This will be the last column I write on real estate. Largely because at the end of the year I will be handing in my license. After 20+ years of working in land development, resort development and real estate sales in general, I am moving on. It has been a great journey.
I was humbled by all the comments I received last week after my column, from both REALTORS® and the public and so I wanted to add a few more thoughts.
At least two news outlets ran such reports last week after they read the published report we discussed. Was the text misleading? On one hand yes, and on the other hand no. You see, the lawyers would have looked at it and said everything looks great, nobody is saying anything which isn’t supportable (except perhaps some overtly optimistic predictions). But the media and the public on the other hand is “hoodwinked” into believing their house values are likely to increase by 7% next year. Is that what was said? No. Is it what was received? Yes, in most instances.
The point last week was that many statements (as evidenced by the media reports) were taken out of context but nobody had attempted to put them in to context.
It is very common in real estate to talk about average house prices (or median house prices) increasing or decreasing. What does it mean to you? In the market we are in today, virtually nothing.
You could be confused into thinking next year for example, your house value is going to increase by 7%, after all, you read it in a report. Yet, it is not what the report said. The report indicated the average house price in Kelowna was going to move up 7% and will lead the country!
How are the two different? Let's say last month we sold 4 x $400,000 homes. A total of $1.6MM in real estate sales, average value is $400,000 per home. Well this month, we sold 3 x $400,000 homes and 1 x $500,000 home. Total sales value $1.7MM. Average house value $425,000. Wow, our homes have all gone up 6.25%, or have they?
Of course they didn’t, but every day reports are written to help you come to a similar conclusion. All it does is cause confusion for you and a difficult meeting for the REALTOR® at the listing presentation who then has to explain how your perception is not quite correct.
So onto the big prediction for next year. Will we see a 7% rise in values or average value? The answer IMHO is a resounding no. The Kelowna market is still very fragile. Our values are somewhere between 2007 and 2008 values, a long way off the mark from where we are today and it will take a long time to get there.
As I mentioned in last week's article there are too many economic parameters working against the housing market to see that recovery. Oil will absolutely soften the Alberta market although you may see a few execs take early retirement now. The dollar is not going to help us. The impact of US buyers in our Kelowna market is completely statistically insignificant. US buyers struggle with the concept of buying in the frozen north. If it were the opposite, Oroville would be a booming resort town like Osoyoos. I have executed large scale sales programs in Osoyoos when the dollar was weaker and there were virtually no US sales. Business in Kelowna is not good across the board, it is recovering, like the real estate markets. Some sectors are doing well and others clearly are not. As I indicated, far from being a benefit at the moment, recreational property is a thorn in our side until that market heals which will be a long way off.
In regards to oil pricing, my understanding of the situation is that light oil exploration may shut down/slow down but too much has been invested in heavy oil to pull out with a swing in pricing. The oil sands are very likely to keep moving ahead regardless of price... that does not mean they will run over here in droves to buy our real estate.
It is not all doom and gloom however. I do believe we are seeing signs of recovery. Let's face it, our transactions are up over last year, that is worth celebrating. Listing inventory is low precisely because people are not seeing the values on their properties' return and are unwilling to sell. I did some research this week looking at the change in values of properties. The only metric to use is similar type of real estate, similar price range, similar features and look at price per square foot values at the beginning of the year and the end of the year.
I looked at four regions and took the first three sales of the year and the last three sales of the year. I looked at the most active range in the market $400k to $500k. What did I find? Nothing exciting. Two regions had seen a very slight gain in per square foot values and two had seen a decline. The net result was a little nudge upwards if you looked at the average! What was interesting is most regions only had 15-20 sales in the year for that particular type and price range of property. A far cry from a busy market.
Next year, I would like to think that we would see increasing transactions and a general slow rise in values across the board. As far as I am concerned we will not be seeing high single digit gains in the real estate market for a long time. If we happen to, watch out... it might bite you where it hurts. What is the best metric for that? The buyer of your home... what are they willing to pay? No stats will tell you that and a professional REALTOR® is there to provide some history and context to their market appraisal.
