CMHC predicts shallow real estate correction

The correction in Greater Vancouver and British Columbia real estate markets should be shallow, according to Canada Mortgage and Housing Corp., provided the province maintains projections for weaker economic growth and doesn't go into a full recession.

CMHC released its fall market forecasts Thursday, which predict lower housing sales to the end of 2008 and on through 2009, with price declines to the end of 2009 in the range of seven per cent provincially and nine per cent in Metro Vancouver.

Read the full article here.

What I think:

Month-over-month housing price trend

Recent month's home selling prices had dropped significantly. The price decline for Greater Vancouver going forward on a year-over-year could be as much as 10% to 12%.

Most of the homes sold the past 3 months registered heavy price discounting from prices recorded in early 2008. Some home prices are now listed for sale at 2007 level. In general, the average price could have dropped 10% to 12% from the peak.

CMHC's projection for 9% drop in price for Metro Vancouver could be too optimistic as current market sentiment is pointing to a larger drop in home prices. The drop in price for 2009 is likely to be in the range of 12% to 15%.

Canada's Economy & Employment 

The anticipated US recession will affect Canada's economy and employment.  The slow down in construction activities and loss of manufacturing jobs in Canada will impact consumer confidence.

Speculative home purchases pushing up home prices the past 3 years will work in reverse. Speculators and home sellers will unload their investments, pushing home prices down in 2009.

Market value vs city assessment value

Many homes sold in the past 3 months were selling below the city assessment values. Average selling price as compared to the city assessment value dropped from around 13% the 2 previous quarters to 4% in the third quarter of 2008. Further price erosion will result in Metro Vancouver homes selling at or below city assessment values.

There are some good buying opportunities in today's market. You need to find the real good deals with the help of your local realtor.

Whether you are planning to trade-up, trade-down or buying your first home, you should discuss your needs with your realtor. You can get the latest real estate market information by following my monthly real estate market up-date.

You can email me if you have any questions on your real estate needs.