Monthly home sales in B.C. have dropped 40.8 per cent since this time last year, as repeated interest rate hikes continue to drive the market from feverish activity to more stable and “balanced” conditions, according to the B.C. Real Estate Association.
The average residential price in B.C. was $918,378 in August, down 17 per cent, from $1,109,000 in January. Prices are still up 2.1 per cent year-over-year, while total sales dollar volumes declined 39.6 per cent since August 2021.
The association still considers the market balanced between buyers and sellers.
“Housing activity across the province remains well below normal but is showing signs of stabilizing,” said BCREA Chief Economist Brendon Ogmundson.
“While inventory is up over last year, active listings have somewhat stalled at relatively low levels in most major markets and as a result we are seeing a healthier balance compared to last year.”
To August, residential sales dollar volume was down 22.1 per cent from the same period in 2021, to $63.8 billion, while residential unit sales were down 30.5 per cent, to 62,502 units, the BCREA noted.
The Bank of Canada’s key interest rate has risen 3.0 per cent since last year and now sits at 3.25 per cent. The bank forecasts rates will climb again by the end of the year in order to suppress demand on goods to tame inflation, which reached 7.6 per cent in July.
This means new five-year fixed mortgages are being set by banks at about 5.5 per cent, as opposed to a common rate of two to 2.5 per cent last year.
Meanwhile, the U.S. consumer price index — which measures how the prices of consumer goods in urban areas change over time — climbed 8.3 per cent year-over-year, according to the Labour Department. That is 0.1 percentage points higher than July, beating forecasts inflation was falling, according to Bloomberg News. The U.S. Federal Reserve overnight interest rate sits at 2.25 per cent, though that is expected to go up by 0.75 per cent to one per cent, next week.
The higher interest rates are “weighing down” the housing market, according to Royal Bank of Canada.
“This process is most visible in the suburbs and exurbs of Toronto and Vancouver where price drops have been most significant to date,” stated a September 7 RBC report.
The report forecast the Bank of Canad would hike its policy rate to 3.5 per cent by the fall, “chilling markets in the months ahead.“
The areas surrounding Vancouver and Toronto, Canada's least affordable markets, face the most risk because affordability has gotten out of control, especially after “outsized price gains during the pandemic,” the report stated.
The Fraser Valley is particularly volatile: Pitt Meadows (-11.3%), Maple Ridge (-10.9%), Port Coquitlam (-10.4%), Cloverdale (-12.4%) and Mission (-15.2%) have recorded the largest price declines over the past three months in Metro Vancouver, noted RBC.