Forget house prices, how about this weather?

In Vancouver, weather runs a distant second in water cooler conversations to real estate as the price tag on property soars ever higher. The recent release of B. C. Assessments’ valuations certainly had tongues wagging and homeowners contemplating a sale in highdemand areas saw potential profits far beyond their earlier expectations.

On the other hand, Cassandras say the relentless surge in house prices is unsustainable and the crash is around the corner. Just wait, they warn, until interest rates rise, as they must — eventually.

While most observers say a crash is not in the cards, they seem to agree that the advance is decelerating. In a report this week, Bank of Montreal noted that Vancouver witnessed a “blistering” first half in 2011, which was followed by a more subdued second half with sales and prices in December down 12.5 per cent and 1.7 per cent respectively from a year earlier. However, for all of 2011, sales rose 5.8 per cent and prices were up 15.4 per cent, more than double the Canadian average.

BMO says debt- heavy households are likely to curb their appetite for mortgages this year despite low interest rates, suggesting “further moderation in housing in 2012.”

But moderation does not presage a collapse and prices are expected to continue rising, albeit more slowly. Royal Lepage forecast last week that average house prices in Vancouver will end the year 2.3 per cent higher than in 2011. Its quarterly house price survey pegged the price of a detached bungalow in Vancouver in the fourth quarter of 2011 at $ 1.017 million, up 14.1 per cent from the same quarter in 2011; a standard two- storey at $ 1.117 million, up 10.4 per cent; and a standard condominium at $ 536,500, up 10.7 per cent. Those numbers compare with national increases of 6.1 per cent, 4.2 per cent and 3.6 per cent.

Factoring in inflation, a price increase of 2.3 per cent means the market will be relatively flat in 2012, which is good news from a public policy perspective. A pause will give incomes a chance to narrow the affordability gap, although Vancouver will remain an expensive place

A cooling of the housing market should calm anxious economists, including those at the International Monetary Fund, who estimate Canada’s housing is overpriced by 10 per cent. But a sharper drop could have adverse effects. The IMF figures a 15- percent decline in house prices would reduce the ratio of household net worth to disposable income by 45 percentage points.

to live. That, in turn, should relieve some of the pressure on governments to intervene, either through monetary policy, tighter mortgage rules or tax measures.

A cooling of the housing market should calm anxious economists, including those at the International Monetary Fund, who estimate Canada’s housing is overpriced by 10 per cent. But a sharper drop could have adverse effects. The IMF figures a 15- per- cent decline in house prices would reduce the ratio of household net worth to disposable income by 45 percentage points, and could trigger a decline in private consumption by more than 1.5 per cent.

Any further deterioration of household balance sheets would be problematic. Household debt to disposable income already stands at a record 153 per cent, of which 67 per cent is mortgage debt.

The bottom line is that the real estate market may be taking a breather, giving buyers an opportunity to step back from the bidding wars and sellers a chance to re- evaluate their biggest asset without the noise of volatility.

For the rest of us, maybe we can forget about house prices for a while and get back to talking about the weather.