Increased home sales in May have fuelled optimism that the slide in Lower Mainland real estate prices is over and the bottom was reached in February.

Before the economic downturn and real estate slump, observers had warned home prices had reached unaffordable heights in Metro Vancouver and were due for at least a correction.

If the bottom was reached in February, the peak-to-trough residential price drop from last spring was roughly 15 per cent and price gains over the past couple of months have clawed back close to five per cent.

The panic that gripped all financial markets last fall and winter has subsided and the change in psychology is playing out in local housing markets, says Tsur Somerville, director of the UBC Centre for Urban Economics and Real Estate.

"People think the worst of the economic downturn is behind us and therefore the fear that was just completely infectious in late 2008 is gone," he said.

Somerville says very low mortgage rates are now the key factor spurring buyers into action.

"Even though the economy is not in good shape, the interest rate environment is so favourable, people who can buy are."

Statistics released Tuesday show the benchmark price of a detached house in Greater Vancouver edged up again in May to $680,000.

That's now up three per cent so far in 2009, but down nearly 12 per cent from a year ago, according to stats from the Real Estate Board of Greater Vancouver.

Benchmark apartments are now up 4.6 per cent year-to-date to $350,000 and attached homes are up 2.4 per cent to $435,850. Both are down nine to 10 per cent from a year ago, closer to the market's peak.

Sales statistics from the Fraser Valley Real Estate Board, which includes Surrey, White Rock and North Delta, also show benchmark prices rose in May and are up so far in 2009.

Detached homes are up three per cent year-to-date to $465,940, attached homes are up one per cent to $298,300 and apartments are up 5.2 per cent to $232,170. Compared against a year ago, before markets dropped precipitously last fall and winter, Fraser Valley houses and apartments are down about nine per cent and townhouses are off 14.6 per cent.

Both realtor associations said the gains in prices and sales point to a stabilizing market.

But Somerville sees potential weakness continuing in the condo market in parts of the Lower Mainland, because it's not yet clear what impact will result from the large numbers of unbuilt units pre-sold before the downturn.

He also cautions a full economic recovery may be far away.

And Somerville sees no quick return to the boom years of double-digit annual gains in B.C. real estate prices that preceded the drop.

"It would be awfully premature to draw a trend line and say we're back on the escalator up," Somerville said.

"The economic story hasn't been fully worked out. Although I think the worst is behind us, the best isn't here yet."

jnagel@surreyleader.com