The times they are a changin', as the Bob Dylan song goes. Change is inevitable, so let's look into things a bit.
The housing market throughout 2020, 2021, and early 2022 experienced a tremendous surge in price growth and sales activity. It wasn't only the housing market, as anyone on the hunt for a sports car, a Michael Jordan rookie card, a boat, or a swiss watch will tell you. The demand for any remotely investment type assets has boomed - just check out the waiting list for a Rolex or a new Ford Bronco.
One contributor is the re-examination of priorities. Undoubtedly there has been a shift towards preference for hard assets, especially those that provide direct lifestyle value. "Honey, we've always wanted to spend more time on the lake, so let's stop putting off the boat and just do it."
There are three more technical contributors: interest rates, inflation and supply. In a supply-challenged market of any kind, price will trend upwards. In the current state of historic inflation the tendency to save cash is low. Increased interest rates, though, are encouraging Buyers to sharpen their pencils and make responsible purchases.
Let's bring it to real estate. It is clear there has been a shift in the market, both in Kelowna and nation-wide. The incredible froth of the last two years has dissipated - so what does that mean? According to the statistics, we're entering a balanced market. Inventory levels are increasing, approaching historical averages, as is the time it takes for a property to sell ("sold days on market" 5 year average is 45-90 days). Prices are softening, but are still up year-over-year. Further, "months of inventory" is still below our 5 year averages.
Supply of new housing has been a chronic challenge, and that won't change any time soon. Supply of all types of properties will remain low moving forward, and that is something that cannot be ignored as our city, and country, continue to grow.
Now let's talk rental market. The rental market is still incredibly tight and rents are historically high, partly due to low vacancy rates. With the 5-10% drop in property values in the last several months, it could be a great time to lock in a fixed interest rate and start demolishing the principal on that investment condo. Put in the down payment and let your tenants start building your equity for you. For a medium to long term investment, it's a no-brainer.
So is this the time to buy? The time to sell?
If you're investing with the intention to flip in 6-12 months, it may be a risky time to make that move.
If you're looking for a longer term family home, it's a fun time to shop, as you have more selection and will be able to be much pickier than any point in the last two years.
If you're investing for longer term revenue, it's also probably a great time to make a move, as you can take advantage of the softer prices, and still capitalize on strong rents. In inflationary and higher interest rate environments, rents tend to remain high as younger people and first-time homebuyers may not be able to qualify for a purchase as easily - so they continue to rent.
For Sellers: while you may have missed out on the absolute height of the market, you are still near record-high values. Plus, your new home will be a bit more affordable. When making a lateral move in the same city or general location, the net result will be the same. Plus, you'll get the benefit of being able to be more exacting with your new home, and have more control over the entire transaction.
The market is uncertain right now, especially if you just read the headlines. When things are booming, we tend to forget what a normal market is like. When things slow down, we tend to hesitate - at the risk of missing the right property. Regardless, timing the market is nearly impossible, so my advice is... make smart investments in quality properties in good neighbourhoods. You won't go wrong.