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Rom’s June 2023 Real Estate Market Opinion

Okanagan Market Prediction

Okanagan Real Estate Market

I hope you are having a fantastic summer and staying cool in this heat!

The real estate market in the Kelowna area is remaining strong and steady. Average absorption is rising and in some areas of the Okanagan, has passed the 30% mark.

That tells us that the market will remain strong throughout at least the rest of this year unless the government decides to put up interest rates aggressively. Sales have caught up from the downturn starting in the second quarter of 2022 and extending to the first quarter of 2023. We have now surpassed the sales numbers of last year month over month.

Home Price Index

Hot topic: Interest Rates

On July 12, 2023, the Bank of Canada hiked another 0.25%, bringing the rate that sets all rates to 5.0% and bank prime rates to 7.20%. We haven’t seen the policy rate start with the number 5 since 2001.

For variable-rate mortgages, monthly payments will go up by about $15 for every $100K of mortgage balance. Stay tuned for the next rate decision on September 6.

As always, this is just the real estate world according to Rom. I hope you are having an amazing summer!

Please remember, I am NEVER too busy for any of your referrals!

July 21, 2023
Rom’s May 2023 Real Estate Market Opinion

Okanagan Market Prediction

Market on the Rise

When interest rates stopped rising and leveled-off, we changed our predictions to a slow gradual increase over the balance of this year. That was contradictory to a lot of opinions that were more negative. It appears we may have been a bit light in our optimism.

The market is actually heating up at a more robust pace than we anticipated. Absorption is up well over the 20% mark. Prices are continuing to rise. Even though the inventory remains a problem and demand is far exceeding supply, sales are rising compared to last year at this time.

People are figuring out how to cope with and deal with the highest prices in Canada because people want to move to paradise.

Interest Rates

However, the Bank of Canada pushed up the overnight interest rate on June 7 by 1/4 of a point for the first time since the end of last year. In my opinion their reasoning is obvious. Inflation was steadily marching down from a peak of 8.1 % in June of 2022 to 4.3% in April of 2023. Then it jumped to 4.4% in May. The target rate is 2%.

House prices across the country have started to increase and although that is good for homeowners it is not good for home buyers. The bank will continue to raise interest rates until it sees inflation resume its downward direction.

However, you always have to remember, this is just the real estate world according to Rom. Have an awesome month and enjoy the upcoming summer.

Please remember, I am NEVER too busy for any of your referrals!

June 17, 2023
Rom’s Jan 2023 Real Estate Opinion

Okanagan Market Prediction

It’s a new year!

I hope your 2023 has started off on a positive note! The big real estate stories for January 2023 are the absorption rate and the number of sales.

Absorption Rate

The absorption rate is down for the Central Okanagan zone encompassing Kelowna and surrounding areas. It is down to 9.01%. This is 3% below the important limit of 12%. Traditionally below 12% we will see downward pressure on prices.

Number of Sales

The other important statistic to note is the number of sales. Sales are down approximately 50%. What this says is the demand has decreased dramatically. This decrease in demand for housing is a direct result of the rise in interest rates. As interest rates rise fewer and fewer and people can afford to buy a house.

There is a silver lining in this cloud

For the last few years sellers have been dictating to buyers what their house is going to sell for. Now buyers have a choice. The market has shifted to a more balanced market and in some places a buyer’s market. Sellers have had to get aggressive in their pricing in order to compete with other sellers. Sellers who refuse to accept that the price of their house has come down in the last few months, are sitting on the market with no offers. This trend is a good thing for buyers. They have more inventory to look at and can bargain more aggressively.

Interest Rates

On January 25th the Bank of Canada overnight lending rate was increased by 1/4 of a percentage point (25 Basis Points). This sent a message that the bank is softening its aggressive attack on inflation. The next interest rate announcement is on March 8th. I believe we will see a similar 25 basis point increase. The bank desperately wants to slow the economy and bring down the inflation rate. However, if they keep an aggressive direction, it will increase mortgage defaults and foreclosures and that is not good for anyone.

However, you always have to remember, that is just the real estate world according to Rom.

Please remember, I am NEVER too busy for any of your referrals!

February 19, 2023
Should You Buy or Wait?

It is hard to believe January is already over. Is it my age, or is everyone feeling the time is going by faster?

As the market is slower everywhere it is important to reach out to Buyers. Buyers have the impression not to buy or do the wait and see approach… sitting on the fence.

Is this a good time to buy real estate? I often get this asked. The answer is Yes!

