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 kelley@kelleyskar.com

What is the Actual Cost of Buying a Home in Kelowna?

Buying a home in Kelowna or anywhere for that matter, right now, can get expensive.

And I’m not just talking about saving up for that downpayment that you are going to need. 

I am talking closing costs.

If it’s your first time looking to buy a home in the Okanagan then you should lean into what I’m about to tell you.

Also, this could be for people that are looking to sell that first home and get into their second or third or fourth.

You get a little rusty and may not remember all of what you need for resources considering most people stay in their homes 4-5 years.

I barely remember what I had for breakfast some days, so I can empathize with you!

Alright, let’s get into it.

How Much of Downpayment do I Need to Buy a Home in Kelowna?

The first cost is the most obvious one and that will be your downpayment. The minimum required to put down is 5% up to $500,000. 

If you are spending over that threshold then you could be required to put down up to 7% in total, there is a calculation in there that I’m not going to get into, just know it could run as high as 7 points.

Ok, let’s back up a little bit and go back to the beginning of your home shopping experience.

There is no cost for getting pre-approved for financing.

There is no cost to hire me as your Realtor to help you find that home.

There is no cost to get out and look at properties.

There is no cost to write an offer on those property.

Here’s where the cost comes in.

You find the right home, let’s concentrate on a single family property for right now and you make an offer.

Your offer is accepted and you have a few conditions attached to the purchase agreement.

What are the Costs of Home Inspections in Kelowna?

One of them is going to likely be a home inspection.

This will be the first thing that you will be out of pocket for. Home inspectors are going to charge you anywhere between $400 and $700 for the inspection.

It’s not a required thing, but it is CERTAINLY recommended.

Anyone that has worked with me knows my personal home inspection story, won’t get into it here, just know that I won’t stop recommending this, ever.

If you are buying a condo, especially a bareland strata, you could be out of pocket for an inspection as well as a condo document review.

There are a lot of agents here in the Okanagan that will review the docs for you. I don’t offer that service.

The way I look at it is, you hire the right people to do the job. For example, if I’m doing renos on my house, I can knock walls out, I can rip up flooring, I can disconnect wiring.

Basically I know enough to make me dangerous. I am not however, going to rewire the house, install the carpet or do any plumbing. I hire the right pro to do the job.

This is how I look at condo document inspections, hire someone where this is the only thing they do, day in and day out. They know what to look for.

You wouldn’t hire Uncle Jimmy to do your home inspection would you?

Ok enough about that now, just know that a condo doc review is going to run you between $400 and $600 dollars.

So, that bareland strata could run you as high as $1300 for inspections.

Once the inspections come back clean and you waive your conditions, you will have some other costs once before you get to the closing table with your notary or lawyer as well as while you are sitting with them.

The deposit will typically be delivered to the buyer’s agent brokerage, the deposit amount will be what you agreed to in your contract and is different than the downpayment.

The deposit will form part of your downpayment. So if you have a $100,000 purchase and your downpayment is 20% or $20,000 and your put up a deposit of $5000, then the balance owing on your down payment is 15 thousand dollars.

What are the Closing Costs to Buying a Home in Kelowna?

Now that’s clear, let’s get to the closing table.

This is where things get pricey.

Here in BC they have a land transfer tax that is required to be paid on most real estate transactions with some exceptions.

If you are a first time buyer, you could be exempt from paying the tax if your purchase price does not go above $500,000. 

There is a partial exemption if the purchase price is less than $525,000. 

There are other thresholds that have to be met like being a permanent resident or Canadian citizen, you have to have lived in BC for at least a year prior to purchasing, filed at least 2 income tax returns as a BC resident in the last 6 taxation years as well as never having owned a home or had interest in a home anywhere in the world and you’ve never received a first time home buyers exemption in BC before.

If you aren’t a first time buyer but are buying new then you may also qualify for a full or partial exemption.

This applies to single family homes as well as condos and some other examples that I won’t get in to in the interest of time.

Just keep in mind in order to qualify for this the property value for a full exemption has to be under $700,000 and for a partial exemption it has to be under $800,000.

You won’t be finding a single family home to build in Kelowna for those price points any time soon.

A condo on the other hand might qualify in this market.

How Much is the Land Transfer Tax in Kelowna, BC?

Ok…if you ARE subject to the land transfer tax the calculation is:

1% of the first $200,000 and 2% on the balance up to $2 Million Dollars. This is where most people will fit in to this calculation. If you are looking to spend more than 3 Million, the taxes get kind of stupid.

If you are looking to buy a $700,000 condo here in Kelowna your land transfer tax calculation would wind up being $12 thousand dollars.

This amount is on top of the 7% that you would be required to put down and not including your inspections or legal fees.

Disbursements is what’s next, I usually use this as an example as it’s easy to explain.

Property taxes can be paid yearly or on a monthly basis. Most people, at least in my experience, choose monthly. 

But to keep the math simple let’s take the example of someone that pays their taxes at the beginning of the year and the amount is $4 thousand dollars.

You take possession of the home on August 1st.

The seller has lived in the home for those 7 months but has paid for 12.

At the closing table you would be required to pay back the seller for the last 5 months, a prorated amount. This would be an example of one of the disbursements.

Another would be the legal fees which are going to run you anywhere from $1500 to $2500 depending on the property and the registrations on title.

