Blog by Rob Chuter

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Regional overviews

British Columbia - expect more balance in 2008

As forecast, affordability conditions deteriorated across every home segment in

the final quarter of 2007 and we still believe the market is poised for some affordability

relief. The two-storey segment continues to carry the brunt of the deterioration

as the hot Vancouver market remains in deeply stressed territory. The

province-wide sales-to-new listings ratio is slowing, indicating a gradual re-balancing

of markets. Mortgage rates should be a positive for markets this year as

we still expect the five-year fixed rate to drift about 75 basis points lower from

current levels. Although house price growth picked up at the end of last year,

softening economic fundamentals are expected to temper demand for existing

homes and slow price gains in 2008 from the 12% pace in 2007 to the 7% range.

Alberta’s housing markets on watch

Affordability appears to have peaked about midway through last year. Conditions

are now already on an improving track with more relief in the pipelines over

the coming quarters. Healthy income gains (running at 5% year-over-year in the

final quarter of 2007) combined with a decline in house prices led to overall affordability

improvements for new homeowners trying to tap into the overvalued Alberta

market. This marks the first time in over three years that the market has

witnessed a broad-based affordability improvement across all home segments.

This also marks the start of what we fear could become a trend. All of the key

housing measures are in contraction mode right now including house prices,

housing starts, and resale activity. The sales-to-new listings ratio has swung

dramatically from deep seller's territory into a more balanced state and has remained

in steady balance for the last six months. Further improvements are

expected as the market continues unwinding and mortgage rate relief materializes.

Saskatchewan is the new Alberta... but for how long?

Saskatchewan now holds the top spot on growth across all key housing indicators

including housing starts, house prices, residential building permits, and resale

activity. Supply constraints in the existing home market have meant overflowing

demand into the new home market. Housing starts soared 62% last year

and we expect Saskatchewan to be the only province to see an increase in housing

starts in 2008. New house prices continue to escalate with year-over-year

growth running at 45% in Saskatoon and 26% in Regina. Supply shortages

continue to push up prices and overall inflationary pressures in the province.

The latest month’s data is still signaling a sales-to-new listings ratio in deep

seller's market. The major erosion of affordability that has occurred over the last

year should gradually take a bite out of current momentum over the coming year.

Manitoba - more upside potential ahead

Resale markets across the province continue to heat up. Excess demand is driving

12%-15% year-over-year house price gains across all home segments. Strong

price gains led to another quarterly deterioration in housing affordability at the

end of last year. Manitoba has not seen anything close to the magnitude of the

deterioration witnessed in Saskatchewan and Alberta. Overall affordability conditions

are still within reason as household income continues to grow at a healthy

5% year-over-year pace - the third fastest in the country. We expect an improving

trend to take hold over the coming quarters as price gains weigh on existing

demand and sales-to-new listings ratios let-up.


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