Housing market activity in the Lower Mainland sputtered again in September, even as affordability conditions started to improve for homebuyers. Despite lower mortgage rates, many prospective homebuyers are opting to stay patient, confident of further rate reductions and increased supply of resale inventory.
Home sales in the region spanning the Metro Vancouver, Abbotsford-Mission and Sea-to-Sky areas reached just 2,783 units in September, down 5.7 per cent year over year. On a seasonally adjusted basis this was consistent with August levels and in line with the low levels observed during the post-2022 rate-hike cycle. September sales were 23 per cent below the same-month average from 2010-2019. When adjusted for population growth, sales reflect levels typically seen during a recession. Year to date, sales have declined six per cent.
While underlying drivers of housing demand remain strong, the challenging sales environment coincided with more listing volume as sellers tested the strength of demand. New listings remained elevated, up 14 per cent from last year, with seasonally adjusted listings up four per cent from August. Low sales and increase in new listings drove inventory above 22,000 units for the first time since 2019. The imbalance between sales and inventory has triggered a near-buyers’ market, though we expect this to be temporary. Still, prices are slipping, with the average price down 2.4 per cent year over year to $1.18 million, including a pronounced 2.7-per-cent drop on a monthly basis. The benchmark value fell 2.3 per cent year over year led by townhome and apartment values.
The path forward for the housing market will largely depend on the trajectory of interest and mortgage rate declines. We expect the Bank of Canada to cut reduce the rate from the current 4.25 per cent to 2.75 per cent mid-2025, with the pace of cuts guided by the economy and inflation trends. While this will directly cut variable borrowing costs, the decline in fixed rates is expected to be more modest, as current rates have increasingly priced in future rate cuts.
As interest rates decline and policy changes come into effect, more buyers are likely to re-enter the market. Key changes include a higher property value cap for insured mortgages which will be helpful in high-priced markets like Vancouver, and the expansion of 30-year amortization eligibility that will further increase borrowing capacity. That said, the rebound in sales will still be constrained. The elevated existing supply is expected to be curbed by higher sales, while declining construction points to further supply constraints over the medium to long term. The risk for prices is to the upside in 2025-26.
The results from the latest Survey of Employers, Payroll and Hours showed a net decline in positions held in B.C. in July. Total payroll counts in the province fell by 0.2 per cent following a flat June. This decline translated to a loss of 5,923 positions, pushing down total payroll employment to 2.56 million positions. Goods-producing industries 0.7 per cent fewer positions while services-producing industry payrolls led the overall decline, down 0.2 per cent. The job vacancy rate remained at 3.6 per cent in July. The job vacancy rate has remained low since the second half of 2023, highlighting reduced job openings due to economic uncertainties.
Bryan Yu is chief economist at Central 1.
