The big question this month is, has the Kelowna Real Estate Market peaked?
From a Real Estate Agents perspective, the phones have certainly been quieter and there is definitely more of a hesitancy with some Buyers, wondering whether the market has peaked, and should they buy right now.
May is normally a very busy time for me, particularly with Parents looking to buy Condos for their children about to attend UBCO, in September.
As usual, I am working with a number of these Buyers, but only 1 or 2 have actually bought so far. Many others are sitting on the fence, either because they haven’t found what they are looking for or they are wondering whether prices have peaked.
As part of my report this month, I will be looking at the numbers, potential causes of the slowdown, highlighting some of the points of interest this month and giving my thoughts on what the coming months might look like for the Market.
Kelowna Real Estate Sales May 2018
When we compare the sales numbers to this time last year we are certainly looking at a dramatic change!
Totals sales are down 33%. Single Family Homes sales are down 29%, Strata Sales 33%, Manufactured Homes 40% and Lots down 48%.
In reality, these numbers are way more normal, and just highlight what an exceptional period the previous two years were.
The Inventory of Active listings is also rising -:
994 788 Residential Up 26%
522 353 Condos Up 45%
317 237 Townhomes Up 34%
400 65 Lots Up 10%
If we analyse numbers of Sales to Active Listings we get a sense of which are Buyers Markets, which are Sellers Markets, and which are Balanced Markets.
Single Family Homes
0 -$600,000 Listings 176 Sales 66 – 2.7 months inventory, a reduction from last month. Seller’s Market.
$600,000- $900,000 Listings 429 Sales 116 – 3.7 months inventory, a reduction from last month. Seller’s Market.
$900,000 - $1.3m Listings 184 Sales 21 – 8.8 months inventory, an increase from last month. Buyer’s Market.
$1.33m plus Listings 205 Sales 10 Months Inventory 20.5 a reduction from last month. Buyer’s Market.
Lakeshore Listings 69 Sales 5 13.8 Months Inventory, a reduction from last month. Buyer’s Market.
0-$400,000 Listings 258 Sales 117. Months inventory 2.2. a reduction from last month. Seller’s Market.
0 - $550,000 Listings 161 Sales 46. Months Inventory 3.5, an increase from last month. Seller’s Market.
What is this telling us?
Inventory is rising across the Board, which is giving Buyers more choice, but in most cases, the Inventory is being Sold, as we see the months of inventory available is falling. This is to be expected as spring is usually a busier time in the Kelowna Real Estate Market.
What is confusing Buyers is that they are seeing lots of price reductions on the MLS® system, which is making them think that prices must be falling.
What is actually happening is the market is ‘normalising’. There is a little more anxiety when homes are on the market for longer than last year, and hence prices are being adjusted.
Our local Real Estate Market is just getting used to pricing homes for the current Market, not the future Market, which, at times, is what was happening over the last 2 years as things were moving so quickly.
The importance of correct pricing can be highlighted if we look at the 208 Single Family Homes that sold this month, and how many sold at list price or above -:
0 - $585,000 - 7 Homes - 14%
$585,000 - $684,000 – 15 Homes 30%
$689,000 - $789,000 – 14 Homes 28%
$799,000 - $1549 – 12 Homes 24%
$1,649,000 to $6,298,000 – 1 Home
What is causing uncertainty in the Kelowna Real Estate Market?
1. Rising Interest Rates – even though the Bank of Canada left their rate the same this week, the rises so far are having an impact on affordability, and we know there are likely to be some other small rises on the horizon.
2. Changes to the Mortgage Qualifying Rules – some Buyers have seen their purchasing power affected by up to 20%.
3. Uncertainty with the Speculation Tax – a number of owners have decided to put their homes on the Market through fear of what is potentially coming in the Autumn. It is also keeping some potential Buyers away.
4. Buyers confidence - questioning whether the Market has peaked.
What is the Future looking like for the Kelowna Real Estate Market?
Buyers Needing Mortgages - Things aren’t going to change for people who need to qualify for a Mortgage. Some Buyers will no longer be able to afford to purchase a home and may have to change their Buying plans and look towards Town Homes and Condos instead.
Affordability - Affordability is only predicted to get worse as incomes cannot keep pace with Home Prices. This is likely to put pressure on the need for more rentals. At the moment, we are seeing more rentals available and Rental Managers are talking about rentals rates softening a little this year. This may only be short-lived. Demand for more affordable housing will remain strong.
Prices - With inventory still relatively low and several areas of the market in Seller’s Market territory, the best Buyers can hope for is a flattening out of the market as it continues to normalise. Overall, economic indicators are still good for Kelowna and BC, although we have seen a small dip in Employment levels recently. This would have to change around before we would start to see a correction in the Market.
We are still seeing multiple offers happening and homes are now selling much closer to asking price. Expect the number of days on the market to increase as for most Sellers the days of multiple offers first day are behind us.
Should I Buy, or should I wait?
If you are moving - Buyers certainly, have more choice than they did. My advice to a Buyer is if you find the Home you are looking for, buy it!
We are certainly in the middle of the 'Real Estate Cycle', and the Market appears to be normalising. Economic indicators, as well as demand and supply, play an important part in what will happen to the Market.
At the moment, these indicators remain good for Kelowna.
If you are Investing – make sure you ‘crunch the numbers’. In a number of cases buying still makes sense, but you have to factor in that rents may soften a little as the summer wears on. Your Yields are what matters!