The Q Report – Q1 2024 - Dirk VanderWal Real Estate

INTRODUCTION

Every quarter since 2018, we bring you a comprehensive report on what actually happened during the entire quarter. This edition is partly characterized by changes we witnessed month-to-month within the first quarter. Read on to see how we measured the shift from winter to spring, where we see things heading in the coming seasons, and how we can help if you have a move to make this year.

THE EXPLAINER

Waiting for the market to … Spring?

At first glance within this edition’s numbers, one of the most striking trends we noticed was how close the first quarter of 2024 was to the first quarter of 2023 across numerous metrics, with very small Y/Y changes recorded. We had entered 2023 coming off of a rollercoaster 2022, and things turned out to be less exciting through the balance of the year, with a return to more typical seasonality, and a lower volume of home sales overall.
Speaking of typical seasonality, as we enter the traditionally busy Q2 spring market, consumers and professionals alike are waiting to see what conditions will emerge. We anticipate a relatively balanced market will persist in the near term, and a larger increase in activity in the second half of the year. More on that ahead.
Recent months have seen the highest number of homes available on the market since prior to the pandemic buying bonanza, which has been creating that feeling of more balanced conditions between buyers and sellers. We are seeing that a large majority of deals contain buyers’ subject conditions for financing, inspection, insurance, and document review — even subject to sale purchases are still fairly common.
However, listing inventory remains short of the level traditionally considered a technical ‘balanced’ market in the Capital Region:

Here’s an interesting twist: several of our past Q Reports explored the market gridlock that arose from the incredibly low inventory of that overheated pandemic market, where hundreds of potential listings were locked up as would-be sellers were unable to secure a new home to land in. We may finally be seeing the opposite effect, where homeowners looking to move finally see enough opportunity in the marketplace to give them confidence to go ahead and list their home, even if they haven’t secured a firm deal on a new property. If this trend continues, we may it see unlocking more inventory as the year continues.
If you’ve been waiting for the right time to make a move, it may be right under your nose. The current market offers a great opportunity for those considering relocating to another area, upsizing, or downsizing, but have been reluctant to engage with the more challenging conditions that have been characteristic of the past few years. This is also the time of year that typically sees the most options available on the market, followed by early autumn. Get in touch with us today for a complimentary data-driven assessment of your circumstances and goals.
Looking at months of inventory (MOI) as another metric, calculated as a ratio of monthly active listings versus monthly sales, the overall market trend has seen a gradual shift from the edge of ‘buyers market’ territory this past winter into the lower fringe of ‘balanced’ heading into spring, giving empirical credibility to the conditions we are finding on the ground with our current home buyer and seller clients.

It is worth noting that the above statistic considers the entire regional market, but different areas and property types may have wildly different absorption rates. We’re happy to perform the calculation for your specific part of the market — we’re only an email away.
Within the first quarter, one of the remarkable points we noted was how much it seemed to be a tale of the first two months of the year being much different than the most recent month. Below, we see the makeup of sales month to month within Q1, where the proportion of sales above asking, just above 9% in January, doubled to around 18% by March.

Note that this indication of increased multiple offer activity is currently limited mostly to detached and semi-detached ground-oriented homes around entry- and mid-level price points, where other segments such as attached housing have been attracting less interest. As well, relative to a truly ‘hot market,’ where The Q Report has recorded conditions where only 25% of listings sold for below list price, this is not yet raising alarm bells that the market is tilting dramatically.

MARKET BREAKDOWN

Overview

The seasonal ramp-up from the quietest period of the year (winter) to the busiest (spring) brings mostly expected movement to the market as a whole. Slightly stronger sales, and a slight tightening in market times and listing discounts, though pricing has remained relatively flat.
A number of longer-term trends caught our interest in this edition’s charts:
- Days on market continue to trend up across all segments; sellers in the current market must be prepared that several weeks or months of market exposure may be required to find the right buyer, especially for ‘niche’ types of property.
- Listing discounts have converged around 2% across all subtypes, further demonstrating healthier market conditions. Looking back 8 quarters, detached homes under $1.5M were registering a negative 9% discount, meaning that the average sale was 9% higher than the asking price.
- Strata listing inventory has continued to climb higher than detached and luxury homes, which has been underway for some time. Detached and luxury inventory have approximately doubled during the same period of time that strata listings have approximately tripled.

