In the Kelowna Real Estate market several factors affect sales, and one of them is supply and demand. As the population grows through emigration demand for houses increases, and in Canada, and parts of the USA many young people struggle to enter the market.
The Economy
Residential real estate creates both jobs and wealth for many families, and every sale provides revenue for the government. In 2018 new construction added $1.13 trillion to the nation’s economy.
When we have a decline in real estate sales it ultimately leads to a drop in real estate prices, lowering the value of all homes. It also reduces the number of loans available to owners. In turn, consumer spending reduces, and this contributes to a downward spiral of the economy. Employment also drops, and no one wants a recession. At this point, the Federal Reserve often lowers interest rates. In 2008, falling house prices triggered a downturn. During 2007 the median price of a single-family home fell by 4% from the peak in 2005, and the signs of cracks in the economy were beginning to emerge. At the time economists could not agree on how bad things were, and of course, some communities suffered more than others.
Interest Rates
The 2008 recession is an example of how a fall in real estate impacts the economy. Falling home prices triggered the start of the downturn.
Between 2005 and 2007 almost half of the loans issued were subprime. When the borrowers defaulted the securities were of little value. The investors then tried to exercise credit default swaps and AIG ran out of funds. In turn, the bailout by the Federal Reserve took place. Banks with mortgage-backed securities ran into trouble, and the bankruptcy of Lehman Brothers started the 2008 financial crisis.
How do Demographics affect Condo Sales?
Many people are becoming edgy, and believe that the Kelowna real estate market will crash in the next few years. However, things are different now and one of them is that subprime loans make up a much smaller market percentage than in 2005 when they were worth 20% of the market.
Banks have changed lending standards, and more people are covered for medical care, due to Obamacare.
Demographics show the characteristics of a population in a given region include the type of residence, income, and educational level of the breadwinners. Looking at all these traits allows lenders to verify if the business is viable in a given region. It directly influences the market in that area when information is gathered through surveys and profiles that show what people can and can’t afford to purchase.
Climate Changes
More extreme weather events like flooding, wildfire extreme heat and drought are rising all over the country due to climate change. So the homeowner needs to consider what impact these conditions will have on those planning to buy and sell homes in the long term.
Many savvy homebuyers are now factoring climate change into their decisions of where to live. And a recent survey showed that half the respondents who plan a move in the next year said that extreme weather had played a part in their decision about where to live. Those that own a home, are forced to consider how climate change will affect their home value. As a result, certain postal codes in British Columbia, Alberta and Ontario have been selling for 3.9% less than those in the low-risk areas, as people don’t want to settle in high-risk bush fire areas.
The trend is not consistent across the country, and it appears that the fear of buying in the areas prone to fire often subsides when the risk of fire passes.
As a buyer in Canada, it is important to understand the risks associated with high-risk flood areas, as home insurance does not cover flood damage. Separate insurance can be extremely costly, but it is crucial that you take that insurance, or in the event of an extreme flood you could be left with nothing. If you are buying in a flood-prone area, Government policies will affect the real estate market, as you may not be able to get insurance, it is important that you assess the risk of the possibility of a 100-year flood event before you buy.