Is Vancouver's real estate market really in free fall?

"Is the Metro Vancouver real estate market in free fall?" shouts the headline.

"Canada's housing market nears 'extreme bubble,' warns ex-Lehman Brothers trader," screams another.

"Fear and loathing in the Vancouver property market," warns the CBC.

It's enough to leave the impression that property values in Vancouver's sky-high real estate market could be collapsing.

Indeed, if you dig into the latest statistics released on Friday by the Real Estate Board of Vancouver, you'll find that the average price of a home in the region has actually fallen — drastically.

A graph of the market published by the Real Estate Board of Greater Vancouver shows the average price of a single-family detached home topping out at $1.8 million at the start of the new year, and then dropping sharply to $1.47 million last month.

That's a loss of about $350,000 on the average home — one could conclude. 

And depending on whether you are a buyer, seller or renter, that could look like great news, terrible, or really just annoying. 

But not so fast.

The truth is — unless you're one of those fortunate folks operating in the upper end of Vancouver's luxury market — the average price shouldn't mean squat to you.

And here is the reason why.

Average prices are just that. They take all the homes being sold, including those worth $5 million, $10 million or $15 million, and put them in the same box as the much more typical single-family residence.

And it just takes a few of those stratospheric deals to skew the average value for the whole market pretty significantly.

So when the flurry of activity at the luxury end of the market dropped off this summer, with the reported prices of some homes dropping by millions, it should come as no surprise to see average prices dropping dramatically too.

But that's not what the numbers say is happening across the rest of the market — and why typical homeowners should not be looking at the average price and concluding that the value of their family home is suddenly in free fall.

A more accurate gauge of the value of a typical house is calculated by the industry based on what they call the benchmark.

A benchmark home is much more like the one most of us live in.

In the benchmark home, the number of bedrooms and bathrooms are measured in single digits. The square footage only has one or two zeros at the end — not four or five. Parking garages lack vehicle elevators and the views include neighbours' backyards, not panoramic vistas.

And when you look at the benchmark prices for Metro Vancouver homes, they have not walked off a cliff, plunging into free fall.

In fact, they are still climbing, albeit just barely.

Words like peaked, flattened, stalled apply. Those are the ones that best describe what's happening now to the value of the typical Metro Vancouver home.

This is not to say that it is perfectly clear what is going on with Vancouver's real estate market.

Everyone in the business admits that the province's 15-per-cent tax on foreign buyers has dramatically curbed activity and the number of homes sold has dropped off dramatically.

But the figures also show the number of buyers in the market is still out pacing sellers, and so far there are no signs of panic selling, boarded up homes, and speculators defaulting on multiple underwater mortgages.

Maybe that's all coming down the road — maybe — but for now most people are still complaining they can't find anywhere affordable to live in this city.

And there is ample evidence that those wealthy foreigner buyers never left  B.C. Many just have flocked to Victoria, where the tax does not apply, luxury homes are a relative bargain and sales climbed 19 per cent in August.

There is no doubt Vancouver has supercharged real estate values, as prices have outstripped wages for years, and griping about real estate is more popular than the weather. But, unless there is a mass exodus from this city, that's all unlikely to change.

So when the next headline makes you wonder if the bottom's fallen out of the market, and your home's value is in free fall, take a deep breath and remember: the typical homeowner has a lot less to fear than the average.