Will the interest rate cut bring buyers to the table?
The Canadian economy has been speaking, and the Bank of Canada finally listened. On June 5th, it dropped its overnight right by a quarter point which will see rates for variable rate mortgages and lines of credit come down. While not substantial, it signals the start of downward movement with interest rates — a welcome relief to many and perhaps a signal that it’s time to buy. With the next announcement in July, many will be singing like Tim McGraw: “I like it, I love it, I want some more of it.”
For the second month in a row, the story is listings. More and more listings came on the market in May, albeit off the pace of April. The result is active listing inventory at levels not seen since late 2020 after the world opened post Covid shutdown. Buyers are more patient though, with sales overall in Greater Vancouver down from April and May of last year – although the Fraser Valley saw sales creep up from April. This only adds to the level of pent-up demand that will start to act with more favourable interest rates and economic conditions. It’s not a matter of will buyers engage, but a question of when.
While there was a break this month in new housing regulations, the market is still factoring in the numerous changes to various housing legislation introduced at the provincial and federal levels. Likely we are seeing properties listed due to capital gains changes, short term rental restrictions and investor frustration with the regulations of the rental properties they own. Owning a property in British Columbia has become a lot more difficult and more costly, and as a result some sellers would rather sell than hold. This has the knock-on effect of removing some rental stock at the same time – not ideal for those struggling to find a rental.
Sales dip even as inventory rises.
There were 2,733 properties sold in Greater Vancouver in May after 2,831 properties were sold in April and 2,415 sold in March this year. This was a 20 percent decrease from the 3,411 properties sold last year in May. This marked the first month-over-month decline in sales this year. With increased listing counts, it should have brought on more sales, but buyers are continuing to show more patience and take advantage of the opportunity of choice.
Sales in May were 20 percent below the 10-year average after being 12 percent below the 10-year-average in April and 30 percent below the 10-year average in March. One step forward, one step backward seems to be the theme in the real estate market. But with the number of homes for sale increasing, this will lead to a better chance for increasing home sales when buyers engage. And that may just be this month. What seems to be happening, though, is that real estate activity is occurring in many different micro markets. Detached houses on Vancouver’s West Side can sell with five offers in the $3 million range while apartment listings below $1 million can sit.
Prices hold alongside increased supply.
Detached properties overall saw the lowest growth in new listings in May, while townhouses surprisingly showed the most growth in new listings. Apartment sales were down the most year-over-year, likely an indication of how much higher interest rates are impacting that end of the market. First time buyers, while getting the benefit of more choice, still must contend with higher rates and especially the stress test which adds another two percent onto the rate for qualification purposes. Expect to see that segment of the market move quickly with rate reductions. Looking at detached home sales, they were up four percent month-over-month while down 18 percent year-over-year (although Pitt Meadows and Maple Ridge saw more sales year-over-year). Townhouse sales were down 20 percent month-over-month and down 13 percent year-over-year, while condo sales were down 6 percent month-over-month and down 22 percent year-over-year.
As listings increased in the last two months, the months of supply didn’t increase much, if at all, in some areas. Greater Vancouver ticked up to five month’s supply (on the border of balanced to seller’s market), while some areas like North Vancouver (even with the number of active townhouse listings double the amount there were in May 2023), Port Coquitlam and Pitt Meadows are at three month’s supply. New Westminster, Coquitlam, Port Moody and Ladner are at four month’s supply, all while listing totals ramped up.
While we didn’t hit 7,000 for the number of new listings in May, after reaching 7,229 in April in Greater Vancouver, there were still 6,484 new listings that came on the market. That’s just shy of the 6,491 we saw in May 2022 and off the May 2021 high of 7,276. For a variety of reasons sellers were coming to the market over the last two months, after being patient over the last two years. As we’ve said, significant pent-up supply had been building as many moves were on hold due to higher interest rates, lack of buyer demand and an inability to find the next home. With more choice available for sellers, we are seeing the sell and buy transactions coming back into the market. That has been missing over the last few years. And with more supply, prices are holding and, in some areas and property types, seeing downward pressure.
The number of new listings in May was seven percent above the 10-year average after April was 29 percent above and March was nine percent below the 10-year average. May will typically see a significant number of sellers come to the market in advance of summer, so it isn’t surprising to see those numbers. We’ll see the number of new listings decrease as June winds down and the summer months come upon us.
Active listings up 46 percent compared to last May.
There were 13,600 active listings in Greater Vancouver at month end, compared to the 12,491 actives at the end of April and 10,552 at the end of March. With sales-to-listings ratios around 40 percent over the last two months, it’s allowed active listing counts to grow quickly in the region. Compared to this time last year, listings are up 46 percent from the 9,293 at the end of May 2023. Detached active listings are up 37 percent year-over-year, while townhouses are up 53 percent and condos are up 56 percent.
The detached market overall in Greater Vancouver remains at six month’s supply - a balanced market. Vancouver’s East Side is bucking this trend, though, sitting with four month’s supply for all residential properties and producing some interesting multiple offer sales. Townhomes moved up to four month’s supply from three and condos stayed at four month’s supply - keeping both technically in seller’s market conditions in Greater Vancouver. Area by area, market activity and the level of competition for listings will vary. Considering how much has come on the market, we still aren’t close to a true buyer’s market and it won't take much to see the shift back to a seller’s market.
The last two months have seen a shift in the real estate market to more active sellers and increased buyer hesitation. With so much talk about interest rates, it’s easy to see why buyers are playing the waiting game. With visions of lower rates, ‘why buy now?’ and ‘let’s shop for the best deal’ have become key themes in the buyer world. But tides can shift quickly when interest rates creep down. Buyers may soon find that the competition they were trying to avoid may come back quicker than expected. Those not distracted or hampered by elevated interest rates could see the best buying opportunity in some time.
Read the full Dexter Realty report and see data from each Lower Mainland community.
