Bank of Canada holds prime rate at 5% but keeps door open to further hikes
Median price of a West Side detached house up $1 million in past year
Total new listings have been falling, month-over-month, since May
East Vancouver is leading all markets in detached house sales
South Delta detached houses are moving to a buyer’s market
It is a sad commentary on the Greater Vancouver housing market when buy and sell decisions hinge more on minuscule interest rate moves than on the pragmatic needs of consumers. But that is what is happening. Two more consecutive Bank of Canada rate hikes in June and July – at 0.25% each – were enough to drive August housing sales down to the lowest level in six months and stall a rally in new listings, which fell 16% from a month earlier.
The Bank of Canada held the prime rate at 5% at its September 6 setting, but any confidence was dashed as the Bank warned that it would not hesitate to jack rates higher if the economy – and the housing market – began to heat up again.
The best advice for buyers is simply to take today’s higher lending rates into the equation and do the best to negate them. It is clear the Bank of Canada is failing, failing to admit it overshot on rate increases over the past year and trying to maintain the illusion it knows what it is doing.
Those considering purchasing a home between now and the next Bank of Canada scheduled rate hike announcement on October 25th should secure a pre-approved 120-day mortgage and talk to a mortgage professional about the best rate and term.
However, buyers and sellers should not be blinded by interest rate fluctuations. It is likely, considering the economic damage already done, and political pressure, that Bank of Canada rates will not increase again this year. Instead, buyers should concentrate on property values and sellers on matching their price to the market.
Buyers cannot ignore the investment dynamics this year. In the past six months, as both sales and listings fell, prices have continued to increase. The August 2023 benchmark price, at $1,208,400, is $65,000 higher than in March of this year. The benchmark detached house price was up $156,000 to $2,018,500 in the same period and the typical condo apartment price increased by nearly $40,000 while townhouse benchmark prices have risen 5% since March to $1,103,900. But August benchmark prices across Greater Vancouver were down 0.2% from July 2023 and strata prices have barely budged in three months.
A key reason for a lack of new listings is universally higher prices that have frozen sellers in place and lower rates they currently have on mortgages. A look at the 20 Greater Vancouver markets shows that the August benchmark price varies very little from Bowen Island ($1.41 million) to the Westside of Vancouver ($1.34 million) or from East Burnaby ($1.19 million) to Ladner ($1.17 million). The potential of pocketing a healthy dividend when moving within the region is diminished, persuading many potential sellers to stay put.
It currently feels like a market waiting for an excuse to buy mixed with a reluctance to sell. Growing pent up buyer demand may be the best way to explain the status of the market. But without any increase in listings, it makes it difficult for that pent up demand to release. And there’s little to suggest we’ll see any increase in supply.
Banks are working with homeowners to keep mortgages funded – one option is allowing 30-year amortizations – and many with lower rate mortgages are unwilling to dive into the high interest rate pool and make a move. Expect that when the mortgage climate changes to more favourable buyer conditions, sales levels will increase in a significant way. The number of new listings in August was 6% below the 10-year average and has been falling, month-over-month, since May. This has kept it a seller’s market with only a 4-month supply of listings available – even with the low sales levels. This is going to keep the overall inventory of listings at two thirds the level they should be to get to balance or to favour buyers.
The bottom line is that September, often a bellwether month for sales, could ring in a traditional market rally, especially with no further increase in lending rates. This is the time for buyers and sellers to take advantage of the upturn.
If you are considering a sale, it is better to list now before fall competition increases. For those looking to buy, the current price stability offers a short-time opportunity.
Greater Vancouver numbers for August 2023
There were a total of 2,296 sales in August, down 6% from July and 23% fewer than in June 2023, but up 21% from August of 2022. Active listings were 10,082 at the end of August, compared to 10,099 at that time last year and 10,301 at the end of July. New listings in August were down 16% compared to July 2023, but up 19% compared to August 2022. Despite a rally over the past six months, overall prices have stabilized. The composite home price in August, at $1,208,400, was up just 2.5% from August 2022, though 27.6% higher than in August of 2020. With a tight supply and a sales-to-listing ratio of 57% in August, Greater Vancouver remains in a seller’s market.
For other regions, contact Berna Yazgan.
