Canada’s resale housing market recovered lost ground in the second quarter and is poised to stabilize for the remainder of 2009, after a very slow start to the year, according to the Royal LePage Market Survey Forecast and House Price Survey released today. As the economy begins to stabilize and consumer confidence improves, house prices are expected to appreciate slightly in much of eastern and central Canada. Greater than national average price declines are predicted for the western cities that saw the greatest price inflation earlier in the decade, including Edmonton, Calgary and Vancouver.

“Given the grim shape that Canada’s real estate market was in this past winter, the turnaround we have witnessed in the second quarter is really quite remarkable. We believe this improvement represents a sustainable change across the country. While seasonally weaker conditions are to be expected in the fall, the plucky Canadian real estate market is stabilizing and a healthy level of activity is forecast for the second half of 2009,” said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services.

During the second quarter, average house prices across most Canadian markets began to appreciate, recovering from the lows experienced during the winter months. Average national prices remain slightly behind those posted during the same period in 2008. Of the housing types surveyed, the price of detached bungalows declined to $327,964 (-3.5 per cent), two storey property prices decreased to $392,378 (-3.7 per cent), and standard condominiums price points fell slightly to $237,112 (-3.8 per cent), year-over-year.

Soper observed, “With our industry’s busiest quarter behind us, we feel comfortable revising our 2009 forecast to the positive. When the anticipated market decline struck last winter, it was with greater speed and intensity than predicted, but the strength of the rebound was equally surprising. If general economic conditions continue to improve, as we expect they will, 2009 will be characterized as a period of moderate housing market correction after several years of above average price growth.”

The 2009 national average house price is forecast to decline marginally by 2.0 percent, to $297,500 by end of year and unit sales are projected to fall slightly by 1.0 percent to 430,000.

“Improved affordability, driven by flat or lower home prices and inexpensive mortgage financing, has been the principle catalyst in this recovery. Pent up demand is also a factor in the lift we see in the second quarter numbers. For six months straddling the year’s beginning, buyers stayed away from the market in an understandable, emotional reaction to very unsettled global economic conditions. Canadians appear to be stepping beyond these fears and are once again moving onto and up the home ownership ladder,” stated Soper.

In early 2009, the precipitous drop in unit sales remains the most dramatic indicator of the recession’s impact on Canada’s real estate market. With spring, consumers appeared ready to believe the worst was behind them and returned to the market in force, driving increased activity across each housing type. Couple this with historically low interest rates and leveling unemployment, Canada’s residential real estate market got back on track during the quarter.

Undergoing an inevitable cyclical correction, price adjustments can be seen with marked variances across Canada’s provinces. As expected, British Columbia and Alberta posted the most significant price modifications, as home values in those markets retreated in the wake of several mid-decade years of unsustainable price inflation, and have now evolved to a more balanced state. Prices appear to have stabilized and it is expected that these regions will continue to see improvements into 2010. In particular, the impact of lower home prices has improved affordability to the point that people are buying homes again on the West Coast, where sales activity has increased substantially.

Alternatively in Atlantic Canada, homes continue to appreciate due to strong local economies, which have helped to shelter the region somewhat from the turbulence witnessed in other provinces.

As well, the region’s generally moderate home prices have helped keep demand strong. Newfoundland, in particular, stands out as a region that continues to see significant home price appreciation, as supply cannot keep up with the demand driven by vibrant and growing industries such as those in the province’s oil and gas sector.

Meanwhile, home prices in Toronto declined slightly in the second quarter, reflecting the national average trend. In the early spring, it was first-time buyers who triggered the increased activity levels, now those looking to move up are also active in the market. Similar to the situation in other large cities in central Canada, the most desirable neighbourhoods experienced supply shortages, which put upward pressure on prices.

“Looking ahead to the second half of 2009, year-over-year price comparisons will likely appear increasingly more favourable. It is important to remember that the baseline for the latter half of 2008 was unusually low, particularly in the fourth quarter when the full impact of the global financial crisis was felt. Our expectation is that most Canadian regions will experience stable housing prices through into the spring of 2010,” concluded Soper.

