything last that long before.

“I don’t think the market could possibly sustain 15 per cent increases year after year. It’s good to get back to a normal market.”

What explains the spike in active listings?

Neufeld thinks it has a lot to do with property investors getting out while they can still salvage a profit.

“If you look at some of the towers in Surrey City Centre, there’s quite a few listings in there that are new buildings where the people haven’t even moved in, and they have the properties on the market,” he says.

“Those are people that bought two years ago when [the units] first went on sale, and now they’re completed, and the properties are right back on the market again.

“So they were never rented or moved into, but the profit taking is happening.”

CHILLIWACK

In the Chilliwack region, it wasn’t a great spring either.

Total sales in May were down 40 per cent from a year earlier, while there was a record spike in total active listings, up 85 per cent over the same period in 2007.

“Buyers are taking longer to make a decision because they have more to choose from,” says Trude Kafka, president of the Chilliwack and District Real Estate Board. “They look around some more; they’re more cautious. They feel maybe they’re paying too much.”

Prices are still rising, though, albeit more moderately than before. The average price of a detached home in May was $364,000, a six per cent increase compared to the same period in 2007. (The price of townhomes rose by the same amount; condominiums dropped by four per cent.)

Kafka has urged sellers to price their homes in line with current market conditions, with an eye toward “curb appeal, cleanliness and good repair.”

She blames a prolonged winter for driving away prospective buyers in the first half of 2008. And while summer vacation season doesn’t bode well for an increase in traffic, Kafka’s counting on a late summer surge.

“We had a tremendous August last year, and I’m just hoping we get a month like that this year.”

HOUSING STARTS

Housing starts in most parts of the valley were up in the first half of 2008 compared to the same period last year, largely driven by multi-family unit construction.

In the Vancouver CMA, multi-family unit starts increased 15 per cent in the first five months of 2008 to nearly 7,000 units; in Abbotsford CMA they were up by 68 per cent to 652.

“Larger projects that were in the planning and pre-sell stage in 2007 have broken ground in the first half of 2008,” says Canada Housing and Mortgage Corp. analyst Richard Sam.

Meanwhile, single-detached home starts dropped across the region in the same period: by seven per cent in Vancouver CMA; by 30 per cent in Abbotsford CMA and by 12 per cent in Chilliwack CMA.

“Single detached houses have been on the decline in 2008 due to waning demand,” says Sam. “Higher prices have eroded affordability for this product, even in areas such as Mission and Chilliwack, where land is cheaper.”

But Chilliwack has bucked the apartment-condo building trend, with a 32 per cent drop in multi-family unit starts in the first five months of 2008.