Detached Homes, <$1.5M

Pressures facing buyers of detached homes include tightening inventory and shorter times on market from last quarter. Pricing saw a mid-year bump last year, but Y/Y and Q/Q metrics are all showing very little movement. PPSF saw a similar but less pronounced increase.
As we noted above, one observable trend which began in late February was an increase in detached homes selling for asking price and above as a result of an increase in multiple offers for well-presented and competitively-priced properties.
We may see a similar mid-year bump as we make the Q2 calculations for our next report, particularly on expectations of interest rates beginning to come down mid-year.

Strata Homes, <$1.5M

We are witnessing a continuing trend in strata sales including an increase in inventory accompanied by longer times on market. Median sale price edged up this quarter, but PPSF edged down, perhaps indicating a shift in the composition of sales.
One-bedroom units in particular have been slower in recent months, with a number of units in buildings about to lose their short-term rental use significantly discounted compared to last year.
The income and down payment requirements to get in the door of what is typically considered entry-level product have apparently proven less than appealing to would-be first time buyers.

Luxury Homes, >$1.5M

For homes priced above $1.5M, listings fell slightly from their fall peak, but remain higher than the past two years, while median sale price hit its lowest point in two years.
Interestingly, while Y/Y inventory is up around 30%, the corresponding drop in Y/Y sale prices >$1.5M amounts to less than 1%. Perhaps worth considering, if one is hoping that more inventory will automatically lead to lower sale prices.
The trend toward lower listing discounts may be connected to softening prices, as sellers adjust their expectations in the higher end of the market.
Competition among sellers is definitely feeling like more of a consideration, as the ratio of active listings to sales through Q1 hovered around 8:1.

HPI® TRENDS

The MLS® Home Price Index® (MLS® HPI®) is purpose-built to gauge neighbourhoods’ home price levels and trends, using more than a decade of sales data and sophisticated statistical models to define a “typical” home based on the value home buyers assign to various attributes on homes that have been bought and sold. These benchmark homes are tracked across localized neighbourhoods and different types of houses. The Q Report’s HPI® trends compares relative regional price movements around Greater Victoria by tracking the HPI® Composite Benchmark Price across 15 districts, comparing Y/Y price changes.

This quarter, the MLS® Home Price Index provides further evidence of a regional market stabilized by higher interest rates.
Some of the areas in the CRD with the highest benchmark — namely, Oak Bay and Metchosin, both of which consistently benchmark well above $1M — saw price declines Y/Y.
Victoria also registered a slight decline of 2.3%. If you read the Strata section of the Market Overview, you may have already suspected this to be connected to sluggish performance in the condo segment.
Most other areas saw gains in line with, or slightly behind, inflation.
- A Q1 survey conducted by Dye & Durham noted that 87% of Canadians surveyed felt that housing was more expensive today than it was a year ago — however, for many Victorians, this sentiment doesn’t appear to hold much water by the HPI numbers.
- A recent article in the Vancouver Sun pointed out that Saanich has the distinction of making the list of Canadian cities with the fewest properties listed for over $1M.

LOOKING AHEAD

The Financial Post recently quoted a market researcher as saying “Many are eagerly awaiting lower rates to jump back into the housing market, and it’s clear that the expected interest rate cuts in the latter half of 2024 will bolster the pent-up demand for housing… This surge in activity could result in a slower spring real estate market that quickly ramps up in the second half of 2024, resulting in a rebound of activity for relevant professionals like lawyers and realtors.”
Indeed, interest rates in the 5-6% range seem to have hit the ‘sweet spot’ of tempering demand enough to keep the market at a simmer, but out of a crash — akin to the broader economic goal of a ‘soft landing.’
But where did all that extra demand go? The pent-up demand mentioned above is there in the numbers. Below, we have calculated the number of Greater Victoria home sales per 1,000 area residents, going back nearly a decade. The circled area represents the time since the Bank of Canada began raising the prime rate, where sales on a per-capita basis have remained below average over what has become a two-year period. Clearly, this suggests there are would-be market participants who have been sidelined by tighter monetary policy.

