Daniel Melnychuk & Susan Shoemaker, Co-owners of MyTown Realty Ltd – Keremeos spoke to the Review in an interview earlier this week to discuss the real estate market in the Lower Similkameen.
Review: “Given the first two months of 2011, what’s the prognosis for the real estate market?”
Daniel: “In a word: uncertain. In the material we’ve just provided, you’ll see that province-wide, the number of sales is down 10 per cent from January 2010 whereas inventory levels are up six per cent. Closer to home, in our South Okanagan Board area, January 2011 prices are down nine per cent from a year ago, dollar volumes down 30 per cent and the number of transactions are down 23 per cent when compared to January 2010. Even closer, in the Keremeos market, 71 MLS® sales were recorded for the year 2010, down 40 per cent from previous years.”
Review: What’s been causing this weak demand?
Susan: “There’s always a domino effect in real estate. Generally stated, the more expensive homes sell to buyers who are selling less expensive homes. And, the least expensive homes are usually bought by first-time buyers. This is what “fuels” the market: A first-time buyer gets their first mortgage and buys a home from someone who moves-up and buys another home and so on. Of course, at any time in history, first time buyers have always had a tough time saving enough for a down-payment; but the recent changes in lending rules, coupled with uncertain economic times are making it very difficult to amass even the minimum five per cent down. Some examples: loan amortization periods have been shortened; qualification rules have been tightened and interest rates are rising. We’re not saying any of that is a bad thing. But, it does affect a buyer’s ability to obtain financing and keep the market moving.
Review: “So, in your opinion, what do you see for 2011?”
Daniel: “Well, on the bright side, the majority of buyers for Keremeos are retired or semi-retired, but someone still has to buy their home before they can move-on, and/or down-size. While the general and specific economic conditions in the valley have put the brakes on rising home prices over the past year, there does come a time when everyone just wants to get moving again. Although spring has been slow to arrive here, we are seeing an increase in buyer activity which is always a welcome sign for sellers.
In fact, the first two months of 2011 have shown slight improvement in the number of sales over 2010. It could be that after a year of sitting on their wallets, buyers want to get back in the game instead of sitting on the sidelines.
Susan: And, of course, the advantages of living in this valley are many: clean air, tasty water, semi-arid climate and more affordable real estate when compared to neighbouring Penticton & Osoyoos. Hard to beat, as far as we’re concerned.
Local real estate stats
2010 saw 71 properties traded.
Over the years 2000 – 2009, the yearly range of properties traded was 106 – 136.
It appears that 2010 saw the market decrease in the Keremeos area by approximately 40 per cent. There was probably a number of reasons why this occurred; the U.S. financial meltdown, the uncertainty surrounding the introduction of the HST, and general economic uncertainty are all factors.
Recent changes to mortgage and lending guidelines will quite probably put downward pressure on housing prices, making it a stronger buyer’s market this year. The changes to CMHC mortgages have resulted in maximum amortizations decreasing from 35 to 30 years, and in addition the maximum loan to value for refinances has been reduced from 99 per cent to 80 per cent. The prospect of rising interest rates is also on the horizon.
Month over month results
(January 2011 vs. January 2010)
1. Average price: Down 8.9 per cent.
2. Active listings: up 12.8 per cent
3. Number of sales to active listings down: 2010 = 6.5 versus 2011 = 4.5
4. Dollar volume: Down 30.0 per cent
2010 = 33,514 vs 2011 = 23.469
5. Total unit sales: Down 23.1 per cent
2010 =108 vs. 2011 = 83