REGIONAL MARKET SUMMARIES

Halifax

In Halifax, a stable economy has contributed to a healthy real estate market where average house prices increased modestly despite a slight dip in sales activity. The market is beginning to pick up following a slow first quarter. Pent up demand will see a return to a more active market in the last half of the 2009 with the anticipation of a slight boost in sales activity and average house prices growing at a leisurely pace.

Montreal

The housing market in Montreal experienced a solid second quarter, with average house prices for most property types expected to increase for the remainder of 2009. Higher inventory levels resulted in balanced market conditions seeing the number of new listings equal to the number of sales. Low interest and unemployment rates will help maintain the strength of the real estate market through to the end of the year.

Ottawa

Ottawa continues to remain a steady market for residential real estate, with sales activity in the second quarter coming out strong from a slow first quarter. Ranked number two among Canada’s large cities for affordable real estate and coupled with low interest rates, all types of buyers were drawn to the market. House prices are expected to remain stable throughout the remainder of year with numbers slightly higher than anticipated.

Toronto

In Toronto, the real estate market witnessed significant second quarter gains. The return of consumer confidence and an upswing in spring market activity brought house prices and unit sales down as buyers emerged to take advantage of affordable properties and low lending rates.

As the market begins its transition from a buyer’s market to a balanced market, with indications of a seller’s market arising, it’s anticipated that the market will stabilize by the end of year.

Winnipeg

Winnipeg’s real estate market has remained relatively resilient in the second quarter with average house prices in key housing segments increasing from the first quarter of 2009. Real estate in

Winnipeg is modestly priced when compared to other cities in Canada, creating ideal conditions for buyers in the province. Looking ahead, average house prices are anticipated to stabilize for the remainder of the year.

Regina

Regina’s real estate market started on the road to recovery in the second quarter of 2009 and is expected to further improve through the remainder of the year. An increase in unit sales helped diminish the city’s high inventory levels as buyers are beginning to initiate deals. Recovering manufacturing and resource sectors, new construction activity in Regina, and low interest rates have also helped to improve buyer confidence.

Calgary

With the economic downturn and the oil and gas industry struggling, the housing market in Calgary has been on the decline since 2008, after many years of price inflation at the beginning of the decade. Quarter one of 2009 revealed some signs of price increases and stabilization in certain areas in Calgary, but the second quarter reveals fluctuations in the market. These price fluctuations are occurring across Calgary in all housing types with the market forecast predicting price reductions for the remainder of 2009.

Edmonton

Housing market conditions in Edmonton were characterized by lower inventory levels and moderate house price increases. Buyer demand was strong during the second quarter as most buyers felt a sense of urgency to capitalize on the recent market conditions. This has led to a slight tightening in Edmonton’s housing market with appreciation in average house prices expected for the last half of

2009.

Vancouver

Vancouver’s real estate market stabilized in the second quarter of 2009 following a price correction that started last fall moving towards a balance between supply and demand. Properties priced at, or below, market value are generating multiple offers from buyers. Average house prices throughout the last half of the year are expected to inch upwards, but increases will likely be in the low single digits.

Royal LePage’s quarterly House Price Survey shows the following annual change of prices for key housing segments in select national markets:

The Royal LePage Survey of Canadian House Prices is the largest, most comprehensive study of its kind in Canada, with information on seven types of housing in over 250 neighbourhoods from coast to coast. This release references an abbreviated version of the survey, which highlights house price trends for the three most common types of housing in Canada in 80 communities across the country.

A complete database of past and present surveys is available on the Royal LePage Web site at www.royallepage.ca. Current figures will be updated following the complete tabulation of the data for the second quarter. A printable version of the second quarter 2009 survey will be available online on August 7, 2009.

Housing values in the Royal LePage Survey are Royal LePage opinions of fair market value in each location, based on local data and market knowledge provided by Royal LePage residential real estate experts. Historical data is available for some areas back to the early 1970s.

