Home prices and sales fall in Metro Vancouver as interest rates rise

But price drops are mostly not enough to offset higher mortgage payments as rates rise.

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The residential real estate market is down another notch from its pandemic boom highs with lower prices and longer unsold properties, new figures show.

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Prospective buyers are now being forced to weigh the positive impact of falling prices against the negative impact of rising interest rates.

Average prices have been falling steadily and sharply since the Bank of Canada began raising interest rates earlier this year, said Hao Li, a Vancouver-based broker at HouseSigma.

In February, the median price for all home types in all of Metro Vancouver was $1.028 million, but it fell 13.5 percent to $889,000 in June, according to HouseSigma analysis.

Still, the MLS reference price for all residential properties in Greater Vancouver is $1.235 million, which is still 12.4% higher than June 2021. Greater Vancouver, for MLS, includes metropolitan communities north of the Fraser River with a few exceptions.

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In some areas, the change in median prices was larger, falling 28 percent in Delta (to $1.165 million from $1.625 million), 23 percent in Surrey (to $843,000 from $1.1 million, and a 23 percent in Maple Ridge ($960,000 from $1.25 million), according to HouseSigma.

In Greater Vancouver, from Whistler to Maple Ridge to Tsawwassen, the number of home sales in the month of June was down 35 percent. In the Fraser Valley, which in real estate includes North Delta, Surrey, White Rock, Langley, Abbotsford and Mission, it fell 43 percent from a year earlier.

Price drops and rate increases can cancel each other out, leaving the buyer in the same financial spot, but this is not always the case and there are some nuances, said real estate broker and analyst Dane Eitel.

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Depending on the exact area and type of home, affordability has worsened even though prices have fallen because interest rates have risen.

He took the median sales price of a single-family home in Greater Vancouver and calculated an increase in monthly payments due to higher interest rates even as the sales price dropped in recent months.

A $2.32 million property with a two percent mortgage rate and monthly payments of $7,840 in April has now dropped to a current sales price of $2.098 million, but now comes with a five percent mortgage rate for payments. monthly of $9,810.

“Payments are two percent cheaper even with more than $200,000 decrease in price,” he said. She was taking on a five-year fixed mortgage, a 25-year amortization, and a 20 percent down payment.

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When interest rates first start to rise, there is an initial phase where sales volumes and prices tend to hold as some buyers jump into the market before they run out. It continues until buyers can no longer afford the higher rates, Eitel said.

“In the 1980s, when interest rates went from 11% to 21%, it wasn’t until they were between 16% and 17% that home sales volumes and prices began to decline,” he said. Eitel.

He thinks we’re getting to that point now that interest rates have doubled.

“This is a very real change in the market,” said Mayur Arora, an agent for One Flat Fee, which has clients in Metro Vancouver and the Fraser Valley.

He feels that buyers will want to see where interest rate hikes stabilize before returning to the market.

The total of 2,444 Greater Vancouver Real Estate Board sales in June 2022 is a 16.2% decrease from the 2,918 homes sold in May 2022. It is a 23.3% decrease below average of June sales of 10 years.

The Fraser Valley Real Estate Board reported that the June sales number fell 5.8 percent compared to May.

With inflation at a nearly four-decade high, the Bank of Canada aims to bring it down from 7.7 per cent in May 2022 to 2 per cent by raising interest rates.

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