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Slow rebound to local real estate

Kathy Michaels, Penticton Western News, May 28, 2009

Real estate prices are showing signs of stability in and around Vancouver and Victoria, but experts say the bottom of the Okanagan’s market has yet to be established.

This week, Landcor and the BC Real Estate Association both released reports that downplayed the hysteria surrounding dropping home values, noting prices haven’t and won’t reach the depths previously anticipated. Both groups also highlighted that real estate values in B.C.’s larger urban centres, have likely plateaued.

In its assessment of the Okanagan, Landcor pointed to a higher than 25 per cent drop in number and volume of sales for the first quarter of 2009 compared to the first quarter of 2008. Despite challenges, they wrote, this market also shows some pricing resiliency year over year.

“There’s been less than 10 per cent price drop in the primary property types and the market is running at or near 2008 levels for non-detached properties despite dropping almost 40 per cent in terms of number and volume of sales,” the report stated. “Condo sale prices softened since last quarter but are still very near levels of the corresponding quarter in 2008.”

Whether that resiliency will continue remains to be seen, however, explained Cameron Muir, chief economist for the B.C. real estate board. His organization’s Spring Market Forecast, also explained that the damage to the market was not nearly as severe or deep as was expected. But conditions in the Okanagan, he said, don’t necessarily mirror those in urban centres.

“In the Okanagan there is still an imbalance between in supply and demand,” he said. “That will lead to continued downward pressure on home prices as that imbalance persists.”

To follow what’s happening in Victoria and Vancouver, more first time buyers need to get into the market locally. Once they do, those who are looking to expand their real estate holdings and move into a house that better suits their needs, will be able to do so—much like a high end domino game.

While Okanagan real estate figures show that first time buyers are slowly coming out, they aren’t plentiful enough in numbers yet.

“In the South Okanagan board right now, they’re still in buyers market conditions, but we expect it to improve in upcoming months and trend toward balance,” Muir said. “One of the reasons we are seeing stronger activity on the coast, than in the Okanagan, is that there are a much higher proportion of recreation and investment buyers in the Okanagan and those are the purchases that are delayed during tough economic times.”

The good news, Muir explained, is that when the conditions started to stagnate experts said prices would have to drop by about 30 per cent to reinvigorate the market.

While home values haven’t dropped that much, other factors have reduced the cost of getting into the housing market by 29 per cent.

“Affordability has increased by 29 per cent and at the end of the day it’s affordability that will draw demand,” he said. “The combination of lower home prices and record low mortgage interest rates has boosted that dramatically. “

Ultimately, that will help the Okanagan catch up to the rest of B.C.

“What we have been seeing in the province and what we expect to occur in the Okanagan is a narrowing of that imbalance of supply and demand as a result of fewer homes for sale, and increased demand for first time buyers.”