Dye & Durham also recently stated that the number of Canadians they surveyed who say they are waiting for interest rates to drop to buy or sell a home has increased from 21% in Q4 2023 to 26% in Q1 2024.
Another survey, conducted by Royal LePage, found that 56% of Canadians looking to buy a home had postponed their search due to interest rates. We see the chart above as verification of this fact.
So, what about those rate cuts?
- The Bank of Canada has made a few hints that they expect rates to come down later in 2024.
- As of the most recent inflation readings, though headline inflation remains sticky at over 3%, when increased shelter costs are stripped out, inflation is already running below the BoC’s 2% target:

If they pay heed to this figure, it may give Macklem et al a little more latitude to make a rate move before headline CPI hits the magical 2% threshold.
Even though CPI inflation seems to be slowing, we all still feel the gut-punch every time we stop for gas, groceries, or a six-pack. Remember that, like many of our Q Report metrics, it is calculated as a Y/Y change, and unfortunately, unless the Y/Y figure turns negative, consumer prices aren’t heading downward.
Market expectations are currently betting heavily on a 25bps cut in June or July, with longer range expectations looking for another full percentage point of cuts within the following year:

Economists largely agree that when the prime rate returns to the ’neutral range,’ — currently forecast around the end of 2025 — Canadians will still be signing mortgages in 4+% range. In the meantime, even the prospect of a potential 100bps of cuts by the end of this year may not provide the financial relief valve that everyone is hoping for. However, the signal sent by some reduction in rates is likely to see a good measure of demand return to housing.
But how much? According to the Royal LePage survey quoted above, 20% of sidelined buyers said they would not return to the market at all, but a mere 25bps cut would be enough to bring back 10% of buyers, 50bps-100bps in cuts would bring back another 18%, and another 23% would return when rates declined by more than 100bps.
Increased consumer confidence and market participation, combined with what is still historically low overall inventory, leads us to believe that the latter half of 2024 and into 2025 will see Victoria’s real estate market once again become more competitive for buyers.

IN CLOSING

Savvy consumers and well-informed advisors are seeing the current market as an opportunity — to potentially ‘buy the bottom’ of this pricing cycle, ‘marry the price,’ and ‘date the rate’ with a shorter-term mortgage, then refinance their lower purchase price when conditions are expected to be more favourable in the near future.

Would you like a professional assessment of your current needs and objectives, informed by a clear understanding of the forces driving our market? Reach out now with your questions. We are award winning professionals, experienced, engaged and networked in our industry, and available to provide you with a confidential, no obligation, no cost evaluation of your unique situation.

Do you or someone you know need real estate advice, personalized market insights, a home marketed and sold using the best tools and accurate data? We are available to be your personal resource. Get in touch today.

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Dirk VanderWal & Fergus Kyne
Newport Realty Ltd.
(250) 385-2033 | info@victoriaqreport.com

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Notes

All views and opinions expressed in The Q Report are solely those of its authors, Dirk VanderWal and Fergus Kyne, and do not necessarily represent the views or opinions of Newport Realty Ltd. or the Victoria Real Estate Board. Not intended to solicit parties already under contract. E&OE.

Terms

For a list of terms and definitions used in The Q Report, click here.

Data Analysis

The Q Report’s analysis includes listing and sales data exclusively from the Victoria Real Estate Board’s Multiple Listing Service® (MLS®) ‘Core’, ‘Westshore’, and ‘Peninsula’ regions. Data is analyzed for unconditional pending and completed sales that occurred between 2024/01/01 and 2024/03/31 except where speciﬁcally noted otherwise.

Data Sources

Altus Group
Bank of Canada
BC Real Estate Association
Canadian Real Estate Association
Chatham Financial
Financial Post
CTV News
MacroTrends
NBF Economics
Reuters News
Richardson Wealth Research
Rob McLister
Statistics Canada
Steve Saretsky
The Globe and Mail
Times Colonist
The Vancouver Sun
Victoria Real Estate Board

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