bc real estate association: gvhba trends 2010 presentation

There and Back Again

Cameron MuirChief Economist

Greater Vancouver Home Builders’ Association

Coquitlam, BC

December 8, 2009

Housing Market

Rebound

Sales Rebound From Crisis Lows

Economic Expansion;Declining Mortgage Rates;

Pent-Up Demand

Residential MLS® Unit Sales (SAAR)Record Low Mortgage Rates;

Pent-up Demand; Lower Prices

Financial Crisis;Global Recession;

Low Confidence

Affordability Concerns;End of 40-Year Amortizations;

Declining Prices

Sources: BC Real Estate Boards, CREA, BCREASeasonally Adjusted at Annual Rates

Units Units

Source: BCREA Economics

Residential Supply & DemandBritish Columbia

Sales-to-Active Listings (seasonally adjusted)Per Cent

Balanced

Regional Differences Significant

Source: BCREA Economics

Large Urban Centres Rebound

Buyers’ Balanced Sellers’

3-month moving average

Sales-to-Active Listings

Sources: BC Real Estate Boards, BCREA

Units

Sources: CREA, BCREASeasonally Adjusted at Annual Rates

Sales Outpace Expectations

REBGV MLS® Unit Sales (SAAR)

Does this look sustainable to you?

Mortgage Payment* Mar-09 Mar-08 Change $ Change % Lowest Since

Victoria $2,166 $2,873 -$707 -25% Feb. 2006

Vancouver Island $1,483 $1,839 -$356 -19% Jan. 2007Powell River Sunshine Coast $1,221 $1,339 -$118 -9% Apr. 2007

Greater Vancouver $2,604 $3,512 -$908 -26% Mar. 2006

Fraser Valley $1,927 $2,527 -$600 -24% Feb. 2006

Chilliwack $1,426 $1,921 -$495 -26% Feb. 2006

Kamloops $1,308 $1,729 -$421 -24% Jan. 2007

Okanagan Mainline $1,692 $2,372 -$680 -29% Mar. 2006

South Okanagan $1,452 $2,037 -$585 -29% Apr. 2006

Kootenay $1,209 $1,582 -$373 -24% Jan. 2007

Northern Lights $1,063 $959 +$104 +11% -

BC Northern $960 $1,169 -$209 -18% Sept. 2006

BC Total $2,081 $2,754 -$673 -24% Mar. 2006*Based on the average MLS® residential sales price, 20% down-payment, 25 year amortization and the average posted 5-year fixed mortgage rate for the month.

Housing Affordability – Spring 2009

Sources:CREA, BCREA

Prices Reaching for Record Highs

• Single-Detached Home Sales Driving Price Growth

• Provincial Figure Reflects Rebound in Large Urban Areas

BC MLS® Average Price

Inflation Adjusted Dollars

Sources: Statistics Canada, CREA, BCREA

Per Cent

Mortgage Rate

Average Payment

Affordability Ceilings Tested

26%

Sources: VREB, BCREA

Prices Rebound on Demand, Low Supply

• All Product Types Share in Price Recovery

• Detached Market Rebounds Quickest

Vancouver MLS® Price

Inflation Adjusted Dollars

Sources: Statistics Canada, CREA, BCREA

Per Cent

Mortgage Rate

Average Payment

Affordability Ceilings Tested Van

26%

Sources: Bank of Canada, BCREA

How Close Are We Affordability Ceiling?

What Are the Risks?

Price Risk

Rate Risk

Inflation Adjusted Dollars

Sources: Bank of Canada, BC Real Estate Association

5-Year

1-Year

Mortgage Rates Rise Modestly in 2010

Fixed Rate Variable Rate

Global Economic Malaise

Per Cent

Sources: International Monetary Fund WEO (July 2009), BCREA GDP Growth at Constant Dollars

Global Recession Slow to End

Sources: Statistics Canada, BCREAChained 2002 Dollars

Canada GDP Dollars (Millions)

Slow and Choppy Canadian Recovery

June Trough?

Index

Sources: Statistics Canada, BCREA

Equities Rally, But Still Recouping Loss

45%

40%

SAAR Units (x 1,000)

Sources: Statistics Canada, BCREA

US Starts

BC Sawn LumberProduction (RHS)

% change

US Housing Bottoms Out, Slow Build

Sources: US Census Bureau, BCREA Estimates

Ratio of Vacant-to-Occupied Housing

1985 – 2002 Trend

1975 – 2008 Trend

US Housing Remains Oversupplied

Sources: FRED®, BCREA

Annualized Auto Sales (Millions)

Cash for Clunkers – Temporary Reprieve

Dollars (Millions) Inflation Adjusted

Sources: FRED®, BCREA

US ConsumersPer Cent

Retail Trade (LHS)

Unemployment Rate (RHS)

$(millions)

Sources: Statistics Canada, BCREASeasonally Adjusted

Exports Continue to Struggle

Sources: english.freemap.ca, BC Stats, BC Real Estate Association

-27% PRC:+22%

Japan:-28%

S. Korea:-12%

2009 YTD-28%

-53%

-51%

-18%

-51%Taiwan:

-26%

Exports Growth Negative, China Exception

Sources: english.freemap.ca, BC Stats, BC Real Estate Association

53.1% PRC:6.1%

Japan:15.1%

S. Korea:5.9%

2008

0.7%

1.6%

1.2%

0.5%

1.0%Taiwan:

1.8%

But US Still BC’s Key Market

Share of BC Exports

Export Revenue Per Capita

Source: Urban Futures – based on 2001 data

Sources: Statistics Canada, BCREA

$US/CDN

Loonie Rises, Greenback Weakens

Commodity Price Index

Exchange Rate

Index

Sources: Statistics Canada, BCREA

Confidence Improving, Buying Flat

Per CentConfidence Retail Sales Growth

Room Revenues (Dollars x1,000)