Royal LePage survey – Vancouver’s real estate market is still witnessing a course correction, as prices continued to decrease in the first quarter of 2009, according to Royal LePage’s quarterly House Price Survey. The average price for homes on Vancouver’s West side and East side, North Vancouver and West Vancouver saw an average year-over-year decline of 12%.

West Vancouver home prices witnessed the largest change, seeing an overall decline of 16.3% year-over-year across key housing types surveyed, however prices stabilized in the first quarter of 2009. Average prices for bungalows dropped 16.2% year-over-year to $880,000, standard two-storey homes dropped 17% to $930,000, and standard condominium prices declined 15.8% to $400,000.

“Prices are definitely down from a year ago,” said Bill Binnie, President of Royal LePage Northshore in North Vancouver. “But prices are starting to stabilize in the middle price range.” Binnie said first time home buyers are accounting for the bulk of sales activity in Greater Vancouver, although home sales are beginning to pick up in the high-end housing market.

In North Vancouver, prices for standard two-storey homes are stabilizing, with the average price of $660,000 unchanged between the fourth quarter of 2008 and first quarter of this year. Standard condominium prices have also stabilized, up 3.6% from last quarter to $290,000. However, prices for key housing types in North Vancouver are down a year-over-year average of 14.2%.

Homes priced according to recent sales in desirable areas are selling quickly, Binnie said. In the first quarter of 2009, the West side of Vancouver saw an increasing number of million dollar home sales. “This increase in activity gives us a parameter we can use to analyze the market,” Binnie said. “Now we have a sense of what people are willing to pay. In January, there were very few sales – so we didn’t have a frame of reference.”

Binnie believes the time is right for buyers looking to move up into a more expensive property. “If you’re moving up, I’ve got great news for you. The spread between the property you want to buy today and your current home is a lot smaller than it would have been a year ago. Secondly it’s going to cost you a lot less to carry a mortgage because of the low interest rates.”

Meanwhile, Victoria home values proved to be somewhat more resilient, with an average year-over-year depreciation of 4.6%. Bungalows in the capital city bucked the trend by increasing both annually and within the first quarter of 2009. Overall, Victoria homes in key segments saw average first quarter price gains of 0.5%.

Carol Geurts, Managing Broker for Royal LePage Coast Capital Realty, believes Victoria is weathering the economic storm better than other parts of the country. “We still have a vibrant local housing market that’s better than in most other cities,” she said. “We’re seeing a lot more activity than last fall. There’s optimism in the market, and that translates to transactions.”

Inventory in Victoria is up, particularly under the $500,000 price point. “The supply of inventory has continued its upward climb early this year, so buyers will have lots of choice this spring. Low interest rates and the departure of winter weather mean a return of consumer confidence.”

While prices in other housing segments have increased this year, Geurts has noticed a decrease in condominium prices. “An interesting trend is that many new condo units are being reconfigured to target first time buyers. We’re also seeing things like cash bonuses and auctions for buyers, so sellers are getting creative.”

Victoria is still seeing multiple offers for homes, which is unusual in a buyer’s market, Geurts said.

Royal LePage’s quarterly House Price Survey shows the following annual change of prices for key housing segments in select Vancouver markets:

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National

Consistent with current economic trends, Canadian residential real estate prices declined during the first quarter, according to a quarterly House Price Survey released today by Royal LePage Real Estate Services Ltd. As the market correction unfolds, year-over-year home prices were lower, as was expected. Increased buyer activity at the end of March suggests that spring will bring its typical increase in unit sales activity as buyers target summer moves.

Regional disparities in quarterly housing prices showed markets in Atlantic Canada outperforming other areas of the country as hardy local economies spurred house price growth across the three housing types surveyed.

Markets in central Quebec and eastern Ontario held steady with areas of modest growth and limited declines. In the balance of Ontario, and in particular the Greater Toronto Area, prices retreated from the record levels set in the first quarter of 2008, with most trading areas showing mid to low single digit declines. With the exception of Manitoba, western provinces saw significant changes as the rapid run-up in prices experienced earlier in the decade gave way to double-digit declines in most regions. As market corrections in B.C. and Alberta were underway well ahead of the full impact of the current economic crisis, it is suggested that these areas may be first in Canada to stabilize.

