Following a period of higher demand and rising housing prices across Vancouver in Q2, Q3 marked an adjustment in prices and demand for homes, with more homes sitting on the market longer than in the previous quarter. While it is common for housing markets across the country to slow down in the final stretch of the year – as people gear up for the holiday season– the drop in activity in Q3 is largely in response to rising inflation and interest rate hikes.
The Federal Reserve is continuing to attempt to slam the brakes on an economy that seems to be heading toward a recession, through gradual interest rate hikes. While it remains to be seen whether The Fed will continue to raise interest rates, experts anticipate that mortgage rates will likely continue to rise well into next year, depending on the state of the economy and inflation.
Median Sales Price In Vancouver
Following The Federal Reserve’s interest rate hike, some buyers hurried to buy homes in anticipation of locking in a deal while the rates remain low. Q3’s median sales price has dropped to $559,948—a decline of 0.6 percent since Q2. One thing to notice is that although prices dipped from last quarter, the median sales price is still up from Q3 of 2021, which saw a median price of $505,000—which means prices have risen by 10.88 percent since last year.
While the market has grown since last year, and the drop from Q2 is not as significant as seen in other housing markets across the United States, it does show that demand for houses is cooling as interest rates continue to rise. The Fed is unlikely to stop their efforts to curb inflation, which means interest rates will rise further – pricing some buyers out of the market. In other words, sellers should price their homes accordingly. The good news is that there is always demand for homes, even in a down market.
Number of Homes Sold
The overall volume of homes purchased dipped from 2,310 in Q2 to 1,722 in Q3—a drop of 25.5 percent. Furthermore, this number represents an even steeper decline of 31.2 percent from Q3 of 2021, with 2,504 houses sold. The decline in demand is a tell-tale sign of a housing market trying to balance itself out from heavily favoring sellers for nearly a decade. While inventory is not yet balanced—which would be 6-months’ worth of homes on the market—the market is steadily shifting away from favoring sellers and towards a more balanced state as fewer homes are being purchased.
For the moment, Vancouver’s housing market continues to favor sellers; however, inflation and rising mortgage rates will continue to push it toward buyers as inventory grows and demand comes in line with supply.
Median Days on Market
As is inevitable with the small decline in demand for homes and the drop in median sales price, homes are now sitting on the market longer. In Q2, the median days on market for homes remained consistent at five days. With the lower demand, houses in Q3 are now spending a median of 16 days on market. This is a strong indicator that the housing market is continuing to balance out as there are fewer buyers able to purchase homes.
Reduced overall sales volume and the increase in time houses spent on the market are a direct result of inflation and rising interest rates, which are likely to continue for the time being. As more lower-end buyers get priced out of the market, sellers need to price accordingly to get offers as quickly as they have in the past.
Mortgage Rates in Vancouver
Although sales volume and median sales price are likely to stabilize, mortgage rates are unlikely to fall any time soon. Due to post-pandemic rapid inflation, The Federal Reserve has raised interest rates in September yet again by another 75 basis points (0.75%), which led to the rise in mortgage rates across the nation. In Vancouver, 30-year fixed mortgage rates are currently at 5.92 percent, and 15-year fixed rates are 5.08 percent as of the time of writing and could continue to increase.
For now, rising inflation will continue to pose a challenge for the government and The Federal Reserve as they continue their efforts to prevent it from getting out of hand. Economists and experts anticipate interest rate hikes to continue into 2023 and potentially even 2024, with the base rate reaching as high as 4.6 percent.
For the time being, sellers need to be smart about pricing homes accordingly as there are fewer buyers in the market due to rising interest rates, shifting the market to their favor.
Future Market Expectations
Vancouver’s housing market will continue to achieve balance as inventory continues to grow and demand for homes stabilizes. Interest rates may increase in the near future as inflation continues to impact the market—affecting both buyers and sellers.
First-time buyers should keep an eye on the market and mortgage rates and try to make a move while the interest rates remain low. Similarly, sellers should adjust their prices to meet current market demands by pricing their homes competitively to attract buyers.
In either case, buyers and sellers should keep a close eye on the state of the market and speak with their agent to determine the best time to buy or sell.
Leave a Reply