Softening prices will give first-time homebuyers a break

Friday, October 31st, 2008

Paul Luke

Sliding house prices in B.C. are filing the sharp edge off the market for first-time homebuyers, Canada Mortgage and Housing Corp. says.

B.C.’s average resale house price will rise 2.4 per cent to $449,450 in 2008 as strong growth early in the year offsets subsequent declines, CMHC regional economist Carol Frketich said yesterday.

But in 2009, the provincial average will fall seven per cent to $418,200, Frketich told CMHC’s housing outlook conference in Vancouver yesterday.

Softening prices will cool the competition for homes, giving buyers more time to reflect, Frketich said.

It will also give those taking their first plunge into home ownership a break.

“First-time homebuyers have been having a more difficult time getting into the market,” Frketich said.

“This price adjustment could release some of that pent-up demand for housing.”

A better-supplied resale market means fewer foundations will be poured this year and next, she said.

Total provincial housing starts will fall by 8.7 per cent this year and by another 18.4 per cent next, she said.

Mortgage rates should stay within 25 to 50 basis points of current levels in the last quarter of 2008, CMHC said.

Posted rates should fall slightly in the first half of 2009, reflecting an easing cost of credit to financial institutions.

But rising bond yields should nudge rates marginally higher in the second half of next year, CMHC said.

“For the last quarter of 2008 and in 2009, the one-year posted mortgage rate will be in the six- to 6.75-per-cent range, while three- and five-year posted mortgage rates are forecast to be in the 6.5- to 7.25-per-cent range,” CMHC said.

In a separate report, the Canadian Real Estate Association said the falling average sale price nationally reflects a decline in sales in the highest-priced markets, noting that prices are still rising in a majority of markets.

The association said the average sale price of an existing home fell 5.4 per cent in September to $289,916 from $306,347 a year earlier. But it noted prices are up in 65 per cent of the boards it represents.

“The recent price declines in the Canadian housing market reflect lower activity in some of Canada‘s priciest housing markets that had posted large price increases,” said CREA president Calvin Lindberg.

Vancouver, Canada‘s most expensive market, has had year-over-year sales declines in the 40-per-cent range, and many analysts suggest the results are skewing the national number.

© The Vancouver Province 2008

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