“We expected a sharper decline in house prices across Canadian markets during the first quarter,” said Phil Soper, president and chief executive officer, Royal LePage Real Estate Services Ltd. With economic hardship dominating our global consciousness, it was predictable that dwindling consumer confidence would continue to drive prices lower. But markets were relatively resilient during the period. Soper continued, “Canadians in most regions should not expect the prices of their homes to begin appreciating again until the overall economy begins to stabilize, likely in the first half of 2010.”

The report shows that the average price of a two storey home in Canada declined 6.5% to $379,636 compared to the same quarter last year. In Vancouver, the average price declined 12.6% year-over-year to $828,750 while in St. John’s prices climbed 15.6% to $265,000. With consumer confidence bolstered following investments by Vale Inco NL and Hebron, Soper commented: “Using house price change as a gauge, Newfoundland is Canada’s sole remaining seller’s market.”

Moderate growth occurred for detached bungalows in Montreal (up 2%) and Ottawa (up 1.9%), while Toronto saw a decline of 6.3% compared to the same period in 2008. Prices in the prairies and in western cities declined with the average price for a detached bungalow down 8.1% in Saskatoon and 11.2% in Edmonton.

The nation’s condominium market waned with the average price of a standard unit dropping 3.4% to $232,877 compared to $241,152 in the first quarter of 2008. Calgary saw a 12.8% drop in average price of condominiums, but declines were less severe in Vancouver (down 5.3%) and in Toronto (down 3.1%). “Condominiums are generally the most affordable housing option, especially in urban centres,” Soper said. “With record low lending rates and new government initiatives aimed at encouraging first-time buyers to enter the market, ownership at the entry level is becoming increasingly accessible.”

Noting recent global efforts to address the economic crisis, including the coordinated response from the world’s leading economies coming out of the G20 meeting and stimulus package announcements at home and in the United States, as well as what appears to be the beginning of equity market recovery, Soper commented, “These glimmers of economic hope are coinciding with a time of year that typically brings renewed interest in the housing market.

Traditional spring trends – increases in open house attendance, calls to brokers and viewing appointments – tell us that potential buyers are stepping off the sidelines and an increase in purchase activity is likely to follow.”

As described by Moishe Alexander, CFC CEO

Moishe Alexander, CFC CEO, presents:

The Corvallis Gazette Times reports from Oregon “Morrie and Colleen Slay didn’t want to sell their house. But after they both got laid off, the Albany residents fell behind on their payments. Faced with foreclosure, they discussed their options with a counselor and decided to put their modest two-bedroom on the market, pay off their mortgage and walk away. With real estate values falling, they owed more than the house was currently worth, so they opted to pursue a short sale. The Slays had a willing buyer and an experienced real estate agent who helped them file all the required documents. But every time they thought the sale might close, the lender said there was a problem with the paperwork and closed their account.”

“Last week, after months of frustration, their buyer pulled out of the deal. ‘We’ve got to start all over,’ Morrie Slay said.”

“Anna Balkema, the Willamette Neighborhood Housing Services program’s lone full-time counselor, said she’s seen very few of the subprime or fraudulent loans that have hogged the headlines. Most of the homeowners she works with have conventional fixed mortgages with reasonable interest rates.”

“So what’s pushing them into foreclosure? In most cases, it’s a layoff or a major medical expense. ‘The most typical scenario we have is one or double job losses,’ Balkema said. ‘I’m not seeing any 10 or 11 percent (interest rates). We’ve had people in foreclosure with a 5.25 — they lost their job and couldn’t make the payment.’”

