SEASONS GREETINGS!It is a wonderful time to reflect on this year and I am feeling grateful and blessed for the support I receive from you, my clients and friends. I hope to continue being able to support you with all of your real estate needs. In October I mentioned that the Real Estate market in the Interior of BC was showing the beginning signs of levelling off. That levelling has continued into November which gives us one more month towards any kind of certainty that this correction is over. The Bank of Canada has maintained its overnight lending at 5% for the 4th consecutive time. The main reason for this is the inflation rate has come down to 3.12%. That is in contrast to 3.8% last month and 6.9% last year at this time. Therefore, it is getting close to their target rate of 2%. As far as corrections go, this was a pretty mild one. In 2008 the correction lasted 4 years. Here’s an interesting point: people talk of prices going down. Even in a correction, prices rarely go down substantially. When the year ends, prices in 2023 will have been stabilized and we didn’t see much of a decline at the end. I expect in 2024, a rise in house prices around 5-6%. In 2024 I expect the Bank of Canada rate to go down by 1-1.5%. |
| Looking forward to a happy and positive 2024 for all, and as always, this is just the real estate world according to Rom. Wishing you, your family and friends a fun and relaxing Christmas and holiday break! |
Tag: Kelowna Home Buyers
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Rom’s Real Estate Market Opinion – Dec 2023
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Rom’s September 2023 Market Review for the interior of BC
There are three terminologies that I personally use to describe what is going on in the real estate market in the Interior of British Columbia. They are: “a leveling off”, “a recovery”, and “a correction”. In the last two years we’ve gone from a recovering real estate market (Rising) to a leveling off and we are now in a correcting market. The characteristics of a correcting market are; reducing absorption (less properties sold in a said period of time), reducing sales, reducing prices with rising inventory, and rising days on the market to sell. That is exactly what we are experiencing right now. These five activities are happening all over British Columbia and likely throughout the rest of Canada or at least in most locations in Canada to various different degrees. The reason is that the major driving force pushing the market down is rising interest rates. Interest rates are governed federally.My prediction in the market going forward is that we will likely have 9 or 10 months of a correcting market. In the third and fourth quarters of 2024 the correcting market will likely start to level off. This will be spurred by the Bank of Canada starting to inch the interest rates down as inflation gets more under control. The correction will not be a dramatic drop in prices. We will likely see a moderate drop in prices. Perhaps a further 10%. The reasoning behind this assumption is that immigration is maintaining a relatively high demand and low inventory is maintaining a relatively low supply. This is why we have not seen a huge drop in prices so far.There are quite a few assumptions built into my prediction that may or may not come true. For instance, if the Bank of Canada continues to raise interest rates the correction will pick up speed and will last for an extended period of time. I see this ending in the last two quarters of 2024.We have had quite a few years of robust markets. British Columbia has the highest Real Estate prices of any province or State in North America. We recently passed Hawaii.Some of you may disagree with me or even dislike me for saying it but,”We needed a correction”.As always, this is just the real estate world according to Rom. I hope you are having an amazing Fall!
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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!
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Rom’s April 2023 Real Estate Opinion
Okanagan Market Prediction
Cruising along
The market is cruising along as we expected it would once the interest rates levelled off.
Absorption is rising and is now above 20%. Prices are starting to inch up as well. Sales activity is still lower than normal when you compare April 2023 to April 2022. The reason for this is a lack of inventory.
Fun Fact
Here’s a fun fact… Of the G7 countries (Canada, France, Germany, Italy, Japan, England and the United States), Canada has the lowest housing per 1,000 people. France is in first place.
In order for Canada to catch up to France, we would have to build 3.5 million more homes on top of the 2.3 million homes expected to be built by 2030. On top of that, Canada has now increased its annual immigration goal to 500,000 per year.
What all this tells us is that the inventory problem is not going away any time soon and is going to get worse before it gets better. The result of that is continued upward pressure on prices; the very thing the government is trying to avoid.
Rest of 2023
Prices will rise slightly for the rest of 2023. Interest rates look like they are going to remain steady for a while which will gradually increase buyer demand further.
It’s a great time to buy Real Estate in the Okanagan! However, you always have to remember, that’s just the world according to Rom.
Please remember, I am NEVER too busy for any of your referrals!
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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.
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Rom’s Dec 2022 Real Estate Opinion
Okanagan Market Prediction
The Year 2022
2022 was a whirlwind of a year. In the first quarter of 2022 our prices rose, our absorption was through the roof and sales were record highs.
After that it’s been mostly downhill. By the second quarter of 2022, prices dropped an average of 10 to 15%. Then they levelled off. Prices have remained relatively constant since the end of the second quarter.
December
Absorption dropped dramatically in December. However, if you look back historically December absorption generally has a fairly dramatic drop from November. This is simply because half of the month is spent around vacation, holidays and family.
What’s ahead in 2023?
It will be interesting to see what happens in the first quarter of 2023. I believe there will be some downward pressure on prices in 2023. This will be caused by a continued increase in the interest rate.
The next announcement for the Bank of Canada is on January 25th. My guess is that it will either be raised 1/4 or 1/2 of a percentage point. These two possibilities will have very different results to the buying consumers across Canada.
A quarter of a percentage point will show that the Bank of Canada is softening their approach on interest rates. A half of a percentage point will show the consumers in Canada that they are definitely not finished yet. If interest rates go up another half a point at the end of January we will see continued softening in sales and prices.
“After a very strong first half of 2022, we began to see market activity moderate amid consistently rising interest rates imposed by the Bank of Canada,” says the Association of Interior REALTORS® President Lyndi Cruickshank, adding that “although inventory levels remain tight, the high interest rates will continue to subdue market activity in the coming months.”
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!
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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!
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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!
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Rom’s August 2022 Real Estate Opinion
Okanagan Market Prediction
Whether the market direction is changing from down to up or up to down, trying to predict the immediate future of the market is like trying to hang glide with a frisbee. There is just not enough new data yet.
Going Up
The absorption in the Central Okanagan went from 11% in July to 15 % in August. Sales are up as well. As I mentioned last month the statistics in the market look much worse because of how they compare to the first quarter of 2022.
There are lots of periods in the last 25 years where low double digit absorption or in some cases even single digit absorption was the norm. Prices as well have come down since the first quarter of 2022 and seem to be leveling off a bit.
Interest Rates
On September 7th the Bank of Canada raised the overnight lending rate by .75%. That sends us a message that they are not finished with their interest rate increases to reduce inflation. The mortgage rates are already following. With each increase a small sliver of the population can no longer buy at all or can no longer buy the type of house they want to buy.
I hate to sound like a broken record but if they continue to push those interest rates up the downward pressure on prices and sales will continue proportionally. I believe that we will actually see a bit of an increase in absorption and sales activity when we do the statistics for September. Kids are back in school, parents have a little more time to house shop and traditionally we see a little bump in early fall.
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!
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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!
