real (estate) talk | September 2024

August is already a slow time for real estate activity in the Vancouver Region, but combine that with high interest rates and elevated home prices and you get something that could be politely described as “exceptionally slow”. There were 2,909 MLS sales in August, the fewest since January (2,321) and the second-fewest for the month of August going back to 2012. Relative to August of last year (when borrowing costs were actually higher than they are now), last month’s sales were down 17% year-over-year. Compared to the prior 10-year August average, sales were 28% lower.

Rather than mull over the August that was not, perhaps the best use of this space is to discuss what might be coming in the months ahead. Real estate activity typically ramps up in the fall from the lows of summer. In fact, in two years of the past 10, sales have actually peaked in October in the Vancouver Region. What’s different this year, however, is that buyers are heading into the fall market with some extra confidence courtesy of three 25-basis-point interest rate cuts by the Bank of Canada. It’s only been about two months since the Bank officially began easing rates, but the cumulative impact of the rate wind-down to-date is notable.

For example, if we assume 20% down on a $750,000 condo (that is, a $600,000 mortgage) and a variable-rate insured mortgage at the prime rate minus 100 basis points, then each of the past three interest rate cuts has resulted in a decrease in monthly mortgage payments of about $90. All told, that’s roughly $3,300 in cumulative annual savings relative to just a few months ago. Alternatively, if we assume that our would-be buyer is comfortable making the roughly $3,900 monthly payment that they would have prior to the Bank of Canada’s first interest rate cut, then the past three rate cuts have resulted in a $56,000 increase in purchasing power (i.e., they can now buy an $806,000 condo with the same monthly payment).

So why would anyone consider making a purchase this fall with so many more interest rate cuts on the horizon? The answer is inventory. With 20,881 active MLS listings across the Vancouver Region at the end of August, buyers have not had this much choice heading into the fall since 2014 (when there were 22,395 listings). Put another way, total inventory was 25% above the prior 10-year August average (of 16,713), with condo inventory leading at 39% above average versus 26% for townhomes and 12% for detached homes.

That inventory won’t be around for long though. Real estate activity is very seasonal and we know from history that a combination of more sales and fewer new listings in the fall (as well as more de-listings) means that inventory will decline significantly between now and year-end. Over the past 10 years, that decline has ranged between 15% and 44% (the average is 33%). How would-be buyers weigh more inventory today versus more interest rate cuts tomorrow will ultimately define the fall market. 

The rennie review is a monthly publication that includes our take on the latest MLS data for the Vancouver Region. In addition to presenting neighbourhood-level stats, it includes information on current rennie projects, a selection of featured listings, and insightful commentary on how and why the market is changing.

Our rennie intelligence team comprises our senior economist, market analysts, and business intelligence analysts. Together, they empower individuals, organizations, and institutions with data-driven market insight and analysis. Experts in real estate dynamics, urban land economics, the macroeconomy, shifting demographics, and data science, their industry-leading data acquisition, analytical systems, and strategic research supports a comprehensive advisory service and forms the basis of frequent reports and public presentations, covering the Vancouver, Kelowna, Victoria, and Seattle marketplaces. Their thoughtful and objective approach embodies the core values of rennie.