Is There Really a Housing Bubble?

Sagging home sales and flat ­prices have prompted speculation that the “housing bubble” might be about to burst — a prospect that immediately catches the attention of British Columbians.
But there is no housing bubble, according to Tsur Somerville, director of the University of B.C.’s Centre for Urban Economics in the Sauder School of Business.

“You can’t burst a bubble that wasn’t there,” said Somerville. “But you can have prices above where they should be and it not be a ­bubble.

For prices to go down ­significantly, contended 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 or something like that.”  None of those conditions appears imminent.

Somerville said it would take “some negative shock,” such as an ­economic meltdown or mortgage interest rates jumping from four per cent to nine or 10 per cent, to trigger lower prices.

“I don’t have a crystal ball but if I had to guess I would be more likely to guess this kind of lower sales/flat prices is more likely to continue.”

The B.C. Real Estate Association is more optimistic. Chief economist Cameron Muir is predicting increased sales in 2013 because of continuing low interest rates, population growth and more full-time jobs.  Employment growth in the ­Greater Vancouver area in the first ­seven months of the year, according to Muir, has been 3.5 to 4 per cent ­higher than the same period last year.

“I would expect to see sales pick up before the end of the year, at least on a seasonally adjusted basis,” Muir said.

Click here to read the complete article form the Vancouver Province.