June 2021 Peachland Market Update
The residential real estate market is still in “Seller’s Market” territory and will likely remain so for the balance of the summer, it too early to tell what headwinds may arise in the fall.
While the panic buying of Feb/March/April has somewhat subsided, the right priced property for sale will still get multiple offers, but more like 2-3 offers versus 5-10 offers. All property types – single family detached, condos, townhomes and building lots have seen robust sales activity and strong price appreciation in the first 5 months of 2021.
The table above shows how the median price for single family detached started the year at $782,000 and now stands at a whopping $900,000. Keep in mind the figure is skewed a bit because there was not only price appreciation, but less homes in the $500-700K range that sold versus the higher price ranges. But still – rapid price appreciation.
Also note that sales volume is up over last year and the year before, while inventory remains way down. In fact, even now that panic buying has somewhat subsided, the very low inventory will keep home prices from softening, there are still way more buyers than sellers for single family detached homes for the foreseeable future. The building industry simply cannot respond fast enough, and most developers prefer to build multi- family homes – condos and townhomes.
This next graph shows Peachland’s home price index – and I have made note of events that influenced the curve of the index. Starting from the point when the government introduced the stress test through pandemic lockdown last year up to the frantic winter/spring market that bring us to today. Note that the top of the line is just starting to bend instead of going straight up. The pandemic created a shift in lifestyle habits – people stuck at home, working from home, and feeling the most freedom and safety in a single-family home. Also wait times for such items as hot tubs, appliances, outdoor furniture that reflect people retrenching into single family homes.
Where are all the buyers coming from?
While 50% of all buyers are local, there are a strong contingent of buyers from the lower mainland and Vancouver area – approximately 25%. Many of those buyers received strong offers for their property on the coast, and have helped to drive up the market here, often with cash offers with no inspection or financing conditions.
Note that only 13% of the buyers have come from Alberta, and we achieved rapid price growth without much activity at all from foreign buyers. Note! There were still approximately 284,000
Immigrants that came to Canada in 2020 (source Ocana Immigration Law Kelowna) with an increased target of $400,000 per year going forward.
Tailwinds for a continued strong real estate market are:
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Low inventory
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Low interest rates
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Economy opening back up after pandemic
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Strong consumer confidence
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Immigration numbers
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Net inflow of population – one of the nicest areas of Canada
Potential headwinds for a softening real estate market on the horizon:
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This summer – a robust forest fire season?
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This fall and beyond - rising interest rates – brought on by rising inflation
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Stock market correction after a long bull market and rising rates
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Post pandemic life – we get back to normal travel patterns – housing becomes less of a
focus for many
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Too many buyers priced out of the market – market begins to stagnate, buyer fatigue
Summary
The Okanagan, like many parts of Canada, has experienced rapid price appreciation in the residential real estate market brought on primarily by a global pandemic and a defining lifestyle change, aided by very low interest rates for mortgages. The forecast for long term median home prices will remain bullish as demand will outstrip supply in the Okanagan with constant yearly net inflows of residents wanting to live here. While you can have market corrections and recessions, housing remains a strong long-term investment, not only a place to call home. The pandemic taught us just how important a home is to the average family and individual, in lockdown we had time to ponder our mortality while shopping and hoarding the elusive roll of toilet paper and face masks, the shortage of which gave us the very first evidence of rising inflation brought on by consumer demand, rising inflation is now broadly evident throughout many markets – not just real estate.