For the first time in nearly two years, the median sales price of a Greater Victoria and area single-family home dropped—just barely—under $1 million. The median price for November, according to the Victoria Real Estate Board, was $999,900.

That symbolic threshold made headlines when it was crossed on an upward trajectory in February of 2021, but that record was quickly surpassed. In the froth of the pandemic housing market, median prices reached a peak of $1.31 million in March of this year, and have been sliding ever since.

“The actual market, by my guess, is down about 18%,” explains housing analyst Leo Spalteholz, who is taking into account the final prices compared to the assessed values of the homes that have sold. “That’s pretty substantial.”

Rising interest rates are part of the story of the decline.

“It just shows how important affordability is to the market,” Spalteholz said. A mortgage on a $1.3 million home six months ago, with the lower interest rates, would be comparable to one on a million-dollar home today, in terms of the actual cost of paying it off. Spalteholz sees that cost—about $5,000 per month—as an approximate limit to what Victoria buyers are willing to swallow.

Interest rates climbed again today, with the Bank of Canada overnight rate rising half a percentage point in the ongoing fight against inflation. That could add even more gravitational pull to an already heavy trend line.

In the new year, BC Assessment values are almost certain to be higher than the selling prices of homes, in a rare reversal of the norm. That’s because the agency’s numbers are based on summer sales data, and prices have fallen sharply since the summer. In Canadian markets, assessed values are usually lower than the sales prices because of a generally upward trend in value. Last March, for example, homes were selling for 125% of their assessed value.

Pricing homes lower than their assessed value will take some getting used to, Spalteholz says.

“This is going to confuse a lot of sellers,” he said. “Down is harder to swallow than up.”

It’s not all bad news for homeowners, though; economy and employment numbers have stayed strong, so it’s yet to be determined if 2023 will see sellers forced by circumstance into sales they can’t afford, or if the market will re-stabilize.

“If we were to see owners getting in trouble we would expect to see lots of new listings,” Spalteholz said. “We haven’t seen that yet.”