The real estate market in Penticton may finally be stabilizing after two record-breaking years of extreme heat.
The market saw a 12.5 per cent rise year over year in the average sale price of a single-family home, often viewed as an indicator for the market, for the first half of 2018 to just under $582,000 — $636,000 if you bought in June, according to South Okanagan Real Estate Board stats.
In fact, just this month, SOREB president-elect Dori Lionello said she closed the largest single-family home sale in the region’s history — a Summerland home sold for around $4.5 million. (Single-family homes have sold for higher, but those have been bought for the purpose of subdividing and redeveloping.)
But even that high sale price in June marked a decrease in prices month over month, with May’s average sale going more than $20,000 higher than June, often one of the hottest months of the year in real estate sales.
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“After a few record-breaking years, we are starting to see the sales slope,” Lionello said. “I’d say we’re maybe starting to normalize. It’s definitely shifting. There is definitely more inventory now than the last couple of years.”
In all, activity in the market has dropped, with new listings decreasing by about one-fifth from May to June.
Total residential and non-residential sales dropped nearly 14 per cent year over year — 680 year-to-date sales by June 30, 2017 compared with 587 for that same time this year. Meanwhile, the average stay on the market increased year over year from 51 days in the first half of 2017 to 59 in the first six months of 2018.
On top of having more inventory, loosening up the market on the supply side, there are also signs of somewhat diminished demand for local real estate. That’s due in large part to changes coming from the provincial and federal government.
Related: Okanagan housing sales for March a mixed story
New rules from the Office of the Superintendent of Financial Institutions now require potential buyers to take a stress test before taking out mortgage insurance even when they are dropping a 20 per cent or higher down payment. Previously, the stress test, which tests a buyer’s ability to weather economic storms such as increasing interest rates, was only mandatory for those making lower down payments.
“It does limit the buying power for, say, an average single-family home, or an average family trying to get into the market. It puts some pressure on them — they can’t afford as much as they did last year if they were buying it,” Lionello said.
“What they can afford is substantially less, and then the prices are going up. It’s kind of a battle to catch up to the market, but now the market is kind of levelling out. That might give families some opportunities to see some stabilization in the prices.”
On top of those changes, the Bank of Canada has steadily raised its benchmark interest rates four times over the past year — including a 25 basis point hike Wednesday — incurring higher rates down the line.
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The market may also be starting to see some effects of a cooling Metro Vancouver real estate market, as the contentious battle continues to bring prices down. For years, that market has seen consistently increasing prices, with even dilapidated homes seeing million-dollar price tags, which Lionello said has made for a good retirement plan for residents.
Sell a $2-million home in Vancouver, and you can get a healthy downpayment on a winery or vineyard, with some personal savings to boot.
“They’re still cashing out, but because the Vancouver markets have slowed, they aren’t coming in droves anymore. They’re fewer and far between,” Lionello said, noting the effects of Vancouver tend to trickle into the South Okanagan with “a four- to seven-month lag.”
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It isn’t yet clear, however, if the current price shift will become a trend, Lionello said.
“We’re all kind of waiting to see how it plays out by the end of the year,” Lionello said, also pointing to new rules in B.C. that bar Realtors from representing both the buyer and the seller.
“There’s some huge different dynamics in play coming down from the government. It’ll be an interesting year. I’m excited to follow it and see what happens.”