Thursday, November 12, 2009
2010 Housing Outlook CMHC
“What a difference a year makes” exclaimed Carol Frketich, B.C. Regional Economist, Monday at the 15th Annual CMHC Housing Outlook. Was there ever a bigger understatement to describe the crazy world of the B.C. Housing market?
A year ago, the financial markets were in a state of shambles bringing the world economy to its knees ending retirement and employment dreams alike. Things have improved but the lasting vestige of an economy racked with high unemployment (8.2%) and underemployment remain.
I was at the Outlook Conference in search of a couple of answers: 1. where are interest rates and hence mortgage rates heading, should my Chilliwack real estate clients look to lock in or not, and 2. in which direction was the market heading, in particular the Chilliwack real estate market, will there be price increases and how large will they be?
The answers are NO and Who Knows.
With enough graphs, charts and numbers to choke an actuarial expert CMHC took to the stage and I dutifully filled my notebook. For you my reader, I have distilled the highlights into this single blog.
1. The housing market has/will rebounded (but the signals are still mixed) supported by:
• Broad Economic Growth
• Low Mortgage Rates
• Strong Resale Market
• Increased Housing Starts
2. Gross Domestic Product (GDP) in B.C. for 2010 is expected to be in the 2 to 3.5% range
3. Mortgage rates will remain low but expect a moderate increase in mid 2010, up .25%
4. Metro Vancouver, Victoria and the western sections of the Fraser Valley all have sellers markets the remainder of the province has a balanced market ( I do not agree with this totally, but okay)
5. Housing prices nationally are increasing but at a modest pace and will stabilize in 2010 particularly after interest rates increase (see point 3)
The Shaky Bits:
1. There is still a negative saving rate in B.C. – what the hell? In contrast to a national savings rate of about 4% the average B.C. resident is dipping into savings or living on credit at -2%. Does this sound sustainable?
2. Did I mention B.C.’s 8.2% unemployment rate?
3. Affordability remains an issue. The average weekly wage rate in British Columbia for British Columbia was $808.81 or an annual income of $42,068. To buy an average valued single family house a buyer with a 25% down payment, taking a conventional 25 year loan having a 5 year term the buyer(s) needs an annual income of:
• Metro Vancouver - $150,000
• Fraser Valley - $92,000
They did not look at Chilliwack real estate but using the same parameters, my best guess is this:
• Chilliwack - $71,000
4. The Canadian dollar is strengthening against the U.S. dollar this will affect exports and jobs. On the bright side, more and more of our production is heading to China.
One of the more interesting parts of the CMHC presentation was the work that they are doing with sustainable housing as presented by Lance Jakubec CMHC researcher. Certainly this work is important but it will need to be tried, tested and then incorporated into the building code to have any lasting significance.
More about CMHC and its many fine services can be found at CMHC.
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Stephen Mullock is a Chilliwack real estate associate broker with 29 years of experience. He can be reached at Royal LePage Wheeler Cheam Realty, telephone 604-792-0077.
Copyright November 12, 2009 by Stephen Mullock.