Moishe Alexander and Canadian Funding Corporation Review CMHC Reports

January 13, 2009 — Moishe Alexander’s review on how the current world economy and Canadian economic turndown is affecting the Vancouver and surrounding area housing market

The Vancouver and Abbotsford area of British Columbia starts a serious downturn in housing starts and is returning to the historical consistent levels of years gone by. The only bright spot will be the apartment condominium construction starts which will increase substantially in 2009. With declining existing home sales and rising home listings, you can expect a 20%-30% reduction in the average price of re-sale homes in 2009.

NEW HOME CONSTRUCTION HIGH BUT MODERATING

Vancouver New home starts were down 4% in 2008 for the same period in 2007 and there will be a further 18% drop in new home construction in 2009, with significant impact on this construction from the single detached home starts which will decline at a faster pace.

The majority of home builders will not be increasing their home inventories, but will be putting all projects on hold until the demand improves, especially in the higher priced ranged homes.

VANCOUVER RESALE MARKETS FAVOR BUYERS

Sales in metro Vancouver, from MLS, have been moving lower since the beginning of 2008. There are several contributing factors. The significant one is the high cost of home ownership with little demand. Not to mention, the first time buyers virtually evaporated from the Vancouver area, but used to be a good market to invest in for multi-residential investments, is now a less appealing option for investors.

Clearly the problem is supply and demand, which historically affects the growth and the value of home purchases.

HOUSING DEMAND MODERATES

Although there has been economic growth at moderate levels, over the same period last year, a surprising prediction by Canada Mortgage and Housing Corporation is that employment will be strong and there will be substantial population growth in Vancouver and surrounding areas in 2009.

Canada Mortgage and Housing Corporation predicts that there will be continued growth in 2009 in major commercial projects with over $30 billion worth of projects that are commencing in 2009 for the main land/southwest development region of Vancouver.

MORTGAGE RATES

Canada Mortgage and Housing Corporation predict that interest rates will decline by a further 25-50 basis points from their current levels in 2009. However, due to the cost of borrowing to the Canadian banks from the markets, the mortgage interest rate will marginally increase in the latter half of 2009, but not significantly enough to negatively affect the housing market in Vancouver and surrounding areas.

ABBOTSFORD: MODERATION IN THE ECONOMY WILL CONTINUE

Due to the moderating job growth in Abbotsford, the housing demand is decreasing rapidly, especially from first time buyers. Although the business climate remains strong in Abbottsford, further consumer and business bankruptcies are predicted to increase slightly. Total migration in Abbottsford is expected to be 2000 plus in 2009.

BUYERS CONDITIONS TO REMAIN IN THE ABOTTSFORD

According to Canada Mortgage and Housing Corporation, resales in the Abbottsford area have declined in comparison to the high levels of last year. Quarter after quarter, sales figures are shrinking and the average MLS sale price will be at least 30% less than the year before.

Currently the average sale price of a single detached house in Abbottsford City proper is $450,000.00.

You can find the entire report in PDF format through the following link:

http://www.cmhc-schl.gc.ca/odpub/esub/64363/64363_2008_B02.pdf

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