Hi everyone. Matt here with your central Okanagan real estate update for June 2022.
So, with the arrival of June comes the arrival of summer. And it may come as a surprise to you but as the mercury begins to rise and summer unfolds this is actually a period of the year where our real estate market naturally cools as people start to think less about housing and more about vacationing. Generally speaking.
While we often-times see seasonal cycles in the real estate industry in a calendar year we are also influenced by larger macro factors that can either layer on or counteract the seasonal cycles real estate goes through in our region on an annual basis and, unless you’ve been living under a rock, you’ve probably heard that the real estate market is starting to soften, period.
While we haven’t seen a noticeable decrease in the average sales price in the area we are starting to see that sellers who are reaching a bit on price aren’t selling and end up chasing the market. What does that mean? Price reductions. Homes that are priced in line with what the recent sales history supports are selling, and we are still seeing properties selling over the asking, but we are starting to see those sales happen less frequently and we aren’t seeing as many homes going well over the asking price as the market is starting to stabilize rather than speed up. An interesting way to frame this is that for the last 4-6 weeks I’ve seen roughly as many price reductions in a given week as I’ve seen number of house sales.
So, where is this headed? Well inventory is still incredibly low, migration to our area is still strong and new home start-ups aren’t enough to bridge the gap. There are a ton of factors at play and a lot of details to consider but in an attempt keep this update digestible and, well, not dry I’ll cut to the chase.
I expect we will see a gradual increase in the number of homes on the market as increased interest rates temper buyers’ appetites and the economy continues to show volatility. Ultimately Kelowna will remain a desirable destination city for many Canadians and the demand for housing in our area, relative to other cities, will keep our house values stable.
While a reduction in average house price seems inevitable I would be surprised if we see something more than a 5% reduction in the average price of a single family detached home if the market continues on its current trajectory. To put this in perspective in response to the 2008 financial crisis, when many people believe house prices were hit pretty hard, at that time in the Central Okanagan we saw the average house price in our area reduce by roughly 10% from 2008 to 2009 but then increase nearly 7% the following year and subsequently bumped up or down 3% for a few more years before increasing substantially again in 2014. It’s worth noting the prime interest rate ranged from 5.75 to 3% in that time period as well. Currently we sit at 3.7%. So, unless we see interest rates like they were in the 80’s our market will stay fairly steady and, regardless of what happens, Kelowna will remain one of the strongest housing markets in Canada by virtue of our climate, location, natural amenities and growing industries.
I believe that we should have a much clearer picture of where out market is headed over the next few years depending on how things unfold over our Fall market. But, if I were looking to buy in Kelowna right now I’d want to buy now with the current interest rates rather than roll the dice in hopes that prices will drop enough as rates continue to bump up as I don’t see a reduction in house prices substantial enough to compensate for the additional cost of higher interest rates. Also, as history has shown, even under the weight of major financial pains we only typically see a decreasing market for a year before things in our area stabilize and timing the market is more luck than genius.
If you’d like to have a more detailed conversation about the factors I see affecting the market and how things may play out feel free to contact me any time.
Until next time!