THE MARKET: IS IT A 10-YEAR CYCLE?
What if you knew what the market was going to do over the next 10 years?
In the South Okanagan it seems every 10 years the housing market hits a peak, then starts to gradually slide. It happened in 1988/89, then nine years later in 1997/98, again in 2007/08 and yet again in 2017/18. It's like clockwork and yet each time the reasons for the slide are different - most recently, the global economic crash of 2008, and in 2017/18 the Alberta oil-market collapse and BC taxes on foreign buyers.
But what if the reasons don't matter? What if the housing market here is a predictable cycle? What if it goes through the same ups and downs every 10 years?
Back in 2008 we thought we'd test this theory: how accurately could we predict when and how long the downturn would last, then predict how long it would take to reach the next peak?
The short answer: Very accurately. It was uncanny.
So we've applied the same thinking to this current cycle, which started after the peak of 2017/18. Check 'The Market: Latest Stats' tag to see what's currently happening but, if this cycle is like the last three, here's what to expect:
2020 to 2022 - Fewer surges and more prolonged inactivity. Sellers have now reconciled that they missed the peak and are more open to the reality that it is now a Buyer's market. Price reductions are the norm. Listings are canceled and then relisted at a lower price in hopes that they appear fresh to buyers. Buyers realize that there's no rush in making a decision about whether to write an offer. In fact they feel bolder about waiting to see if the price gets reduced on a property they like. Sharply priced new listings sometimes get multiple offers but that's become a rarity.
2023/24 - The bottom of the market. Buyers are scarce. Even sharply priced properties languish. Sellers are defeated - many are open to any reasonable offer just to get the property sold.
2024/early 2025 - Listing inventory starts to shrink. The sellers who had to sell have either sold, taken on renters or walked away from the property. Foreclosures are becoming more common. But sales are too, and prices start to hold steady. By mid 2025 buyers are less complacent as one or more properties they had their eye on sell - at or close to list price. By the end of the year new listings are priced slightly higher than recent similar sales and selling, sometimes in a multiple offer.
2026 - Momentum becomes more apparent as new listings continue to be priced higher than recent sales - and sell. Buyers are now more sensitive to acting sooner than later if they find the property that works for them. As the year progresses inventory shrinks. Multiple offers are becoming more common. And, as those buyers bid against each other and drive up the eventual sale price of a property, the next property similar to that will be listed even higher. And sell.
2027/2028 - The next peak has arrived. Prices in 2027 are climbing weekly. By the end of the year they have gone up by tens of thousands of dollars in just about every sector of the residential market. But then in most sectors prices level off in 2028 with the exception of unique one-of-a-kind properties, which can still be rising in value with multiple offers. But the end of 2028 price reductions become more common as it becomes apparent that they are no longer rising. As 2029 unfolds, we're back to the beginning of the down cycle (see 2019).
Expansion/Contraction: Depending on where a property is located, the timing above will vary. Generally, the market expands and contracts from the economic center. In the South Okanagan, that's Penticton. The first sign of the downturn is when properties in outlying rural and even semi-rural areas stop selling. Rural areas like Faulder, Twin Lakes, Willowbrook. Semi-rural areas like Naramata, West Bench, Kaleden/Heritage Hills, St. Andrews. At the bottom it feels like you can't give properties in areas like these away. The clearest sign of the peak - when those same areas are commanding top dollar and selling like hotcakes.