It is an exciting time in the Okanagan real estate market. House valuations are up (tax assessments up from 5% to over 13%), days on market to sell are down, multiple offers seem to be occurring at a steady pace and the outlook in Kelowna and the surrounding area is positive.
What is fueling this current market?
And, more importantly, what do buyers need to consider prior to committing to a purchase?
It is well-known that the Okanagan is a destination for retirees. Two years ago marked the start of the baby boomer generation retiring and the Okanagan, specifically the Central Okanagan, has benefited from increased buyer activity. At the same time, the local economy has improved and along with it solid job prospects, and a continuing focus on entrepreneurs and the growth associated with lifestyle moves plus the pressure of increased population. Things are looking good for growth and house values. Good news for sellers!
On the flip side, local buyers are feeling pressure in this new market. A $500,000 home in Kelowna is vastly different from the same priced home in Vancouver (which is probably a condo) and it is hard for local families to compete against out of town budgets. As such, value under $500,000 is getting hard to find. Prices are creeping upward and many local families will be priced out of homes that only a few years ago, they could have easily afforded. Today, more than ever, Buyers need real advice!
Positive Pressure for sellers means negative pressure on buyers.
What specific things do buyers need to understand before they purchase?
- Interest Rates – 2.5% to 3.5% are common ranges today but the last real estate boom in the Central Okanagan saw average rates in the 5.75% and 6%. What do your payments look like should this happen in the future?
- Rents – rents are increasing but so are housing prices. Buyers looking to purchase a property with rental income are smart. Yet, the value of a suite (authorized or not) can become over inflated in a hot market. Ask yourself, could I rent this ENTIRE home for less than my mortgage payments?
- Historical Prices – before a buyer writes an offer, they should have their agent perform a comparative market assessment on the property. What is it really worth? And, I believe this number should be compared to sales of similar homes from 2007, the last time house values spiked in the Central Okanagan.
- Approval – bank approval is not an ENDORSEMENT! Just because the bank will lend you the money, does not mean it’s a smart buy for you.
- Future Selling – before a purchase you should consider what it will take to sell this property in the future. Is this a good buy? Or, is it simply “the only good option” in a sea of bad ones?
- Patience – Waiting for that 10 out of 10 property is folly. However, certain properties are better than others and it’s better to be patient than to sandwich into a marginal home and lose money later.
- Beware of your agent! – Buyers need to understand that most agents “need” to sell homes to make a living yet this can go against what’s best for the buyer in the long run. While it’s not the job of the agent to be negative, it is the agents job to provide skilled service and this means helping clients understand the good, the bad and the risks associated with purchasing a property in a hot market. Just because it has a suite and the bank gives you a mortgage does not means it’s always the “right” choice.
Making a “good” purchase in today’s market requires the assistance of a skilled and experienced agent. Not only do you need an agent who can help you when in an multiple offer you also need an agent who can confidently advise you against making a poor purchase decision.
If you make a bad buy, it will harm your finances for years.
First-time home buyers are surprised to learn that it will cost upwards of $30,000 or more to prepare and sell the home they are purchasing. And, with 5% down, many of these buyers do not have $30k in equity. At the same time, there are sure-fire ways to protect against these costs before you buy and a skilled agent can help you understand.
Luke, Bo and Sandra and I take working with all buyers seriously and we can help you find value in any market condition. We don’t need your business, we want to earn it!
Contact us at info@desrosiersCook.com 250-300-4748