Kamloops' real estate market will remain firm heading into 2010, avoiding the "frothy" levels of Metro Vancouver, the B.C. Real Estate Association's chief economist said Wednesday.
Cameron Muir outlined to a Kamloops homebuilders' conference the past decade's economy, real estate market and where he forecasts both will go next.
Beyond all expectations, Vancouver's housing market is hitting record sales activities and prices late in 2009, something Muir said is not sustainable because interest rates have nowhere to go but up.
Last year's credit crisis helped affordability across B.C. through a combination of lower housing prices and lower mortgage rates. In Kamloops it brought the monthly cost to purchase a home down by 24 per cent.
The same sudden increase in affordability on the Coast market caused a frenetic amount of activity once fear from the crisis wore off. But that activity cannot last, Muir argued, calling it "irrational exuberance."
In Kamloops, prices and sales have recovered from last year's fall. Sales activity for the year is up 13 per cent from last year and median prices down only four per cent from last year's record, according to Canada Mortgage and Housing Corp.
"We have high prices, affordability limits and we inject higher interest rates," Muir said of the coming year.
He expects the prime rate to rise from today's 2.25 up to 4.75 moving into late 2010 and 2011.
Those rebounded prices and higher mortage rates, combined with a slow recovering economy, mean the days of double-digit housing price increases are over, Muir argued.
"How high can prices go before consumers reach a limit on what they can pay?"
The latest Multiple Listing Service numbers show median prices in Kamloops have recovered near where they were at last year's peak. But the Interior's economy is expected to recover slowly, along with the rest of North America. A particular burden here will be a continued slump in the forest industry.
"This will be the slowest recovery we've ever seen coming out of a recession," Muir said of the Canadian economy.