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What's in the News?

BCREA ECONOMICS NOW - Canadian Housing Starts - January 9, 2014
by Cameron Muir, BCREA Chief Economist
British Columbia Real Estate Association

Canadian housing starts declined in December from 197,797 units at a seasonally adjusted annual rate (SAAR) to 189,672 units SAAR. A decline of 4.2 per cent. The trend in Canadian new home construction also declined slightly to 195,760 units SAAR over the past six months, a rate that is slightly higher than demographic demand suggests is needed. For all of 2013, Canadian housing starts in urban centres were down 12 per cent compared to 2012.

New home construction in BC urban centres increased 14.5 per cent in December to 30,886 units SAAR. A ramp-up in new home construction to end the year pushed total starts for 2013 higher by 1 per cent compared with 2012 at 25,685 units. Single family units finished the year up 8 per cent while multiple unit starts declined 2 per cent.

Looking at census metropolitan areas (CMA) in BC, total starts in the Vancouver CMA jumped 47 per cent year-over-year in December to finish 2013 at 18,696 units, a decline of 1 per cent over last year. In the Victoria CMA, total starts were nearly quadruple that of December 2012 and finished the year down 1 per cent at 1,685 units. New home construction in the Kelowna CMA were up 59 per cent in December and posted 1,013 total starts in 2013, the first time since the 2008/09 recession that Kelowna new home construction has cleared the 1000 start threshold. Housing starts also posted large gains in the Abbotsford-Mission CMA in December. New home construction doubled in that area in 2013 at 749 total starts.

BC Home Sales Post Strongest October in Four Years Vancouver, BC – November 15, 2013.
by Cameron Muir, BCREA Chief Economist
British Columbia Real Estate Association

The British Columbia Real Estate Association (BCREA) reports that a total of 6,673 residential sales were recorded by the Multiple Listing Service® (MLS®) in BC during October, up 26.5 per cent from October 2012. Total sales dollar volume was 34.5 per cent higher than a year ago at $3.6 billion. The average MLS® residential price in the province was $540,432, up 6.3 per cent from October 2012. “The fall housing market is shaping up to be the most active in four years,” said Cameron Muir, BCREA Chief Economist. “Persistently low mortgage interest rates and an element of pent-up demand have driven home sales higher in the province’s large Lower Mainland and Vancouver Island markets.” “While the rebound in consumer demand has been significant, home sales are trending near the long-term average and any continued acceleration will depend on stronger economic and employment growth,” added Muir. Year-to-date, BC residential sales dollar volume was up 8.2 per cent to $33.6 billion, compared to the same period last year. Residential unit sales were up 5.1 per cent to 63,020 units, while the average MLS® residential price was up 2.9 per cent at $533,321. Full report:

December 2012 - BCREA "The Bulletin"

Understanding Property Assessments and Statutory Deadlines - by Connie Fair, President and CEO of BC Assessment
British Columbia Real Estate Association

What is the current value of my property? That is one of the main questions that property owners have for REALTORS®. One reference for market value is to look at the most recent property assessment provided by BC Assessment (available at However, there are important statutory dates that must be
referenced with assessed values which should also be understood by REALTORS®.

The purpose of the assessment roll is to create an equitable distribution of property taxes. In BC, equity in taxation is achieved when all properties are assessed at market value. Because the main goal is equity, all assessed values must be determined as of the same date. Each annual assessment roll (released on January 1) reflects an estimate of market value as of the preceding July 1. In other words, there is a six month lag between the valuation date used to estimate market value and the earliest publication of those market values.

Other important dates to help understand assessments are the physical condition and land title record dates. Each assessment reflects an estimate of value based on the physical inventory that existed as of October 31. Hence, the assessment notice property owners receive in early January is an estimate of value based on the physical inventory that existed the preceding October 31 and its market value at July 1. Market value is the most probable price of a property in an open market between a willing purchaser and seller based upon comparable sales among similar properties within a given jurisdiction.

BC Assessment's goal is to create as accurate an assessment roll as possible. Each year we assess two million properties at a combined value of over $1 trillion. The assessments are used by local governments and the province to raise more than $6 billion in property tax revenue. Property taxes are a major expense for many homeowners and should be distributed equitably among taxpayers, making it crucial that our data is as accurate as possible. To this end, we publish extensive information on our website at which we encourage you and your clients to use, as well as advise us if a correction is required. Contact us if you have questions about assessments and we will be pleased to assist you.

BCREA would like to thank Connie Fair, President and CEO of BC Assessment, for providing this article.

December 2012 - BCREA "The Bulletin"

Housing Bubbleony - by Cameron Muir, BCREA Chief Economist
British Columbia Real Estate Association

I am now convinced that we will never hear the end of housing bubble speak. The premise is now as firmly entrenched in popular consciousness as carbon emissions and TMZ. It has taken the form of idolatry in the blogosphere, where any countervailing narrative is demonized. It has catapulted university dropouts into media darlings because of a hackneyed webpage and an opinion. It has been tarted up by so-called experts who predict impending doom year after year, despite being completely wrong every time.

