House Prices

Kamloops Real Estate: Time for a Reality Check

Okay enough everybody!

It is time for a reality check---stop watching those wacky TV shows where a couple of guys who don’t know a hammer from a garden hoe, buy a dump, paint a few rooms, hang a flat screen TV on the wall and then flip the place for twice what they paid for it.

The Canada Mortgage and Housing Corporation’s latest housing market report says, in so many words, the party is over and the bar is closed. Rising mortgage rates, cautious consumers, declining housing starts and increased supply of houses on the market is bringing real estate price increases back to earth.

According to CMHC, the double-digit growth in housing prices that British Columbia has experienced over the last four years will slow down return to a rate more inline with inflation. CMHC’s mortgage rate forecast calls for 5-year mortgage rates of 7.12 percent in 2008 and 7.42 per cent in 2009.

Add in a few other facts of life these days, like the high cost of gas and rising prices for food and you can bet your sweet petunias that home buyers find a half million dollar mortgage a little less enticing than they did a few years ago.

So what’s the situation in the ‘Loops?

Well, a few years ago, you could buy a decent property in a nice neighbourhood for $170 thousand. Barring an outbreak of Ebola virus in Kamloops, those days are most likely, gone, vanished, over forever.

“We are not going back to 2003 market prices,” says Louise (Ziggy) Morash from Remax Reality in Kamloops. Morash looks at the Kamloops region with the steely eye of someone who has been in the marketing and sales business for 20 years and watched the city grow like an Okanagan wildfire.

Prices have more than doubled in Kamloops since 2004. The upward movement in house prices nothing less than astounding. The average house price in Kamloops at the end of the first six months of 2008, according to CHMC statistics , was $392,753. That is a smoking red-hot increase of 18 per cent from $332,841 compared to the same period in 2007.

After what Morash describes as “some banner years” in the Kamloops market, things have definitely changed. “There used to a lot of multiple offers for almost anything that came on the market,” she says “Now houses can sit on the market for 30,60 even 90 days, but if they are priced right, they are selling.”

The Canada Mortgage Housing report says MLS sales are down about 50 per cent in the first half the year in Kamloops. That would make it one of the slowest real estate markets in B.C. at the moment.

However, Bob Gieselman, the president of the Kamloops Real Estate and District Association says you have to consider the big picture when evaluating current market conditions. “I think the market is leveling off, but you really have to consider what has been happening here since 2004 to really fairly evaluate the situation,” he says.

Gieselman is an agent with Royal LePage and been working the real estate business for 30 years. He’s seen the ups and he’s seen the downs in the Kamloops real estate market. “At the end of every cycle, the price always ends up higher than where it started.”

It’s true that the number of houses for sale in Kamloops has ballooned what you really have to look at the number of houses sold. “It is exactly the same as it was in 2004,” he says.

It may also be true that some people have rushed their homes onto the market because they are worried that house prices may retract. Despite the fact that CHMC says housing sales are slowing, and there is downward pressure on price increases, CMHC says house prices will continue rise. For the Kamloops market, it is predicting that the average home price in the city will be in the $400 thousand range.

As an agent, Morash feels that the market slow down is ‘a good thing’, as Martha Stewart would say. “I didn’t always feel comfortable working with people in the kind of crazy market we had. People felt rushed into buying houses that sometimes weren’t really what they wanted,” she says. “In the next few months, things will balance out and it will be a better experience for everyone.”

Sellers, used to seeing those 20 percent year-over-increases, in market values may need a little wakeup call after years of hearing about offers that routinely come in well over asking price. ““We are in a period of attitude adjustment in terms of the sellers,” says Louise Morash, “Sellers have to lower their expectations at little.”

And, buyers may have to have get a hold of themselves too. “We’ve seen people come in and make offers on properties $100 thousand or $150 thousand under asking price,” says Gieselman, “But that just isn’t the situation we are in at all.”

Remember those two guys, the house flippers, looking to make a year’s salary in 3 months by fluffing up houses, putting some fresh flowers in vase on the dining room table and filling the house with the smell of fresh cookies? Well, they could find that instead of making a bundle, they end up losing a bundle.