Partway through the fourth quarter of 2022, there are a lot of unknowns in the real estate market. It has been the story of 2022, with interest rates significantly increased and the inflation rate still way outside the planned inflation of 2-3% at 7% for August, there is a lot that is left unknown. Everyone has questions, but I have been finding with professionals and experts, the answers have are always preceded with "it depends" or "here are 2 outcomes", there are a lot of unknowns right now and it is tough to predict the reactions, however, this week we are looking at the BCREA Housing forecast for the fourth quarter of 2022 and heading into 2023. Here is the report, right from BCREA Chief Economist Brendon Ogmundson on the entire BC real estate market.
"The dramatic rise in Canadian mortgage rates has prompted an equally dramatic shift in the BC housing market. While the year started with home sales on pace to exceed 100,000 unit sales for a second consecutive year, aggressive monetary tightening in response to the highest inflation in decades quickly sent demand to the sidelines as five-year mortgage rates more than doubled. Compounding the impact of rising mortgage rates, mortgage stress test requirements mean many potential buyers have to qualify at more than 7 per cent. There are some signs, however, that fixed mortgage rates have now peaked. Expectations for the Bank of Canada to raise its overnight rate to above 3 per cent have been priced into mortgage rates since the early spring. But, with the Bank of Canada firm in its intent to lower inflation, both fixed and variable mortgage rates are expected to stay elevated over the next year. As a result, home sales will finish 2022 much weaker than last year’s record-breaking totals and that weakness will likely carry into 2023. We anticipate that provincial home sales will end 2022 down 35 per cent to 81,900 units and fall a further 5 per cent to 77,790 units next year. With sales far below normal levels, inventory has been accumulating, though from record-low levels at the start of the year. Weak sales and an increase in inventory mean that some market segments, largely more expensive markets, have tipped into buyers’ market territory. Consequently, average MLS® home prices have come down from peak levels, somewhat due to major shifts in the composition of sales toward less expensive homes, but also largely as a result of significantly depressed sales activity. We anticipate that, owing to a steep increase at the start of the year, home prices averaged across all of 2022 will still end the year up 4.4 per cent, but average price levels will be slightly lower in 2023. While the housing market is currently feeling the weight of higher interest rates, the downturn is unlikely to be long-lived as BC’s strong population growth combined with extremely favourable demographics means there will be no shortage of demand for housing in the province."
Forecasts are always tough as one unexpected move or change in the world can change the overall trajectory. That being said for the real estate market in the Okanagan, I can definitely attest that what we have going for it that no one can take away is the Okanagan lifestyle. With the lifestyle drawing 45% of the real estate buyers so far in 2022 from outside the Central Okanagan, the next question is, can they continue to afford it? That is it for this week, I hope you have a great week! Let me know if there is anything in the world I can do for you.
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