Last month’s numbers testify to return of home builder confidence and, therefore, of new-home-buyer confidence
Peter Simpson
Sun
Polygon Homes president Neil Chrystal isn’t alone in his expectations for ‘a bright future,’ suggests this image of a gathering of prospects last October on the first day the company sold homes in its Luma tower in Burnaby.
Phew, that was close! Were it not for a surge in housing starts in December, 2009 would have been remembered, or forgotten, as the worst year for starts in the Lower Mainland since 1962.
Now, if you remember the 1960s (frankly, if you do, you likely weren’t participating in them) 1962 was memorable because that was the year Johnny Carson debuted on The Tonight Show, Nelson Mandela was jailed, the Cuban Missile Crisis was headline news, and Telestar, the world’s first active communications satellite, was launched. The point is, 1962 was a very, very long time ago.
Fast forward to December. A total of 875 starts — both detached and attached homes –were needed last month to surpass the 2000 total of 8,203, thereby avoiding that dreaded worst-since-’62 label. Honestly, I figured the chances of reaching 875 were slim. After all, according to Canada Mortgage and Housing Corp., only 793 starts were recorded in November, and December is somewhat of a wind-down month, what with the seasonal holidays and all.
Surprisingly, 1,010 starts were recorded in December, bringing the year-end total to 8,339. A statistical bullet might have been dodged, but no one is celebrating. The starts total lagged 11,252 behind the homes started in 2008. That means production and installation of kitchens, bathrooms, flooring, electrical, lumber, roofing, concrete, windows, doors, etc. were also greatly curtailed.
Each housing start creates nearly three person-years of employment, a fancy term for three full-time direct and indirect jobs for one year. Homebuilding is a huge economic generator for communities.
Early last winter and spring, the real estate market softened considerably. Builders -small and large -were holding standing inventories of completed, yet unsold homes of all types and price ranges. Builders who had experienced the highs and lows of many real-estate cycles found ways to turn these new challenges into opportunities for their businesses, tradespeople, suppliers and homebuyers.
The builders met with their subtrades and suppliers -many of whom were sitting idle and contemplating their own futures -explained the challenging situation, asked them to participate in the cost-cutting process, then reduced prices significantly, some homes by $100,000 or more. Creative marketers devised innovative sales programs that captured the attention of homebuyers. Some were even advertised as “bulk liquidation sales.” Hey, it is what it is. And if lower prices to consumers are the result of this so-called guerrilla marketing, good on them for their creativity.
The lower prices, combined with historically low mortgage rates, created some sweet deals for homebuyers, who were able to take their time looking for homes that best matched their needs and financial obligations. I recall telling a reporter that “the panic has been taken out of the purchase.”
In late spring and early summer, as standing inventory was reduced or eliminated, builders gained the confidence to start new projects. For example, one builder boldly and successfully launched two projects simultaneously, one in Coquitlam, the other in Cloverdale. The sales generated starts, creating jobs. As promised, the builder was loyal to the subtrades and suppliers who stuck by him.
In the fall, people lined up overnight for a chance to buy condominiums at attractive pre-construction prices. The sales office opened at noon Saturday. By close of business Sunday, 135 of 180 condos had sold. The fact the condo was in Burnaby, not downtown Vancouver, created a buzz. Shortly afterwards, another builder released a nine-storey condo building in the Mount Pleasant area. The first phase sold out on opening weekend. The second phase is doing well.
Yet another builder released the second phase of a low-rise condo project in Surrey, which had been on hold for many months. Sales were brisk on opening weekend and the project is close to a sellout.
There are many similar stories of successful launches of new-home projects. One housing economist referred to the turnaround as a “post-recession growth phase.” Another commented that the rapid rebound might signal that the economic recession in this region was not as severe as in other regions.
The B.C. Real Estate Association reported that homes sold through the Multiple Listing Service in B.C. soared in December, an increase of 132 per cent from the same month in 2008. Sales of homes sold through MLS in 2009 rose 23 per cent from 2008. Prices increased two per cent.
So, what about 2010? CMHC is forecasting 13,000 starts for the Lower Mainland, and within the home-building community the confidence is continuing. Builders are launching new projects throughout the region, including some massive master-planned neighbourhoods.
One builder plans openings of four condo projects. Another has six on the go, or planned. Yet another builder, in business since 1905, has nine projects in the ground or planned. I could name more, but my point is that these commitments show confidence in this region, now and in the future.
I try not to reference specific builders in a column such as this, but a recent full-page open letter in this section warrants special mention.
On Jan. 9, Polygon Homes president Neil Chrystal, under the heading, “A bright future,” encouraged everyone to enjoy the upcoming Olympics, summarized the challenges of 2009 and looked ahead with optimism to the promise of a better 2010: “We look forward with confidence, helping to build a strong future for British Columbia … one of the most beautiful places in the world.” Good for Chrystal and Polygon.
There are, however, some clouds on the horizon. There is talk of interest-rate hikes mid-year, and, of course, the HST kicks in on July 1. And as cash-strapped governments at all levels scramble to balance their books, I am worried homebuyers will bear the brunt of higher home prices because of increased taxes, fees, levies and development cost charges imposed on new homes.
All stakeholders need to consider themselves partners in progress and work to remove impediments to housing afford-ability. If you are in the market for a new home, a few words of advice. Shop within your means. Speak with a mortgage professional to determine how much you can afford, then get pre-approved. Allow for possible interest-rate hikes. Don’t be afraid to ask lots of questions. Research the builder.
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