“Wells Fargo, one of the nation’s largest mortgage lenders, is an enthusiastic supporter of the Making Home Affordable initiative, according to Judith Olsen, a community development officer in the bank’s Portland office. ‘The foreclosure and resale process is expensive — it’s expensive for the bank, but it’s also expensive for communities. We really don’t want the houses back, trust me. We’re not in the real estate business, we’re in the lending business,’ Olsen said.”

“Morrie Slay wishes his lender had the same attitude. If the short sale had gone through, the mortgage company would have lost about $12,000. But compared to going through foreclosure, that could end up looking like a bargain. ‘They’re still going to end up losing. It’s going to take time, it’s going to take money — I just don’t understand,’ Slay said.”

“‘It’s just very frustrating for both of us,’ added his wife, Colleen. ‘If you know anybody that wants a house …’”

The Oregonian “Allan Smith doesn’t know the stories behind the foreclosed homes he sells each weekday morning on the Multnomah County Courthouse steps. His job is to sell houses, not ponder why. Besides, these days everyone he encounters has some sort of financial problem or complaint, even the banks doing the foreclosing and the speculators hoping to find a deal in someone else’s suffering.”

“‘You’d think, with the financial crisis, things would be hopping,’ he said. ‘But if I sell three or four, that’s a solid week. We’re frozen here’”

“In the last quarter of 2008, homeowners defaulted on 1,054 loans in the Portland region. That’s more than half the total for all of 2007 and almost as many as in all of 2006. Several hundred homes come up for sale each week in Multnomah County. Yet most of Smith’s auctions get postponed as antsy investors decline to bid on artificially overpriced houses or banks give borrowers more time to make payments on loans they never should have taken out.”

“‘The banks and the investors are both in the business of making money,’ Smith says. ‘Buying a house you’re not going to be able to sell for a year or two isn’t a great way to do that.’”

“Affordable-housing advocates have protested a few auctions this year, arguing that banks and lax regulators are responsible for the rash of people losing their homes. Smith’s work is fairly grisly when you ponder it. Each week, he provides play by play for dozens of financial apocalypses.”

“That doesn’t depress him: ‘This is the system,’ he says. ‘You buy a house, you promise to pay it off.’”

“Tom Moyer dug a hole deep under downtown Portland last year, betting that buyers, lenders and renters wanted 32 stories of luxury real estate. He found renters to fill the offices and shops. But Moyer — a 90-year-old self-made millionaire, owner of 9 million square feet of real estate and builder of the Fox Tower — couldn’t get a loan to get out of the ground.”

“Moyer’s four decades of empire building smacked into a wreck of a recession April 10, when he halted construction on his $170 million Park Avenue West tower. That morning, Moyer paid 100 workers in the pit spiked with rebar. On Wednesday, the final three workers climbed out of the hole for the last time.”

“Park Avenue West was supposed to show off the city’s rising wealth. It was to be Portland’s fourth-tallest building at the city’s center, passed every seven minutes by a MAX train. The condos, offices and retail shops were designed to set new standards of opulence for a town wrapped in fleece. ‘This will be a sentinel to downtown,’ Lloyd Lindley, former chairman of the city’s design commission, declared in 2007.”

“Instead, the pit shows off the depths of Oregon’s economic troubles, No. 2 in the country for unemployment. For now, the economy makes the pit a civic eyesore. Plywood, barbed wire and Jersey barriers provide their own kind of sentinel. The top concrete parking floor — 40 feet below ground — stops in midspan. One column pokes up wearing a coat of concrete, then the next is naked rebar.”

“The site is framed as a snapshot of the era when easy credit and booming real estate busted. Even for Tom Moyer.”

“The crews working for Mark Sorensen’s company, R2M2 Rebar & Stressing, made their money threading rebar and wires together for the concrete column that would run up the center of the building. The company helped build Intel plants in Hillsboro, most of the Pearl District’s condos, the aerial tram and all seven buildings in the South Waterfront District. But the housing market collapse and credit crisis hit R2M2 as well.”

“Work on the core was picking up April 10 when the call went out. ‘It was just becoming a full-time deal,’ said Stan Campbell, Sorensen’s general superintendent. ‘Then it ended.’”

