Number of houses for sale has tanked

[Glacier]

The number houses for sale in my neighbourhood has gone from 28 (7.7% of all homes) to 9 (2.5%) today. As far as I can tell, a lot of homes have been selling lately.

[twobits]

And those numbers would suggest that the doomsayers for market valuations are wrong if you agree with supply/demand economics. IMO, Okanagan real estate is not going to get any cheaper than it is right now. Twenty years ago people were shocked when a shack on a 33 ft lot in east van went for 300k. Try getting one now that is just a tear down for less than a mill.

[Static]

And those numbers would suggest that the doomsayers for market valuations are wrong if you agree with supply/demand economics. IMO, Okanagan real estate is not going to get any cheaper than it is right now. Twenty years ago people were shocked when a shack on a 33 ft lot in east van went for 300k. Try getting one now that is just a tear down for less than a mill.

20 years ago the average mortgage rate was 8%, or roughly 3-times higher than it is today. Use a mortgage calculator and the amount one can borrow with todays mortgage rates is exponential when compared to historical rates. Where is the extra income going to come from to cover higher interest rates should rates normalize? The higher interest expense will be deducted from the amount of principal the lender will allow one to borrow. IMO there is a very large chance that prices will decline based on simple financing rates.

House prices are a deceiving as well. What metric should be used is what ones money can buy. With this in mind, prices have declined in the Okanagan since one is able to buy more home today than less than a decade ago.

[fluffy]

There is much to be said for market forces to be sure, supply and demand plays a huge part in it. You've got to consider the number of prospective purchasers and the kind of money they have at their disposal. It would be interesting to see a breakdown on the types of properties being sold, condos and townhouses which are appealing to retired folk and part-time residents versus single family dwelling which are traditionally the sought after product for families, and how the prices of these different real estate products compare to years past.

[jimmy4321]

Now if only we could have a demand for condos, they're hard to move without losing your shirt.

[twobits]

20 years ago the average mortgage rate was 8%, or roughly 3-times higher than it is today. Use a mortgage calculator and the amount one can borrow with todays mortgage rates is exponential when compared to historical rates. Where is the extra income going to come from to cover higher interest rates should rates normalize? The higher interest expense will be deducted from the amount of principal the lender will allow one to borrow. IMO there is a very large chance that prices will decline based on simple financing rates.

Sound logic static and I understand what you are saying. And interest rates are huge when it comes to determining what one can afford. I have no crystal ball but IMO, the new normal for interest rates is going to be a 2 or 3 point spread that is on average 4 points lower than the historical average you refer to as "normalized".
And beyond that there are market niches. Even in the event of a two or 3 point climb in rates, there is still a trillion dollars in equity position in the lower mainland. These people do not need to finance their downsizing to the Okanagan. Even with the hit they might take in a buyers market because of rates, they will still have a debt free home in the Okanagan and 300 to 700k capital gains free from principle residence sale left over to supplement their pensions.
That is one of the reasons I remain bullish on the long term value of any Okanagan real estate.

[Glacier]

Historical interest rates:

[twobits]

Thanx for the graphs Glace. Think that pretty much shows that Static was focused on a period of time that were not normal rates. I can't fault him though in thinking that those were normalized rates cuz they were the reality for two decades and quite likely a very strong influence in his current rationalization just because that is what he grew up with. The economic conditions of those years are very unlikely to be duplicated by countries that operate in a free market environment where goods and capital flow easily. It's a new global economy now. Countries that do not want to participate in this new global economy will see inflation and interest rates. Venezuela anyone?

[TimmyE]

I had a realtor from a local realty company who said he just got a listing in a neighbourhood close to mine. He asked me if I wanted to buy it? I don't know him, never bought a house from him or his company, nor is my house for sale. Yet he phoned me out of the blue. Maybe all is not rosy in real estate land.

[onestop67]

Land is the one thing that God can not make more of.

Buying land will always make money, if you can afford to hang on to it.