Now, I'm not wearing tinted glasses. Housing markets go up and they go down. However, my point is that sharp and significant declines in home prices are usually created by massive economic shocks, like the 21 per cent mortgage rates and recession of 1982. Yes, there can be short term speculative bubbles that float back to earth after the circus leaves town, but home prices in Vancouver, for example, have been incongruous with other Canadian markets for decades.

The big test was 2008. That was the year of the doomsayers, when the largest financial crisis since the Great Depression besieged us and the collateral damage hurled us into a global recession, one from which we still haven't fully recovered. The airwaves were all a buzz with end of the world prophets and those predicting home prices would be chopped in half, at least. It was going to be the big one! The housing market had gone through a significant inflationary period leading up to 2008. Unlike today, speculation
was clearly evident. Accusations abounded that Vancouver was overvalued, unsustainable and frothy. One financial institution even had a publication called Housing Bubble Watch, now defunct, in which Vancouver was always the straw man.

So what happened? Home prices fell 15 per cent from peak to trough, but that was short-lived. Indeed, once the clouds of uncertainty dissipated only a few months later, buyers came back in droves.

The most dramatic turnaround ever recorded occurred in Vancouver during 2009, when the year began with 1980s level consumer demand and ended with sales tracking near record levels. Prices came right back to where they were before the crisis, and have stayed there, for the most part, for the past three years. If such a severe financial crisis and global recession couldn't trigger a meltdown of the housing market or pop any asset balloon, what could?

The main misconception about housing markets is that they behave like the stock market. They don't. Bad news can drive stocks lower in a matter of seconds, whereas homes are relatively illiquid; they take a long time to sell and have higher closing costs. In addition, owner-occupiers typically don't speculate with the family home. In times of hardship, the home is typically the last thing to go. Instead, they hold off on other expenditures like lattes, movie tickets, new TVs and vacations.

In a market that has a well-diversified economy and expanding population, fire sales are extremely uncommon. Unless there is household financial catastrophe on a large scale, potential home sellers simply wait until market conditions improve.

I write this piece as home sales in Vancouver and many other markets stagnate and homes prices tread water (see the Canadian Real Estate Association's Multiple Listing Service® Home Price Index for an accurate reading). I have no doubt that the voices of impending doom will soon renew their bellicose refrain. Perhaps their tea leaves will be right this time and the market will indeed collapse, leaving homes selling for 50 cents on the dollar. I'd put my money on that refrain continuing for a long time to come.

August 2005 - Housing Bubbleoney

By Cameron Muir, Senior Market Analyst
Canada Mortgage and Housing Corporation

I must admit that I sometimes chuckle when bombarded by Vancouver’s latest home-grown fad—Housing Bubble Mania. The armchair economists who populate Internet blogs on the subject have been prognosticating a Vancouver housing bubble for years now. The imminent crash hypothesis is based on what can only be called pseudo analysis supported by few facts. In these forums, only discourse that agrees with the cause is valid, and all else is labeled incorrect or even conspiratorial. The popularity of such opera is due, at least in part, to the fact that impending doom sells.

Today, even the chartered banks are weighing in, trying to reap the harvest of media exposure that accompanies any news release with Housing Bubble in the title. Of course, the banks recognise that the so-called bubble is an illusion, a fact contained in their research if anyone bothered to read it. Recently, one bank economist released the first of a supposedly quarterly report called Housing Bubble Watch. The bombastic title eclipsed only by the disclaimer, “it is impossible to identify a bubble before it bursts.” So why bother? Publicity, that’s why.

No reputable economist believes the housing market is due for a 1982-type collapse, where prices fell 40 per cent in one year. They will tell you, including those milking the Housing Bubble theme, that housing markets move in cycles, that today’s hot market will eventually cool and that home prices will likely edge downward before the next cycle begins. Headline material? Hardly.

Nevertheless, the spectre of a market crash is proving to be irresistible as bait for media attention. In fact, the Housing Bubble is merely a straw man propped up by some economists so they may knock it down in fine analytical style. It’s shooting fish in a barrel. However, an unintended consequence of all this is the anxiety created when people only remember the term Housing Bubble and not the rationale for why it doesn’t exist.

Housing is a long-term investment for all but a small minority of buyers. Those who choose to speculate do so knowing the risk. Long-term homeowners face much less risk and can more fully enjoy the many other benefits of their homes. This is the crux. Homeowners expect the market to ebb and flow, and the current market cycle is just that—a market cycle. No catastrophe is on the horizon. Don’t be fooled by straw men and housing bubbleoney.

The views expressed here are those of the author and not necessarily of CMHC.

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