Sources: BC Stats, BCREA

Tourism Demand Wanes

Sources: Statistics Canada, BCREA

Unemployment Rate Employment (x 1,000)

• Unemployment Rate Stabilizes

• Full-Time Employment Down as Part-Time Gains – Hours Cut

• Healthcare Sector Strong Y/Y Growth

• Pressure on Public Administration

• Losses in Tourism and Discretionary Sectors

Labour Market Patterns StabilizingBC Province

BC Employment Forecast2007 - 2017

Source: COPS BC Unique Scenario

Units

Sources: CREA, BCREASeasonally Adjusted at Annual Rates

Projected Sales Range

Sales Outpace ExpectationsBC MLS® Unit Sales (SAAR)

Affordability InducedDecline

Financial Crisis

Units

Sources: CREA, BCREASeasonally Adjusted at Annual Rates

Vancouver Forecast Range

REBGV MLS® Unit Sales (SAAR)

Units

Sources: Statistics Canada, Urban Futures

BC Homeownership Rates

Per Cent

Sources: VIREB 2008 Buyer Profile, BCREA

• Parksville/Qualicum, Campbell River are Preferred Destinations for Albertans

• Alberta Personal Income Weaker on Income Growth and Depressed Investment Income

• Oil and Natural Gas Prices Impact Corporate Profits and Investment

Alberta Buyers Key Source of Demand

Building Permits (Residential)

Sources: CMHC, BCREA

Urban Housing Starts 45+ Year Low?

20 Year Average

Individuals

Sources: Statistics Canada, BCREA

Risk of Multi-Decade Low Starts

Units

Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets

Inventory Tops Below Previous Cycles

Under Construction (RHS)

Inventory (LHS)

Individuals

Sources: Statistics Canada, BCREA

Migration Still Strong Despite Recession

Total (RHS)

Net Change

Sources: BC Stats P.E.O.P.L.E Model

Per Cent Growth

55+ = 36% of Population

BC Population Distribution - 2028

MLS® Prices to Plateau

Price

Forecast

Per Cent Change

BC Average MLS® Price

Sources: CREA, BCREA

• Current market strength fuelled by pent-up demand and low mortgage rates

• Pull-back in sales activity from current high expected, but demand remains elevated

• Prices to remain firm on attractive mortgage rates, population growth, and lack of new home construction

• Underlying economy recovering, but slowly

Final Thoughts:

Per Cent

Sources: Canadian Bankers Association, Statistics CanadaBCREA

*Annualized, Population denotes those aged 15+

Mortgages in Arrears BC Bankruptcies Per Capita*

Financial Balancing Act for Consumers

Sources: CFIB Business Barometer®, BCREA

MonthlyQuarterly

Business Outlook Improves

-22%

Per Cent

Sources: Bank of Canada, BCREA

Core Inflation

Target Inflation BandTotal Consumer Inflation

Low Inflation Dampens Rate Pressure

• Negative Inflation Signals Continuation of Low Rates

• Continued Slack and Tepid Growth to Keep Inflation Pressures Low in Short Term

Per Cent

Sources: BC Stats, BC Government September Update Budget and Fiscal Plan,, BCREA, NBER

US Recessions

BC Economy To Improve in 2010

Sources: Bank of Canada, BC Real Estate Association

5-Year

1-Year

Mortgage Rates to Rise Modestly in 2010

Fixed Rate Variable Rate

Units

Sources:CREA, BCREA

Sales To Remain at Healthy Levels

Building Permits (Residential)

Sources: Statistics Canada, BCREA

Residential Building Low but Improving

YTD July: -64%Singles : - 50%Multiples: -71%

Units

Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets

Inventory Tops Below Previous Cycles

Under Construction (RHS)

Inventory (LHS)

Ratio (3m moving average)Sources: VIREB, BCREA

Buyers’ Balanced Sellers’

All Markets Show Improvement

Mar Sept

Sources: CHBA-BC, Altus Group, BCREA

Ready or Not – Harmonized Sales Tax

Home Price (x 1,000)

Additional Tax CHBA-BC/Altus Group Report

2006 Censal Data42.8 % of New Homes < $400K

18.1% of New Homes $400-$500K23.9% of New Homes $500-$750K15.2% of New Homes > $750K

57% of New Homes Above Threshold

BC a Population Growth Leader

Sources: Statistics Canada, BCREAPer Cent

Building Permits (Residential)

Sources: Statistics Canada, CREA, BCREA

Residential Building Intentions Low

YTD JulyBC: - 64%

Victoria : - 67%

Sources: CMHC, BC Real Estate AssociationYTD August

New Housing Starts

-80%-71%

-11%

-65%-63%

Units

Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets

Nanaimo New Home Supply Swells

Under Construction(RHS)

Inventory

Capital Region Price Distribution - 2008Units

Sources: BC Assessment Authority, BCREA

35% Below $275K

Sources: Statistics Canada, BCREA

Unemployment Rate Employment (x 1,000)

• Unemployment Rate Remains Low

• Full-Time Employment Down as Part-Time Gains – Hours Cut

• Healthcare Sector Still Stable

• Pressure on Public Administration

• Losses in Tourism and Discretionary Sectors

Labour Market Moderately WeakensVictoria CMA

Units

Sources: VREB. CREA, BC Real Estate AssociationSeasonally Adjusted at Annual Rates

Projected Sales Range

Sales Outpace ExpectationsVictoria MLS® Unit Sales (SAAR)

Affordability InducedDecline

Financial Crisis

Units

Sources: CMHC, BCREAFigures reflect activity in 9 large BC markets

Victoria CMA New Home Inventory

Under Construction (RHS)

Inventory (LHS)