Derrick Penner
Sun
Despite a rebound in Metro Vancouver real estate resales, June new-home prices continued to slide as builders adjust to changes in the market.
Statistics Canada said Wednesday that Metro Vancouver new-home prices dipped 0.9 per cent from May to June, the biggest monthly decline among Canada‘s major centres, and stood 9.1 per cent below prices in June of last year.
Nationally, new-home prices slipped 0.2 per cent, the ninth straight month of decline, despite predictions the slide would likely end.
“In general, [new-home prices] are a lagging indicator in the market,” said Robyn Adamache, a market analyst with Canada Mortgage and Housing Corp.
Adamache said the housing resale sector sets the tone for the overall market, but it takes some months for the new-home market to follow.
She noted that it took a few months after sales in the resale sector collapsed last fall for builders to roll back their production of housing starts and adjust prices to reflect declining values on the resale side.
“Since the spring of this year we’ve been seeing builders respond to what’s happening in the resale market,” Adamache said. “We saw some pretty big market promotions where prices were reduced, and we’re still seeing more of that.”
She said builders are likely watching the resale market to see whether the higher sales seen in June and July hold to form a trend.
“And if we continue to see lower levels of listings on the resale market, we could start to see new-home prices start to turn around as well,” Adamache said.
Statistics Canada, in its report on the new housing price index, said though prices for some of the most popular home models rose in Vancouver, on balance contractors lowered prices in an effort to stimulate sales and sell off their inventory.
Rob Grimm, a principal with builder Portrait Homes Ltd., said his company dropped its prices 15 to 20 per cent after sales collapsed.
“I think the market knows where prices need to be,” Grimm said. “We’ve found the price point that people are happy with and are buying homes at. You start playing with that, and you start playing with your velocity.”
Grimm said Portrait Homes “took a bath” on sales of its inventory last winter as it lowered prices to reflect the market.
Since then, however, the builder has won the cooperation of its contractors on price reductions for labour and materials, allowing it to build new homes on a “razor-thin” margin.
Grimm said the firm hopes to make up the profit on increased sales, and though overall, Metro Vancouver housing starts are way down, Portrait expects to build and sell 60 to 70 new single-family homes in a development called The Crest at Silver Ridge in Maple Ridge, compared with 30 to 40 in 2008.
Grimm said he was surprised that new-home prices continued to slide in June because he has started to see upward pressure on prices from his contractors.
Nationally, economists had forecast prices to remain flat for the month.
“On balance, when combined with the disappointing housing starts report released [Tuesday], this report provided further confirmation on the dichotomy between the new and existing homes markets in Canada,” said TD Securities economics strategist Millan Mulraine.
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