Looking over West Kelowna from Smith Creek in West Kelowna.
3,500 Listings Shy?
How bad, right now, is the housing supply in the Okanagan? Well Andrew Ramlo with Rennie Institute, believes the Okanagan is shy of 3,500 listings right now.
Economics 101 is based on supply and demand. With the reduction in supply, and demand remains constant, prices will rise, if demand falls off or stays constant and supply increases prices are to be reduced. In the last year, we have seen incredible price increases in the Okanagan, which is good if you are a seller but has the complete opposite effect if you are a buyer, and if you're both, well you are kind of in limbo.
This week we look a bit further into this topic. It is tough to know exactly how much supply is needed.
One tough part with the supply is finding the happy medium where it isn't too much supply compared to the demand that it could cause a "housing bubble" and cause it to burst. But also, finding the balance between providing enough housing that will keep housing and rentals at affordable rates, that the area can sustain.
This week I have taken an excerpt from Andy Ramlo's presentation regarding the state of the housing market right now, and an outlook in the Okanagan where he did a presentation luncheon to Urban Development Institute which full video can be viewed here (1hr).
To save you an hour of your life, you may never get back unless you are like me and you enjoy taking in this type of information in your spare time, over the coming weeks, I will hopefully touch base on the entire presentation, at least the parts that had the biggest impact on me.
Here is a chart that really shows the correlation between housing here in the Okanagan and comparing it to the amount of supply which is in this case the active listing numbers from CREA. The red line is average sale prices and the bars are the total amount of active listings. Starting at the left and moving to the right you can see the correlation between supply and demand, anytime there was a steady amount of supply the prices remained relatively constant, there would be ups and downs based on seasonal cycles but pre-2000's prices were relatively consistent. As we move into the early 2000's the supply started to dry up and prices started to make climb. Between 2000-2008 the number of listings on the market for the most part was less than the total amount of active listings in the '90s with this reduction in supply, prices started to increase. Until 2008, when there was a rapid increase in supply. We all know what happened in 2008, the housing and stock market crash in the United States, which translated to Canada's housing market as most people's investments took a hit. People wanted or had to sell their homes to free up their money. From 2008 to 2014 other than the seasonal fluctuations, inventory remained fairly much the same and prices were relatively stable. The peak of the new listings on the market happened in 2011 and then it steadily decreased heading into 2015. Whether something flipped in the early 2010's with consumer behaviors, whether people cashed out their investments or took early retirement, it appears that demand slowly decreased the supply of housing until where things really took off in terms of real estate prices in 2016. Since 2016, inventory in the Okanagan has been decreasing and the gap between prices and inventory is further and further, as prices have increased to where we are today. Currently, the Okanagan has 1,186 active listings at the end of March (my last month's numbers might be different as I used different parameters than what CREA would be using i.e.: Central Okanagan vs Okanagan). But based on the average listings, in March we should have had 4,662 active listings. All in all there is a deficit of around 3,500 listings right now on the market, where if we were to get 3500 new listings on the market Andy believes that we would be at more of a balanced market, where prices remain relatively consistent. With so much demand in the Okanagan for housing, really the only way to get the additional supply is to build more supply. We will get more into this in future emails.
Studying the real estate market is what I do to stay ahead of the curve.
Have a great week and feel free to reach out with any questions or if there is anything I can do for you!
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