Sagging homes sales and flat prices prompt speculation that the "housing bubble" might be about to burst - a prospect that grabs the attention of many British Columbians. BUT..there is no housing bubble according to Tsur Somerville, director of UBC's Centre for Urban Economics in the Sauder School of Business. "A bubble isn't just defined by high prices" Sommerville said and identifies a housing "bubble" as conditions being akin to what happened in 2007. "It didn't matter what a condo looked like or who built it, people were lined up around the block and saying 'I'll take 12 please'. That's more of a bubble environment."
If there was a large number of unsold units coming onto the market or a huge change in the economic environment, that would cause prices to tank. For prices to go down significantly contends Somerville, "You need people who have to sell, either because the economy has collapsed and they don't have any income or developers have built a whole bunch of units that are unsold and the bank is screaming at them or foreclosing." None of these conditions appears imminent. It would take some negative shock, such as an economic meltdown or mortgage rates jumping from 4% to 9 or 10% to trigger seriously lower prices.
BC Real Estate Association's Chief economist Cameron Muir is optimistic, predicting increased sales in 2013 due to continuing low interest rates, population growth and more full-time jobs. "I would expect to see sales pick up before the end of the year, at least on a seasonally adjusted basis," Muir said. BCREA is forecasting MLS sales to go up by 7.5% in 2013.