Perfect Storm for a WHITE-HOT Vernon Real Estate Market
From the desk of Rod O’Keefe…The perfect storm for a WHITE-HOT Vernon real estate market…
2022 is NOT Red Hot, it’s WHITE-HOT for the Vernon/Okanagan and area sellers!
Prices are being pushed to record highs. Even our Tax Assessments are sky-high setting all kinds of new records for us in the Okanagan. The two main factors contributing to these unprecedented price bumps and over list price sales are:
- Record low inventory
- And a high number of buyers relocating and trying to enter this market.
What is causing this low inventory supply shortage and high home demand?
- Record low-interest rates. If you borrow an extra $100,000 right now on a 5-year closed rate mortgage over 25 years, it might only cost you an extra $100/week at the current posted interest rate. Savvy buyers know to get in now as financially speaking these low rates are expected potential rises into double digits in the nearer future. So, if you are a buyer/investor taking out a low interest (1.5%-2.5%) leveraged loan to invest in a property with a potential 7-10% in real estate appreciation in the first year not including your loan leverage it simply makes investing in real estate at this time very desirable.
- Many people are leaving the bigger city centers to escape the city density and higher risk for covid infection. Worthy of note is, many individuals (especially in the city centers) are finding newfound freedoms with covid restrictions, now allowed to work from home under their companies’ new guidelines, they are taking advantage of:
- Newfound work flexibility
- Early relocation to the Okanagan valley is now a real possibility
- Better home pricing comparatively to the large city centers
- Better dollar value, they certainly get more for their money in the Okanagan market when compared to the homes they are leaving in the big city. So money in their pockets!
More and more families are making important lifestyle choices that provide the foundation to an exodus from the larger City centers.
- In Vernon, we are also seeing this at a micro-level. Kelowna residents working from home are relocating to Vernon to take advantage of the Vernon market. Buying a home in the Vernon area is near $100/square foot cheaper (18%-24%) than Kelowna. On average the same money spent in Kelowna for a home would be found in a comparable home in Vernon 16-19 years newer. Again, the contrast in values for families with newfound flexible work options is outstanding and they are capitalizing on it by relocating to Vernon.
- Finally, we have always had a strong number of Baby Boomers retiring in the valley and those numbers have increased even more. The baby boomers who were planning international real estate purchases have now realigned their real estate plans for the Okanagan area. This is partly due to the travel restrictions over the past 2 years that have created uncertainty for foreign investment and getaways.
These key contributing factors to our supply shortage and high home demand will continue to drive Vernon and Okanagan real estate prices even higher.
Keep on the lookout! Another factor to watch for in 2022 is our fragile supply chain which is negatively impacting pricing and timing for contractors/builders. This forces these industries to hedge their new home builds. In many cases resulting in an extra/topped up quote of $30,000-$40,000 to account for these uncertainties with the supply chain. Even appliances, paint, lumber, fuel, and raw materials are impacted by our current challenges with the supply chain continuing to rise in price.
Lots to continue to watch for here in 2022 but the good news for sellers is that even with an interest rate increase expected, over the next 4-7 months, we also expect home prices will stay very strong. For more information or to speak with me directly, call 250-545-9039.
