Low mortgage rates coupled with lower prices encourage consumers to buy
Marke Andrews
Sun
Record sales volumes in Metro Vancouver and Victoria helped lift B.C.’s real estate market in July, the B.C. Real Estate Association reported Friday.
Nationally, markets experienced record sales for the month, posting their biggest year-over-year increase in two years.
With lower prices and near record low mortgage rates, B.C. buyers rushed to scoop up 10,051 homes through the Multiple Listing Service in July, the association said, lifting the month’s results 53 per cent over the same month a year ago.
“Record home sales in Metro Vancouver and Victoria propelled the province into balanced conditions [between buyers and sellers] last month,” association chief economist Cameron Muir said. But conditions are not equal everywhere, he cautioned, adding that Interior markets have been interrupted by forest fires.
And while monthly sales volumes have been slowly increasing this year, the 46,380 homes sold through MLS during the first seven months of 2009 is still down six per cent from the same period a year earlier. The dollar value of those cumulative sales, at $21 billion, is 10 per cent less than in 2008.
In an interview, Muir attributed the sales gains to lower mortgage rates and lower prices compared to a year ago, and a feeling among consumers that prices and rates may go up, making this a good time to buy.
“In the fall and winter months, we saw demand fall off sharply as a result of the global financial crisis. First-time buyers were largely absent from the market,” said Muir. “In the spring leading into the summer, we’ve seen an increase in sales as a result of households seeing an end of the recession in sight. Mortgage rates went up in late May and June, and that was a tremendous signal for prospective buyers who had locked in with pre-approved mortgages.”
Nationally, the Canadian Real Estate Association reported Friday that realtors sold 50,270 units last month. That’s an 18.2-per-cent jump from a year ago. It also marked the first time sales had topped 50,000 in July.
“The difference in the resale housing market now, compared to the beginning of the year, is night and day, and nowhere is this more evident than in the west,” said Dale Ripplinger, president of CREA. “Homebuyers recognize that interest rates and prices have bottomed out.”
A five-year fixed-rate mortgage, the most popular product among consumers, is still available for under four per cent at some financial institutions. Variable-rate mortgages, tied to prime, remain in the three-per-cent range and are not expected to rise until June.
The low rates seem to have worked and have the housing market even hotter than it was in 2007, a record year. July sales in 2009 were 3.9 per cent above the previous July high set in 2007. It has been a stunning reversal for a real estate market that had almost ground to a halt over the winter. MLS sales on a seasonally adjusted basis have risen for six straight months, and are up 61.2 per cent off the decade-low set in January. Sales are only off 1.4 per cent from the peak in May, 2007.
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