Ok Bank of Canada: You Win!
High interest rates have slowed the economy and real estate sales
Active listing counts climbed again this month
Second highest number of new listings in July since 2008
Buyer opportunities abound in the market
For the past 10 years we’ve all been asking for more listings in the real estate market… well we are finally seeing it. We have more listings, now what are we going to do it them? And as they say, opposites attract. With fewer sales and a noticeable increase in listings, the opposite of last year in the first 6 months – we could see this opposite attract more buyers to the market in the last half of 2024, attracted to the opportunities that are out there.
Let’s talk economics. The Bank of Canada made their second consecutive interest rate drop in July, seeing their rate decline to 4.5%. And with economic data abound pointing to a sluggish economy here in Canada and the U.S., expect that trend to continue through the remainder of 2024. South of the border, their Federal Bank has been more patient, and it is beginning to appear that this patience has come at a cost.
Data out of the U.S. is pointing to an economy slowing quickly, resulting in a pull back in the stock market and bond yields falling quickly in both Canada and the U.S. – think fixed rate mortgages. After hitting a high of 4.46% in 2023 the 5-year Canada bond rate is down to 2.9%. The U.S. Federal Bank announcement is in September and expect their first rate cut to happen with successive rate cuts to follow that. Will that make a difference to buyer sentiment? With the increase in listing inventory allowing for more opportunity, prices are showing signs of weakness which could create one of the best buying opportunities we’ve seen in many years in Metro Vancouver. The second half of 2024 should be one of those years where the number of sales in the back half are more than the first.
There were 2,333 properties sold in Greater Vancouver in June, after seeing 2,418 sold in June, 2,733 sold in May, 2,831 sold in April and 2,415 properties sold in March this year. There hasn’t been much variance in buyer activity in 2024, consistently patient would be the best way to describe it. This was a 5% decrease from the 2,455 properties sold last year in July after a 19% decrease in June from the 2,988 properties sold in June 2023. Comparing to last year isn’t exactly comparing apples to apples. Last spring there was a feeling that rate cuts were on the horizon and much like Lucy pulling out the football on Charlie Brown, the Bank of Canada cranked up rates in June and July. After that the market went quiet, buyers were noticeably absent. This spring, it felt more like buyer sentiment was “fool me once, shame on you, fool me twice, shame on me.” Buyers weren’t ready to fall for the story line of more interest rate cuts. But the neon sign is flashing that they are coming, and more likely faster than anticipated.
Sales in July were 18% below the 10-year average after June was 24% below the 10-year average and May being 20% below the 10-year average. Not much changed on that front, this is a market where demand is building and waiting for the signal to buy. Trends are like 2019 where an influx of listings in the spring lead to stronger sales in the last half of the year. And after experiencing mortgage shock of the stress test in 2018 which negatively impacted the borrowing power of buyers, the demand that built up through 2018 and into 2019 started to come back into the real estate market.
While the number of new listings dropped in July compared to August, the absorption rate remained relatively flat. Dropping slightly to 41% in July, after being at 42% the previous two months, the growth in active listings was slower. Likely due to several listings coming off the market as the patience of some sellers gave out. Greater Vancouver is still sitting at 6 months of inventory (on the border of balanced to buyer’s market). North Vancouver, New Westminster, Port Moody, Ladner and Pitt Meadows are the only cities at 4 months supply – technically a seller’s market. This is mainly due to falling total inventory counts in those areas while other cities saw total actives continue to increase in July. West Vancouver continues to be one of the only markets in Greater Vancouver showing to be a buyer’s market with its current sales activity and listing inventory. Make no mistake though, there are some areas and types of properties that are a buyer’s market.
Once again new listing totals declined in Greater Vancouver in July. After seeing 7,229 in April, 6,484 new listings in May, 5,851 new listings in June, the total for July was 5,689. It seems markets throughout North America experience this trend with more listings hitting the market, so Metro Vancouver was not alone. It helps to create a healthier balance in the market and while other locations are experiencing steeper price declines, Metro Vancouver is remaining relatively flat, with the House Price Index only down 0.8% month-over-month in Greater Vancouver. Whistler, Squamish and the Sunshine Coast are experiencing higher price declines, down 2%, 1.9% and 3.7% month-over-month respectively and down 7.7%, 3.3% and 2.8% respectively in the last year.
For the fourth straight month, the number of new listings declined month-over-month, but July still produced more than last year. In July 2023 there were 4,757 new listings, 16% fewer than July of this year. So far 2024 has proven to show that pent up supply is finally coming to the market. After the end of July, the total number of new listings for the year is 76% of the total that came out in 2023. Expect to see fewer new listings come to the market in the last half of the year though, as it typically the case and likely more sellers playing the wait and see game.
The number of new listings in July were 12% above the 10-year average after seeing June at 2% above the 10-year average, May at 7% above the 10-year average and April at 29% above the 10-year average. In fact, the month of July saw the second highest number of new listings for the month since 2008. While trending lower, sellers are still far more active in the real estate market than buyers.
There were 14,326 active listings in Greater Vancouver at month end, compared to 14,180 at the end of June and 13,600 at the end of May. The growth of active listings has slowed significantly after being up 46% year-over-year at the end of May, currently sitting 39% higher than this time last year. Some sellers are simply refusing to participate in the market and taking their homes off the market after failing to attract a buyer at a price they are prepared to sell for. Some sellers are content to be on the market, while others would prefer to be sold. While not quite at the highs of 2019 when there were close to 16,000 active listings in May that year, this increase in listings is positive for the real estate market and should help to keep prices relatively flat if further interest rate decreases pull buyers back into the market.
Looking at the different types of homes, detached active listings are up 30% year-over-year, while townhouses are up 49% and condos are up 47%. Since the end of March though, detached active listings are up 41%, while townhouses are up 38% and condos are up 32%. With new home starts down significantly and rental projects being the focus of many developers, we’ll continue to see supply constraints in the strata ownership market in the years to come. This could be the best time to get into that market.
The detached market overall in Greater Vancouver remains at 8 months supply while townhomes and condos stayed with 5 months supply keeping it in that mix of seller’s to balanced market conditions in Greater Vancouver. The tighter supply continues to be in North Vancouver where there are only 3 months supply of townhomes and condos, Richmond, Ladner, Tsawwassen, Pitt Meadows and Maple Ridge townhomes at 3 months supply and townhomes in Port Moody with only 2 months supply.
The autumn real estate market is setting up for one of interest rate declines and an economy in need of stimulation. The cracks are showing, have federal banks waited too long? It is beginning to appear that the 3 remaining Bank of Canada meetings could all lead to reductions in their interest rate with fixed rates following. Great news for buyers and many sellers who have been looking to sell this year.
For other regions, contact Berna Yazgan
