After touching heavens, house prices fall to earth
It’s been a year of high highs and low lows in Kelowna’s real estate market. It was announced with much fanfare that the average selling price of a single-family home in the city hit a record high of $782,398 in July.
However, a slowdown quickly followed and the average price nosedived to $650,785 by November. That’s a plunge of $131,613, or 17 per cent.
Whether you were selling your home or not, you felt immediately poorer. If you were selling, you would have to accept less for your home. If not, your net worth took a big hit.
Everyone watches home prices as a barometer of local economic health.
It feels good to be in a vibrant market where your home is worth three-quarters of a million dollars.
If feels deflating to realize your home, and your net worth, can lose value so quickly.
In boom time 2017, there were 5,517 residential sales in the first 11 months of the year.
Over the same period this year, sales declined 20 per cent to 4,411.
While there has been much hand-wringing over the sales and price slumps, the Kelowna housing market is still considered healthy.
To put things in perspective, it was only 2016 that the average selling price fully recovered to $550,000 after peaking at that amount in 2008 before the recession.
Selling prices have been on a tear since 2016 and, as with everything cyclical, which real estate is, a correction was inevitable.
While the $782,398 pinnacle for average selling price was hit in July, signs of weakening were seen in March. Sales started to flag, but the prices continued to climb.
“It takes time for those active in the market to respond to changing conditions,” said Okanagan Mainline Real Estate Board president Marv Beer at the time. “So, sales activity tends to fall before prices adjust.”
All the stars aligned in 2017 and early 2018 to make the Kelowna market soar.
The economy was buoyant, consumers were confident and homeowners in Vancouver were selling their places for an average of $1.6 million and coming to the Okanagan to buy a similar place for half the price.
The Vancouver market eventually cooled and that chill spread to the Okanagan.
As well, the so-called triple whammy of negativity further jinxed the Kelowna market.
Mortgage interest rates are on the rise, tough new mortgage qualification rules are in place and the B.C. government is scaring investors with a speculation tax.
Canada Mortgage & Housing Corporation forecasts the waning market will continue in 2019 and that only small gains could be made in 2020 and 2021.
It all means Kelowna currently has a balanced real estate market, in which sales and prices are steady for both buyers and sellers.
Sellers have to price their property realistically, knowing that buyers have time to look around and negotiate.
It’s an adjustment, for sure, from the recent sellers’ market, in which homes were priced high and often fetched more when frenzied potential buyers started bidding.
However, a balanced market is better than a buyers’ market, which is usually the sign of a skittish economy in which purchasers are few and far between, homes sit on the market a long time and sellers usually have to drop the price to attract a buyer.