Buyers feel financially secure as rates inch up, analyst says
Derrick Penner
Sun
Prices of homes in Squamish recorded the largest increase during the past 12 months compared to other areas in the Lower Mainland, according to figures released Wednesday by the Real Estate Board of Greater Vancouver.
An increase in Greater Vancouver home sales in June indicates both strong employment and buyer concerns about rising mortgage rates, according to at least two analysts.
Greater Vancouver recorded 3,951 sales on the Multiple Listing Service in June, a 7.4-per-cent increase from sales in June 2006 — and the second-best June on record, according to statistics from the Real Estate Board of Greater Vancouver.
Forecasts have predicted sales would slow in 2007, however, Cameron Muir said buyers are feeling more financially secure and able to afford to buy a home.
Buyers have also watched mortgage rates inch up over recent weeks. Posted rates for a five-year closed mortgage stand at 7.24 per cent, according to the Bank of Canada, compared with 6.64 per cent at the beginning of June.
Muir added that the increase can act as an incentive for house hunters who had received pre-approved mortgages at lower discounted rates to buy.
“If you look at affordability, it has eroded somewhat because of those higher rates,” Muir said.
“Typically what can happen with the perception of higher mortgage rates on the horizon, many potential buyers who have been sitting on the fence not quite ready to jump right in [do buy] in anticipation of higher borrowing costs.”
Robyn Adamache, senior market analyst for Canada Mortgage and Housing Corp., added that the recent bump up in interest rates was not something that she had forecast, and it makes sense that some buyers would jump in to take advantage of pre-approvals.
In general, however, she expects mortgage rates to average out at a somewhat lower rate.
“We’ll probably see another [mortgage-rate] increase going forward, and then more of a downturn,” Adamache added.
Banks offer discounts from their posted rates to their better customers, and Adamache said that as long as buyers can get discounted rates below six per cent, she does not believe that mortgage rates will put a significant dent in the market.
The surprise in sales statistics, Adamache added, is the strong price growth. In Greater Vancouver, prices have increased about 10 per cent over the first half of 2007, which is more than she expected.
However, she added that provincial job growth and economic performance is stronger than anticipated in her forecast, which increases demand.
Greater Vancouver, saw a continuation in the shift toward multi-family housing in its June statistics with all of its growth appearing in townhouse and apartment condominium sales.
Some 1,846 condominiums changed hands in Greater Vancouver in June, a 16-per-cent increase from June a year ago. Townhouse sales were up 3.2 per cent to 775 units.
Combined, the sales outweighed a 10-per-cent decline in June sales of single-family homes across Greater Vancouver. June saw 1,632 single-family homes sold compared with 1,805 in June a year ago.
The so-called benchmark price for a typical single-family home hit $715,715 in June, up 10.3 per cent from a year ago. The benchmark townhouse price also rose 10 per cent to reach $443,060. Benchmark condominium prices were up almost 11 per cent to $360,469.
Greater Vancouver’s inventory of unsold homes also rose to 11,811 units, a 17 per cent increase over June of 2006.
In the Fraser Valley, realtors reported 2,126 MLS-recorded sales in June, a decrease of three per cent compared with the same month a year ago.
However, Adamache added that the single-family category experienced the biggest decline with 1,037 sales representing an almost 10-per-cent decrease from the same month a year ago. Condominium sales, in the meantime, were only down 7.4 per cent, and townhouse sales increased almost 10 per cent to 427 units.
The average price of a Fraser Valley single-family home hit $529,678 in June, up 11.5 per cent over June 2006. Apartment sales averaged $219,935, up 16.2 per cent and townhouse sales averaged $321,613, up 11 per cent.
The Fraser Valley’s inventory of unsold homes stood at 8,182 in June, up 39 per cent over 2006. However, Jim McCaughan, the Fraser Valley Real Estate Board’s president, said the inventory level decreased two per cent from May and overall sales are “on par with some of the strongest real estate cycles in [the] Fraser Valley’s history.”
© The Vancouver Sun 2007
