Vancouver Real Estate Market Update for September 2024

In the first week of September, the Vancouver real estate market received an update that reflects significant shifts. August numbers reveal that home prices have dropped even further, with detached homes now firmly in a buyer’s market—a term seldom used in Vancouver. Compounding this, the Bank of Canada (BOC) cut interest rates for the third time, and all indicators point to more cuts ahead. As we move into the traditionally active Fall market, many wonder if September will mark a turning point, leading to a rebound in prices, or if the downward trend will continue throughout 2024.
A closer look at the BOC's rate cut decision reveals that inflation has eased, with recent data showing inflation at a 40-month low. The central bank has reiterated its goal of bringing inflation down to 2%, and Governor Tiff Macklem’s dovish comments suggest that additional cuts are likely if economic data continues to support them. The financial markets have already priced in another 25-basis-point rate cut in October and a full reduction by December.

Interestingly, the BOC acknowledged the upward pressure on inflation from housing and shelter costs, even though national trends show rental rates and home prices have been falling for months. As these lagging indicators catch up, inflation is expected to ease further. Macklem also hinted that while inflation may drop, housing prices could begin to rise again as interest rates fall and market activity strengthens.

Bond markets have also responded to the recent rate cut, with the Canadian five-year bond dropping to an 18-month low of 2.84%, signaling that fixed mortgage rates could follow suit in the coming weeks. Additionally, contrary to expectations, the Canadian dollar has strengthened against the U.S. dollar following the cuts—a potential signal that the U.S. Federal Reserve might also be gearing up to reduce rates at their upcoming September meeting.

Turning to Vancouver's August real estate statistics, the market saw continued slow sales with a total of 1,896 transactions, marking a 17% year-over-year decline and a 23% drop from July. This represents the fourth consecutive month of falling sales, making August 2023 one of the weakest on record. New listings also fell, with 4,109 homes hitting the market, a 36% decrease from July, although the yearly increase was 4%. Inventory levels dropped for the first time in seven months, but still remain 21% above the 10-year average.

The sales-to-active listings ratio sits at 14%, down 3% from last month and marking the fifth monthly decline in a row. We use this metric to determine if we are in a Buyers or Sellers' market. Detached homes are seeing a ratio of just 9%, deep in buyers' market territory. Meanwhile, the MLS® Home Price Index (HPI) recorded its third consecutive monthly decline, down 0.2% month-over-month and 0.9% year-over-year, bringing the benchmark price to $1,195,900.

While the median price has fallen to $945,000 and the average price to $1,252,000—both back to January 2024 levels—the HPI remains a more stable indicator, smoothing out some of the month-to-month volatility.
As we head into Fall, the big question remains: will inventory continue to rise as sales volumes decrease, as seen after the previous rate cuts, or will the market stabilize? With 1,050 new listings and 205 sales recorded in the first two business days of September, the upcoming weeks will be critical in determining the trajectory for the rest of the year.

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