“Rob Frederiksen was deep in the pit when he got the call over his radio about 2 p.m.: ‘Tell everyone to grab their tools and come up out of the hole.’ I got on the job and I thought, ‘I’m pretty lucky to be here,’ he said. ‘I thought, ‘I’m here for another 18 months.’ Then ka-pow.’”

“Oregon lost 20 percent of its construction jobs between April 2008 and April 2009, far more than the national average of 13 percent. The state’s construction industry has shed 35,000 jobs since the August 2007 peak. The job cuts frustrate workers, but Frederiksen wondered: ‘Who do you blame? You think Tom Moyer, he owns half of Portland, it seems like. It just goes to show you it doesn’t matter how much pull you got or how much money you got. Everyone’s susceptible.’”

The Idaho Statesman. “The declining Treasure Valley housing market is either nearing bottom or nearing a cliff, depending on which statistic you look at. Pending sales – contracts that have been signed but not closed – are way up: 27 percent in Ada County and 39 percent in Canyon County, according to Jere Webb, an agent with Coldwell Banker who publishes…monthly statistics for real estate professionals.”

“Pending sales usually close within 45 days, so Webb expects the number of homes sold to rise significantly in the next couple months. Of course, there’s a catch. ‘A number of these could be short sales and bank-owned properties which take longer to close, and are less definite than sales of homes that aren’t distressed,’ Webb said.”

“If a significant number of these pending contracts are for distressed homes, sales prices will likely continue to fall, since such homes tend to sell below market prices. According to Webb, 37 percent of sales in Ada County and 64 percent in Canyon County in May were distressed.”

“Loan originator Doug Adams with Idaho Street Mortgage said he expects rates to stabilize. Adams said he was inundated with refinancing applications in March and April, but the pace will slow if rates keep rising. Another factor slowing closings is a raft of new government regulations and lender requirements.”

“‘What used to take four to five days to underwrite is now taking three to four weeks,’ Adams said.”

The Columbian in Washington. “A formal plan to build a Vancouver waterfront community with almost 5,000 residents and 3,500 workers was submitted to city planners. Gramor Development of Tualatin, Ore., and its local investors filed a master plan for redeveloping the former Boise Cascade paper mill site along the Columbia River. Gramor President Barry Cain called the project ‘a once-in-a-lifetime opportunity to connect the community with the river.’”

“City officials have long coveted the waterfront project, not only for its potential to create jobs and generate taxes, but also for the prestige of having a prominent project on the West’s mightiest river. The overall project would include 3,000 to 3,300 residential units.”

“Residential units would be a mix of condominiums, apartments, senior housing and so-called ‘affordable’ work force housing for people earning modest wages. Cain said the first phase of construction likely would include five or six buildings offering 1 million square feet focusing on affordable and senior housing, a reflection of a sour market for luxury condominiums.”

“‘No one is going to plan on … regular condos right now,’ he said. ‘We are probably a few years away.’”

The Edmonton Journal in Canada “Economic woes, rising unemployment and a glut of condos caused the Edmonton region’s apartment vacancy rate to inch up by 1.3 per cent in April. The vacancy rate for rental apartments in the Edmonton census metropolitan area rose to 4.7 per cent in April from 3.4 per cent in April 2008, says the national housing agency’s spring rental-market survey.”

“Wood Buffalo, which includes Fort McMurray, had Alberta’s biggest vacancy increase, rocketing to 6.9 per cent from 0.1 per cent in a year. Rent for an average two-bedroom suite fell to $2,165 from$2,350. In the Calgary area, the apartment-vacancy rate more than doubled to 4.3 per cent from two per cent in the same period last year.”

“‘A lower level of employment is affecting the demand for units the rental market,’ said analyst Lai Sing Louie. ‘Landlords are responding to rising vacancies by providing incentives.’”

“‘With elevated levels of supply and inventory on the existing and new condominium markets, some investors have decided to rent out their units rather than sell them at reduced profits,’ said Richard Goatcher, senior market analyst for Edmonton.”

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