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Real estate is seen in downtown Vancouver, Oct. 16, 2012.Rafal Gerszak/The Globe and Mail

A reduction in fresh listings should set the stage for a gradual recovery in Greater Vancouver's housing market, says the chief economist at the B.C. Real Estate Association.

In January, the number of new residential listings in Greater Vancouver fell 10.9 per cent from the same month in 2012, marking the eighth consecutive month of year-over-year declines. But there remains a backlog of active listings that will take some time to clear before the region's real estate market regains its balance, Cameron Muir said in an interview Monday.

"Sales levels in 2012 were quite low from a historical perspective," Mr. Muir said, noting that the number of homes changing hands in Greater Vancouver began tailing off in early 2012 and started to slump further in August, after Ottawa tightened mortgage borrowing rules in July.

"The evidence that we see is that Greater Vancouver home prices have edged down 2 to 3 per cent over the past year. Some potential buyers are taking a wait-and-see approach in anticipation of a deflationary spiral, but I don't believe that a substantial price correction is going to happen," he said.

The Real Estate Board of Greater Vancouver's January home index price, which strips out the most expensive properties, was $588,100 for single-detached homes, condos and townhouses – a decrease of 2.8 per cent from the same month in 2012.

Real estate prices in Greater Vancouver and the Fraser Valley, which includes the sprawling and less-expensive Vancouver suburb of Surrey, have fallen only a relatively small amount, considering the sharp drop in sales, Mr. Muir said. In January on the multiple listing service, sales decreased 14.3 per cent to 1,351 in Greater Vancouver, while sales declined 23 per cent to 617 in the Fraser Valley.

"Once consumers in this spring's market realize that prices have not dropped substantially, they will likely get into the market and get on with their lives. Buying a principal residence is just as much a lifestyle decision as it is a financial decision," he said.

Mr. Muir forecasts that 2013 will be a period of transition in British Columbia, saying he expects a soft landing with slightly lower prices on average this year, before prices climb modestly in 2014.

Across British Columbia, the total volume of resale homes that sold last year fell 11.8 per cent from 2011, but the B.C. Real Estate Association predicts that provincial sales will rise 5.6 per cent to 71,450 units this year and increase another 6.1 per cent to 75,830 in 2014. That would be an improvement, but still down from the 10-year average of 86,800 units sold annually in the province.

There were 5,128 new listings in Greater Vancouver in January, down 10.9 per cent from 5,756 in the same month of 2012, while the total number of active listings climbed 5.6 per cent to 13,246. With the U.S. economy on the mend, that will translate into better times in British Columbia, including job growth, Mr. Muir said. Population growth in Greater Vancouver will combine with low interest rates to keep the housing market in a healthy condition, he added.

On Vancouver's closely watched west side, the home index price for single-family detached homes dropped to $1.99-million in January, down 7.5 per cent from the same month of 2012. Mr. Muir said residential prices had surged on Vancouver's west side in 2011, so that neighbourhood has fallen the hardest.

A measurement known as the sales-to-active-listings ratio was 10.2 per cent in January. B.C. real estate agents consider it a balanced market when the ratio ranges from 15 to 20 per cent. It is deemed a buyer's market below 15 per cent and a seller's market above 20 per cent in the Vancouver region.

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