What is Going to Happen in the Kelowna Real Estate Market: Correction?
If you look at the stats that our association here in Kelowna pushes out on a monthly basis, you will see that they always like to show the year over year values.
Things like, year over year sales or median prices or days on market.
This means they are comparing February 2022 to February 2023.
This is a completely inaccurate representation of where the market is going as it only paints a picture of what was a year ago.
I prefer to look at the whole picture.
I track, analyze and study data on a monthly and a quarterly basis.
So for example, the market from the end of Q1 all the way through the rest of the year saw a trend line of a market correction where single family home prices continued to see a drop.
That being said, if I showed you numbers from November 2021 and compared to November 2022, you wouldn’t think things were all that bad price wise.
And even then, that would still not paint an accurate picture.
If we look at where prices were in January of 2022 and compare them to November you’d see something completely different.
Ok, so where are we now?
Is Kelowna in a Buyer's or Seller's Market?
We are in a state of correction where it’s a buyer’s market.
There are two different pricing metrics that I look at when I am tracking the state of the market.
The first is median pricing, this is where we look at the midpoint of sales prices where an equal number of homes sold above and below this sales price.
The second is the benchmark pricing which is an MLS estimate of the value of a typical home in a community, based on size, age, number of bedrooms and bathrooms, lot size, style etcetera.
There is a difference in the actual value of the homes, for example in Q1 of 2022 the median price for a single family home in Kelowna was 1 Million 2 hundred and 60 thousand dollars.
The benchmark price came in at 1 Million 60 thousand 3 hundred dollars.
Just a little bit of a difference there.
Pricing matters but really what I am looking for are the trends.
Like what happened each month and what happened each quarter?
Where did we wind up from where we started?
What is the Real Estate Trend for Kelowna?
Do the trends suggest that prices are increasing or decreasing?
Well in the case of 2022 we saw some declines, the market peaked in about March of that year and we saw a quarter by quarter drop in pricing throughout the rest of the year.
Sales also declined through 2022 by about 33% compared to 2021.
But come on, who in their right mind is going to compare stats in 2022 to stats from 2021 or 2020 for that matter.
Both of those years were crazy for the market, one was slow and the other was plain nuts.
If we want to compare numbers, let’s look at 2019, which arguably, was the last somewhat sane market that Kelowna has seen over the last 4 years.
We can’t compare pricing due to the price points being way higher now than 4 years ago but we can look at sales numbers and pricing trends.
For pricing, 2019 saw a nice balance of a 4% increase in the benchmark, in January of that year the benchmark price for a single family home was $658,000 and the year ended at $687,000.
This is what I am hoping to see in 2024, more on that in a bit.
Ok, in 2019 there were a total of 2 thousand 3 hundred and 36 single family homes sold.
In 2022 there were a total of 2 thousand 3 hundred and 65 homes sold, this includes the market peaking in March of that year.
Pretty equal right?
Other metrics might include average days on market.
In 2019 it took a total of 50 days to sell a home where in 2022 the average turned out to be 34 days.
Bit of a difference there but I expect things to fall more in line with 2019, this year.
As mentioned before, the market was still pretty hot through Q1 of 2022.
Alright next I wanted to look at the absorption rate or months of supply on the market.
These stats really tell a story, when I look at 2019 and 2022 there are a lot of similarities especially in the last half of last year.
Months of supply jumped up in June of last year and pretty much mirrored the months of supply going back to 2019.
This metric tells me that I am on the right track when looking back at 2019 as a comparable year to 2022.
What is Happening in the Kelowna Market in March of 2023?
We are firmly planted in a buyers market at the moment, there are fewer sales with a drop in demand and more listings on the market.
As the Spring market starts to ramp up here in the next couple of weeks I think we are going to see demand begin to pick up.
Buyers will likely get used to these higher interest rates, the market will settle in and we will see sales begin to happen again.
It won’t outpace supply but it will help to balance the market out going through the spring and into the end of the second quarter.
My prediction is that we see a consistency of around 5-7 months of supply on the market with an average number of days to sell to creep up into the mid 40s to mid 50s.
So, what about pricing?
Well with a buyers market we typically see prices drop and see a correction in the market before the real estate market begins to balance out.
I saw a lot of this happening in Calgary’s market over the course of the last decade, there were multiple peaks and valleys in that market.
It was incredibly tough to predict.
The Okangan market is a little easier when looking at previous sales price data going back the last 15 years.
There are all of these small jumps in pricing with a small drop or correction and then a period of steady and balanced increases along the way.
I fully expect that the pricing we see today is the Okanagan’s new normal and that we will likely see further corrections moving through the spring with prices balancing out through Q2 and the rest of the year.
Will Housing Prices Drop in Kelowna in 2023?
We could see another 3-5% drop in overall median pricing before the end of Q2.
My prediction for 2024 is that we will likely see a return to balance and small increases in pricing by 2-4% per year.
The Okanagan has seen some volatility in the real estate market over the last 3 years, from March of 2020 to March of 2022 there were mostly peaks and now some valleys that we have had to contend with.
This is not typical for the market here. Not to worry though, balance is coming, it’s just going to take about 12 months to get there.
Here’s the advice that I would give to buyers right now in this market…there’s a good chance that you will be able to find a decent deal in the single family market and the apartment condo market.
However, there hasn’t been much movement in the townhouse segment in terms of pricing so be realistic with the offers that you are making for that style of home.
That’s not to say you can be unrealistic when writing on the other two segments, it just means that you are going to have a little more wiggle room in negotiations than we have seen the last 3 years when negotiating on single family and apartment style condos.
For seller’s…look, pricing and marketing is what is going to sell your home. Without a great price, marketing isn’t going to mean much.
Be realistic and find an agent that knows the stats, and is going to price you ahead of the market instead of behind it.
Think about this if you are looking to sell your Kelwona Home this year…do you want to Sit or do you want to Sell?
Pricing strategy is everything.
Ok, that’s all I’ve got for you today.
As always if you have questions about the market here in Kelowna, West Kelowna, Lake Country or anywhere here in the valley then we should talk.
Give me a call at 778-716-7527 or shoot me an email at firstname.lastname@example.org