Rate-sensitive markets like real estate have fallen over 20% depending on the individual market due interest rates increases and inflation. But this is still an excellent opportunity for investors and new home buyers to take advantage of much lower real estate prices despite the current higher mortgage rates. It’s worth noting that despite much higher rates with lower purchase values, the monthly payments in many cases are very similar. Either you pay top dollars in a high market, 100,000+ more with a lower interest rate, or purchase a property much lower, with higher interest rates.

Example:

Taking the average Canadian sold price, a buyer today would save almost $160,000 on the down payment despite having a higher monthly payment of $257.

With a short-term rate strategy, this buyer can lock in a 1-2 year fixed rate to ride out the current rate cycle and then be in a position to renew/refinance at future lower rates.

Whereas waiting until rates come down, we could see real estate values return to growth, which would mean higher down payment requirements and more competition.

February 7, 2023
Rom’s Nov 2022 Real Estate Opinion

Okanagan Market Prediction

The month of November is following in the tracks that we expected it to. The first quarter of 2022 saw a huge price increase. The second quarter saw a 10 to 15% price drop.

Past to Present November

Since then it’s been flat as a pancake. Prices and absorption have stabilized for the last 4 or 5 months. The real change has been the number of sales. The number of sales in November of 2022 is basically half what they were in November of 2021.

A Balanced Market

Sellers are no longer sitting with their REALTORS trying to decide which offer, over list price, they are going to accept. They are having to be more conservative with pricing and they have to consider their first offer because there might not be another one.

As much as this seems like the sky is falling it really is simply “back to normal”. This is what a balanced market looks like. It just seems worse because it followed such a boom.

Interest Rates

There is still downward pressure on prices but the market is resisting….for now. The interest rates will tell the last chapter of this story. On December 7th the Bank of Canada raised its interest rate by 50 points to 4.25%. The bank also signaled that a pause in rate hikes could be coming. Although I think there may be one more increase at the beginning of next year.

However, you always have to remember, that is just the real estate world according to Rom. Wishing you and your family a Merry Christmas and a very happy new year!

Please remember, I am NEVER too busy for any of your referrals!

December 9, 2022
Rom’s Oct 2022 Real Estate Opinion

Okanagan Market Prediction

The market in the Okanagan for October is responding pretty much the way we anticipated. It continues to “Stabilize” or flatten out. We are starting to experience the seasonal slowdown that we experience every year at this time. However, sales are down compared to last October.

Past to Present October

We need to keep in mind last October was not a regular October. It was a boom. The absorption is also down although not substantially. The Central Okanagan absorption is 12.49%. Basically, that number indicates that we are at the very bottom of a balanced market where absorption extends between 12 and 20%. If you look at the prices, they have come down approximately 10 to 14% since the first quarter of 2022. However, they seem to have leveled off.

At the end of October, the Bank of Canada raised the overnight lending rate by 50 basis points (1/2 of a percentage). I believe they will do the same thing (maybe this time .25%), in the beginning of December. Although this is a fairly aggressive rise in interest rates it’s not as aggressive as we’ve seen in the past few months. The overnight lending rate has gone from .25% to 3.75% in just a few months.

Conclusion

Although, the lending rate is having its effect on the market, and it is slowing down inflation and decreasing sales I think you will see the market pick up again as we step into the spring market at the end of February. We see a slow down every year at this time.

As always, this is just the real estate world according to Rom. If you have any real estate questions give me a call or send me an email at any time.

Please remember, I am NEVER too busy for any of your referrals!

November 21, 2022
Rom’s Sept 2022 Real Estate Opinion

Okanagan Market Prediction

The keyword for this month is stabilization. The absorption has stabilized, prices have stabilized and inventory has stabilized. There are some interesting things going on in this correction which is keeping this market stable and putting a fairly abrupt end to our correction, for now.

Unemployment

The most important one being that unemployment is at an all-time low. In most corrections unemployment rises. This country is seeing a new paradigm where businesses cannot get people to work. There are high paying jobs right across this country with no one to fill them.

However, we expect another aggressive interest rate hike, possibly 75 points and at least another 25 points? hike in November or December this year. This will likely put a damper on the stabilization in the upcoming months.

Conclusion

We have been getting so used to record low mortgage rate hikes and therefore it will take a while to get used to these higher rates. However, keep in mind that the average interest rate since 1990 is 5.79%. We are still about a half a point below that average.

As always, this is just the real estate world according to Rom. If you have any real estate questions give me a call or send me an email at any time.

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Please remember, I am NEVER too busy for any of your referrals!

October 21, 2022
Rom’s July 2022 Real Estate Opinion

Okanagan Market Prediction

The Real Estate market in the Okanagan is going through the predicted correction of the last couple of months.

The big story this month is the market changes in the Kelowna area. Absorption has dropped to 11%. In general, a consistent absorption above 20% will create upward pressure on prices. A consistent absorption below 12% will create downward pressure on prices. That is exactly what we are seeing.

