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

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

Median prices have been dropping consistently and considerably since the Bank of Canada started hiking interest rates earlier this year, said Hao Li, a Vancouver-based broker with HouseSigma.

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

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

Still, the MLS benchmark price for all residential properties in Greater Vancouver is $1.235 million, which remains 12.4% higher than it was in June 2021. Greater Vancouver, for the MLS, includes Metro communities north of the Fraser River with a handful of exceptions.

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

Price drops and rising rates can cancel each other out, leaving the buyer in the same financial spot, but this isn’t always the case and there are some nuances, said real estate agent and analyst Dane Eitel.

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

He took the average selling price for a detached home in Greater Vancouver and calculated a rise in monthly payments due to higher interest rates even with the drop in sale price in the last few months.

A $2.32 million property with a 2% mortgage rate and monthly payments of $7,840 in April has now fallen to a current sale price of $2.098 million, but it now comes with a 5% mortgage rate for monthly payments that are $9,810.

“The payments are cheaper at 2% even with an over $200,000 decrease in price,” he said. He was assuming a five-year fixed mortgage, 25-year amortization and a 20% down payment.

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

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

He thinks we are hitting that point now with interest rates having doubled.

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

He feels buyers will want to see where the interest rate hikes level off before they return to the market.

The Real Estate Board of Greater Vancouver’s total of 2,444 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 the 10-year-June sales average.

The Fraser Valley Real Estate Board reported the number of sales in June fell 5.8% compared to May.

With inflation at a near four-decade high, the Bank of Canada is aiming to bring it down from the 7.7% posted in May 2022 back to 2% by increasing interest rates.

Home Sales Plummet in Metro Vancouver as Buyers Adjust to Interest Rate Hikes by Joanne Lee-Young | Vancouver Sun