We have covered a lot on this video so let’s recap the up front costs versus the closing table costs:

Up front costs would include:

• Your inspections which could run you upwards of $1300

• Your deposit which could be anywhere from $5 thousand to say $30 thousand depending on the size of the purchase. And of course that would be required after the removal of your conditions.

Closing table costs would include:

• Disbursements. Things like property tax.
• Land Transfer Tax. 
• Balance of your downpayment.
• Notary or Legal fees.

Alright, that’s all I have for you today. If you are thinking of making a move to the Okanagan, looking to sell your current Kelowna, West Kelowna or Lake Country Home or are looking to purchase your very first property, then we should talk.

Give me a call at 778-716-7527 or shoot me an email kelley@kelleyskar.com

Kelowna vs. Vernon: Which City is Better to Live in?

About two months ago I shot a video talking about the differences between living in Calgary and Kelowna.

At this point it seems like that video is pretty popular with just over 1200 views.

So I thought I would shoot a video that is a little closer to home and one that those moving to the Okanagan would actually consider to be a little more relevant.

So which is it? Vernon or Kelowna? Which city is better to invest and to live in?

Let’s get after it. Welcome to LiveLoveKelowna

The BIG difference between Vernon and Kelowna is the size.

Vernon’s population according to 2021 census data sits at 44,519. Kelowna on the other hand is quite a bit larger coming in at 144,000 and if you include West Kelowna in that you can add on another 36,000 to round it out to an even 180,000.

So what does that mean besides more people? Well it means more traffic. Bigger headaches when it comes to infrastructure. A big population jump during the summer months with all the tourists flooding the area.

But, it also means that with a larger population comes more amenities. 

What Amenities are in Vernon and Kelowna?

For example, there are two Home Depots in Kelowna and West Kelowna. Kelowna has the ONLY Costco in the southern interior. You have greater access to more variety in shopping, restaurants, gyms, movie theaters etc, etc, etc.

So let’s jump into what the similarities are.

First off, both communities are like a 24/7/365 playground for the outdoor enthusiasts regardless of the seasons. Both areas offer multiple golf courses, places to hike, fish and camp as well as the opportunities to explore wineries, cideries and craft breweries.

Of course both cities are nestled up against a couple of lakes you may have heard of like Lake Okanagan? 

Winter time brings you skiing adventures at Silver Star near Vernon and Big White which is a 45 minute drive from Kelowna. The Spring months get going right around the same time so you’ll be able to really take advantage of the playground that is the Okanagan from early in the year!

What is the Cost of Living Like in Kelowna Versus Vernon?

Really what I’m talking about is the cost of housing, as we know groceries are going to be similar, gas prices are similar, insurance rates are similar.

So what would you pay for a single family home in Vernon?

Let’s look at some of the averages for the two communities. 

Right now the benchmark price for a single family home in Vernon is sitting at $717,000. This includes the North Okanagan which would encompass areas like Armstrong, Coldstream, Enderby, Predator Ridge and everything in between.

As of the end of January 2023 there are 75 homes listed for sale under $730,000. 

How does that compare to Kelowna you ask?

Same time frame, larger market, more homes typically for sale and there are 27 single family options under $730,000 in the Greater Kelowna Area.

The benchmark price for a single family home right now in Kelowna is quite a bit higher sitting at $1M 2 thousand 4 hundred dollars. This would include areas like Peachland, West Kelowna, Kelowna and Lake Country which make up the Central Okanagan.

It certainly seems that Vernon wins out on this comparison, smaller market, but 2.5 times the homes listed for sale in the same price bracket.

If affordability in housing is what you are looking for, then you will likely find it in Vernon.

What are the Demographics Like in Vernon Versus Kelowna?

If we go back to the census data and have a look at the age demographics of between 25 and 49, Kelowna’s population comes in at 47,885 or about 33% of the total population.

Vernon on the other hand has 7,710 residents in the same age bracket of 25-49 which represents about 17% of the total population of the city. The over 65 crowd for Vernon represents about 32.9% of the population and 24.7% for Kelowna.

So when we are comparing age demographics, Kelowna wins this round hands down, the data suggests that Kelowna is overall a younger city compared to Vernon.

There are a ton of similarities between the two cities, especially when it comes to the natural beauty and the plentiful activities that you can do outdoor all year round.

If you are trying to decide which community is going to be the best fit for you, if it were me I would ask myself these questions:

1. Do I want to be in a larger centre with greater access to different amenities or does size really matter?

2. Is the cost of housing one of the driving factors in my decision making process?

3. If I am in that 25-49 age bracket or the over 60 age demographic, which community makes more sense for me slash us to be a part of? 

I want the residents of Vernon to know, I am certainly not bashing here by suggesting you can’t raise kids in Vernon because of the demographics. I have friends that have done just that.

All I am saying is that the data would suggest that there is a higher rate of retirees or people of retirement age living in Vernon versus Kelowna and this could be a consideration for some people when deciding where they are going to move to the Okanagan.

Alright, that’s all I have for you now, make sure to check out my video on the right side of your screen where I compare Kelowna to Calgary. There’s likely to be a whole series of these coming in the near future!

If you have any questions about making a move to the Okanagan or if you already live in Kelowna or West Kelowna, then we should talk. Give me a call at 778-716-7527 or shoot me an email to kelley@kelleyskar.com