Kelowna Real Estate information by Dave Beeson

Kelowna Market Comments by Paul Fabri

Kelowna‘s real estate market has a split personality.
New-home construction in 2009 was dismal, down 71 per cent from the year before, according to just released year-end statistics from Canada Mortgage and Housing Corporation (CMHC).
Yet, last-year sales of existing homes were up six per cent from 2008, according to new year-end figures from Okanagan Mainline Real Estate Board (OMREB).
"When the recession hit, the reality was resale homes were a better value," said CMHC‘s Okanagan analyst Paul Fabri.
"There was competition and the existing housing market won out."
By the numbers, that means 3,660 existing homes of all kinds - single-family, condominium and townhouse - changed hands in 2009, up six per cent from the 3,445 the year before.
In 2009, construction started on 657 homes of all kinds, a 71 per cent freefall from the 2,257 starts in 2008 and even more from the record 2,805 in 2007.
Surprisingly, prices didn‘t suffer that much.
While construction activity was severely curtailed in 2009, the average price of a new single-family home increased to $764,188 from $716,494 in 2008.
"The prices are misleading," explains Fabri.
"We record prices when homes are finished. Many of those homes that were finished in the 2009 recession were started in the boom of 2008, so they were high-end and had a corresponding price. What we‘ll find here in 2010, as homes started in the 2009 recession are finished, is
average price is down as more modest homes are being built and the cost of construction, labour, materials and land is cheaper."
While there was incredible fluctuation in existing-home prices as the recession raged in late 2008 and early 2009, year-over-year averages weren‘t that severely impacted.
For instance, the average selling price of all the single-family homes sold in the city last year was $460,077, down nine per cent from $505,257 in 2008.
The average selling price of all the condos sold in Kelowna in 2009 was $255,229, off 11.3 per cent from $287,743 the year before.
Last year‘s townhouse average was $350,707, down 8.4 per cent from $382,687.
"If the last six months are any indication, we are on our way to a more balanced and sustainable market conditions in 2010 as sales continue to rise and inventories drop," says OMREB director Brenda Moshansky.
"This is good news for buyers as well as for sellers."
Moshansky admits the sales increase in 2009 was surprising.
"We expected it to be flat or a nominal increase," she says.
"Six per cent is quite a substantial increase, considering."
Real estate is a leading economic indicator.
That‘s why when the housing market boomed 2005-to-mid-2008, the rest of the economy
followed with business growth, rampant consumer spending, record tourist visits and general optimism.
The reverse happened when the financial meltdown in October 2008 crippled every aspect of the economy.
A big part of Kelowna‘s housing boom was second-home buyers - the moneyed crowd from oil rich Alberta and elsewhere, who were attracted to the Okanagan.
They wanted mansions on the lake, homes around the golf course, condos in highrises, chalets at the ski hills and view properties on the mountainsides.
Developers catered to the demand as the buying frenzy pushed construction to record levels and prices.
Of course, second-home buyers are the first to drop out of a market when the going gets tough, after all, a second home is a discretionary expense.
The regular market of people who live and work in Kelowna and want to buy their first home or move to another one also took a breather.
After all, consumer confidence was wiped out by the recession and prices were high.
However, mortgage interest rates slid to rock bottom and prices adjusted downward meaning a lot of locals found it was the time to buy.
Those same conditions are expected to entice second-home buyers back.
But not too quickly.
There‘s still a condo glut in the city and the economy, while recovering isn‘t gang-busters the way it was.
Re/Max realtor Wolf Krieg sums it up by saying: "We are in a fantastic location. Real estate values will grow where people want to live, play and retire - rare areas like here in the Okanagan. And do not forget, we, the baby boomers are getting older. How many people want to move to Winnipeg to retire."

Published Thursday, January 14, 2010 6:22 AM by David Beeson