Right now, the actual housing market is so over evaluated. But people keep buying. So it stays that way. Because they get financing that they should never get. Overextended...

If (when) a recession hits, those people will not be able to make their monthy payments. It will all crash. And it will be a disaster for the averager people. The rich will feed off of it and make billions more.

[Carrs Landing Viking]

Land is the one thing that God can not make more of.

Buying land will always make money, if you can afford to hang on to it.

Right now, the actual housing market is so over evaluated. But people keep buying. So it stays that way. Because they get financing that they should never get. Overextended...

If (when) a recession hits, those people will not be able to make their monthy payments. It will all crash. And it will be a disaster for the averager people. The rich will feed off of it and make billions more.

LOL, best laugh I have had all day.

[Static]

^^^^^ care to expand?

[twobits]

^^^^^ care to expand?

I will. That post would have received an "A" in a 10th grade business class for making the connection between rates, affordability, and what can possibly happen if rates go up. Bravo in the very simplest of terms.
The real world however has an algorithm that contains many more variables. The poster's A plus B could result in C could be enough of an explanation of the real estate crash in the US because it really was that simple, but there is very little comparison to the Canadian Housing market. Canadian lenders have magnitudes more of lending criteria than what was required in the US.
You are smart enough to realize that static. Yet you and some others continue to hang onto the notion that the bubble will burst in Canada just like it did in the US. It just ain't gonna happen Static cuz our banking system is a completely different animal than of that that created the bubble in the US.
I have to think that you continue to hang on to the bubble burst eventuality just to justify your own non investment in personal real estate. There will always be housing market corrections for a number of different reasons but for average Joe Taxpayer, you do a disservice to if you advise not to buy a long term personal real estate investment like a home to raise a family that is in the end also Capital Gains exempt.
You may be perfectly capable of making renting your residence a better investment decision than buying because of your training in investment and willingness to monitor the computer for hours daily. 99% of the population does not and your suggestion that people that buy homes are fools because the return is better elsewhere actually comes off as being rather pompous.

ETA-I will actually go one further and suggest that the majority of today's seniors that are struggling with OAS and CPP as their income stream and visiting the food bank, chose to rent rather than own their principle residence. In the Okanagan, that home in the worst part of town is at least a 350k nest egg to reverse mortgage and avoid the food bank.

[Static]

Bubble or not, I think your very naive to think house prices cannot drop 30%. Interest rates alone can trigger that simply by not being able to lend the same amount of principal. Furthermore, our banks still make risky mortgages but only keep what they feel are safe mortgages on their books. The remainder will be sold off in the open market to pension funds etc.

Home ownership rates are at an all time high in Canada. The majority of home sales are due to divorce and death meaning the majority are forced sales. That is all fine and dandy except when there are limited buyers, downward price pressure ensues.

I have been following the Kelowna market, and $350k already buys about 20% more house today than it did a few years ago. Does that not indicate a price correction? The average sale price is also dictated by interest rates as the housing bulls will borrow as much as their lenders tell them they can finance. As the interest rates fall, the average sale price climbs because more principal availabe in the market. It is these large mortgages brought on by historically low interest rates that will become burdensome to those who are highly leveraged and from the people I know, the majority are. I also know three mortgage brokers who all admit there are many liar loans in the Canada's market. Our banks may be safe lenders but they are not the only lenders in town.

I am certain that Canada has experienced price corrections in the real-estate market before when risky lending was not popular like it is today. There are far more market forces at play than just high risk loans.

ETA: CMHC Mortgage Affordability Calculator $8000 monthly income, $320 monthly prop tax and heat etc, zero other debt:

Interest Rate: Mortgage Affordability: Decline in Mortgage Principal:
2.5% $550,000
5% $435,000 -21%

A healthy economy will dictate a mortgage rate of 5%+, as history has proven.

[Thinktank]

I have been following the Kelowna market, and $350k already buys about 20% more house today than it did a few years ago.

That was two years ago.

How can you tell anyway?