Here is the executive summary of the BCREC Housing Forecast…
Fewer homes are selling and there are too many houses on the market, leading to lower prices. Conditions are expected to improve next year and the number of homes sold will increase slightly (4 per cent). Home prices have been dropping since the spring but most of these price corrections will occur this year.

Consumer confidence has weakened. Though 2007 saw a big increase in people coming to BC from other provinces this number will decline slightly in 2008. International in-migration is forecasted to increase by 6 per cent however. Housing starts in the province are expected to dip a modest 2 per cent due to falling consumer demand, rising new home inventories and tighter credit.

Mortgage rates are expected to drop from current levels and remain flat for most of 2009 before trending upward. But what does this mean for the average consumer?

“For homebuyers, this means an increase in effective mortgage rates, either through higher posted rates or a lowering of the discounts commonly offered during the last few years. In the variable rate market, consumers are paying at or above the prime rate, in contrast to the discounts offered last year”

Though the actual rates have not changed the availability of credit is tighter, the incentives are less and the restrictions on borrowing have increased. As a result, of the decline in consumer confidence demand for housing has fallen to a level not seen since the beginning of the decade. The global financial crisis and volatile equity markets are keeping consumer sentiment low. It’s a buyer’s market. Buyers are benefiting from a wide selection of homes for sale, at lower prices.

Increased affordability and some improvement in consumer confidence are expected to lift home sales by 4 per cent to 28,000 units in 2009. While a small increase in home sales is not sufficient on its own to firm up home prices, a reduction in the inventory of homes for sale is expected to trend the market toward more balanced conditions in 2009. After three years of record-breaking performance, MLS® residential sales are expected to decline 25 per cent to 13,500 units this year, before edging up 4 per cent to 14,000 units in 2009. Sellers are expected to delay putting their homes on the market until conditions improve. This will reduce the number of homes for sale, creating a more balanced marketplace and firmer home prices.

The complete report in PDF format is here