A wintry summer is brewing for BC’s real estate market with soaring interest rates drastically reducing buyer purchasing power while sellers clamber for yesterday’s prices. Home sales fell sharply in May while home values are declining, slowly but surely.

Multiple Listing Service (MLS) sales fell 16.3% in May adding to April’s 13% decline to a seasonally-adjusted 6,853 units. On an unadjusted basis, sales fell 34%.

While sales remained above levels observed just prior to the pandemic and above the same-month average from 2010-19, momentum is quickly weakening. This is not surprising with fixed mortgage rates well above 4% and at a 10-year high, while variable rates are rapidly shifting higher. With home prices up 40% during the pandemic, prospective buyers face a very different market, and many have quickly been priced out of ownership. High consumer price inflation is further amplifying affordability challenges for households.

Sales declines were observed in most regions of the province. Specifically, the real estate boards of Chilliwack (-25%) and the Fraser Valley (-20%), which covers Abbotsford-Mission and eastern communities of Metro Vancouver, including Surrey, led the drop in sales while the rest of Metro Vancouver fell 18%. Vancouver Island fell 18 percent, but remained elevated, with more modest declines in the interior and northern markets. In contrast, retiree demand and migration from Alberta continues to support conditions outside Metro Vancouver.

Declining sales are contributing to a quick moderation in market conditions. Fewer sales and steady new listings lifted active listings in the province for a fifth straight month with inventory on the rise in most markets. Sales-to-active listings ratios remain in a range consistent with a sellers’ market, but the rapid decline suggests markets are nearly balanced, with the potential to move into a buyers’ market range.

At $980,324, the average price fell 4.7% from April and marked the first sub-million-dollar reading since November. Consistent with sales, declines were deepest in Chilliwack (-4.3%) and the Fraser Valley (-6.7%), although average prices eroded in most real estate board areas.

After an impressive run where BC manufacturing sales increased for seven consecutive months, the streak came to an end in April as sales dipped 2.9 per cent from March to $5.8 billion. Both durable goods (down 1.6 per cent) and non-durable goods (down 4.5%) posted weaker sales.

Key manufacturing areas such as wood products (down 5.9%); transportation equipment (down 5.5%); computer and electronic equipment (down 3.2%); and electrical equipment, appliances and components (down 5.1%) weighed down overall sales. The decline was only partially offset by a few sectors showing gains, such as food manufacturing (up 1.7%), fabricated metal products (up 2.3%) and sales of machinery (up 3.9%).

Over 2022’s first four months, total sales remained 10.1% of last year’s pace with durables (up 6.7%) and non-durables (up 15.1%), considerably ahead of last year’s pace notwithstanding April’s dip in activity. Manufacturing sales activity dipped across the province in May. In Metro Vancouver, sales fell 1.5% and were down 4.3% in the rest of British Columbia.

Interest Rates Send Shivers Through BC Real Estate Market by Bryan Yu | BIV