Prices Changes

The prices in the Central Okanagan area have come down about 10% since the beginning of the year. That is a fairly aggressive drop. However, it’s all relative, we saw a very aggressive rise in prices between February and April.

Prices generally do not change nearly as aggressively as other statistics. The reason for this is the resistance of sellers to acknowledge a downturn in the market. It is also important to note that all prices do not change at the same rate. For example, homes under $800,000 are staying fairly flat while homes over $800,000 are coming down more aggressively.

This is following an age old rule; the market always corrects from the top down and recovers from the bottom up. What that means is that the lower price ranges are less affected by a correction. The reason for this is the buyer pool is larger in the lower price ranges so the demand stays stronger.

Interest Rates

On July 13, 2022 the Bank of Canada raised their overnight lending rate by a full percentage point. This was the highest increase in 20 years. The government is doing everything they can to curb inflation and that is what is slowing the market. We will likely see a continued trend if they raise the rates on September 13th. I suspect the depth of the market correction will dig deeper then.

As always, this is just the real estate world according to Rom. If you have any real estate questions give me a call or send me an email at any time.

Please remember, I am NEVER too busy for any of your referrals!

August 19, 2022
Rom’s April 2022 Real Estate Opinion

What’s happening in the Okanagan Real Estate Market?

The Federal Government has announced 2 ways they are considering to slow down the upward pressure on house prices.

Firstly, a proposed ban on foreign buyers purchasing houses across Canada for the next 2 years. However, the percentage of foreign buyers in Canada has dropped from 9% in 2015 to only 1 % in 2020. I therefore don’t think this will have any real effect on house prices.

The second proposal is to invest billions into new construction. That is really the only way to slow down the house price increases. The market is driven by supply and demand. We either have to increase the inventory or decrease the demand. The demand for housing in April is still strong in the Okanagan. The absorption rate for March 2022 in the North and Central Okanagan is still above 60%. That means in March 60% of all the houses on the market on the first of the month sold in March. Therefore increasing the inventory should work to slow down the market.

We haven’t yet seen the effect on the market of the rising interest rates and in turn the increasing mortgage rates. Although it is still a great time to sell your home (especially if you own a secondary home!!), the increasing mortgage rates will price more buyers out of the market. Increased mortgage rates and increasing inventory should help shift to a more balanced marketplace.

The graphic below shows that the market is similar across Canada. The only place in the entire country where prices dropped was the Yukon and it was only by 1.5%. BC is in the top 3 for price increases.

However, you always have to remember that this is just the Real Estate World according to Rom.

If you would like to find out what your home is really worth in a market like this give me a call or text me at 250-317-6405 and I would be happy to evaluate your home. It can be done completely remotely if you prefer. It is totally free.

April 16, 2022
Rom’s November Real Estate Stats & Opinion

Okanagan Real Estate Report November 2021

*click images to enlarge

Rom’s Real Estate Opinion

The real estate industry is full of surprises; never a dull moment. That’s why I love this business so much. Very often people quote “history repeats itself”. It’s pretty hard to find historical data that illustrates that history is repeating itself in the Okanagan Real Estate market. This is all new territory.

Winter Real Estate

It is the time of year that, historically speaking, things should slow down. There are other reasons for a slowdown too. Interest rates are rising and consumer confidence is skeptical as to whether this market can sustain itself. People are expecting a slowdown. “The bubble has to burst”, some of my clients are saying.

However, the stats don’t lie and they never will. What’s happening in the statistics in the Real Estate market? They are RISING. If you recall last month I referred to the expected slow down and decrease in absorption simply because of the winter months. However, in November the absorption rate is rising.

Let’s check out the numbers

In the Central Okanagan, 71% of the residential inventory sold in November, up from 54% in October. Not only that, the inventory actually went down. What does this mean? As bizarre as it may sound, the demand for Real Estate in the Okanagan, which is already higher than ever in recorded history, is now starting to increase again. Prices are going to continue to rise.

The fact that we all live in paradise is no longer a secret. In my opinion over the next few months it has to soften a bit because winter is here. It softens every year at this time. However, as we get closer and closer to 2022 it is setting itself up for a very hot spring in the Okanagan Real Estate Market.

In Conclusion

As always this is just the real estate world according to Rom. Have an amazing Christmas and stay safe and healthy. Wishing you a Happy New Year and an end to this Pandemic in 2022.

If you would like to find out what your home is really worth in a market like this give me a call or text me at 250-317-6405 and I would be happy to evaluate your home. It can be done completely remotely if you prefer. It is totally free.

December 16, 2021