There are many professional REALTORS® in Kelowna who will work hard to give you accurate information and assist you in marketing and selling your home. As usual your job is to develop a relationship with the one that you trust can do the job for you but there are plenty of examples of very good and productive REALTORS® in the Okanagan, choose wisely and you will get good counsel and at the end of the day with a little good fortune, the job will be done too.
The local Real Estate Board does a good job of providing ongoing education programs and managing the group affairs of the REALTORS® in the Okanagan. It has been a privilege to work with my colleagues in the industry but it didn’t mean that I couldn’t disagree with them from time to time!
As most of you know, this column was started with a focus on Okanagan real estate. Over time, more and more columnists started covering the real estate sphere and so it morphed in to a personal column with some of my own viewpoints on life.
I had to come back to real estate this week after reading the above headline yesterday in an article. The article went on to quote a Remax report that said that we are in for a very happy time in Kelowna with skyrocketing house prices predicted. We are going to lead the country. The recreational markets are hot.
I was more than a little confused. My own home has been on the market for three years with barely a showing and I have many friends in the same position.
To suggest that recreational markets are a big plus in Kelowna is more than a little foolish. We have one ski hill that has just gone through foreclosure with no offers and another one that is unable to open and proceed with development plans plus a behemoth project on Kelowna’s south western corner of the lake that is rumoured to be in big trouble.
I was so intrigued I tried to pull some stats but interestingly the historical stats have disappeared from our databases.
I looked at one resort, the recreational type of darling that the article refers to, La Casa. A very popular resort with tourists and investors. In 2014 the average house sale (of which there were precious few, was $288,000 at the resort. Average lot sale (of which there were 21) was $40,000, however if you removed the top 4 outliers, that quickly reduced to $26,760 on 17 sales.
Compare this to 2007? Well I couldn’t because the history has disappeared. But I will tell you what was happening in 2007 because I was very involved in sales at the resort.
I was selling cottages for $650,000 and lots for over $100,000. I would hazard a guess since I have no files to refer to, that the average cottage sale at La Casa in 2007 was very close to $420,000 and the average lot sale may have been close to $100,000.
We had better lead the country for a good several years with skyrocketing prices to restore the equity that was here in 2007. But is that realistic?
The truth is plain and simple. The Bank of Canada is afraid of debt levels in Canada. Kelowna has seen more than its fair share of businesses close down this year, houses are not being listed because they are not getting the value the owners want (which is precisely the reason for the low inventory), the Canadian dollar is seriously weakened and oil is back to levels we have not seen for as many years as good real estate prices.
Good economy? Skyrocketing? Think again.
I think we should tread very carefully, I think we should write slightly more intellectual articles that dig in to the fundamentals that drive real estate markets and I think we should avoid the use of flagrant terms like “skyrocketing” because it sets us up for a fall. As REALTORS® we are meant to be professional mentors and guides to our clients not “cheerleaders” for a soft housing economy that has had a good year relative to the past few years.
2014 has been such an exciting year for me in many ways. Lots of lessons, progress and of course a few setbacks.
A firm grip on the reality of life reminds me that flowers don’t grow in a desert where the sun always shines. We need periods of contrast in order to frame our reality.
One of the areas I have been spending a lot of time in is the internet marketing sphere and I am by no means an expert, but I have been able to figure out a few very important aspects that have severely and positively impacted my marketing ability for my adventures, charity and businesses.
Of course as we compete on the internet we have a much larger environment to make our statement. We want to succeed but how do we best deliver our message. In particular one aspect that always gets my attention is video. Like it or not, we live in a world driven by entertainment. Video has evolved to the point where we can literally record important aspects of our lives with a cell phone not much larger than a credit card. By 2017 it is forecast that 70% of bandwidth will be used up by video viewing!
What used to take hundreds of thousands of dollars of camera equipment and the knowledge built up from a university degree in post production technology has been replaced by the smart phone evolution and apps that cost less than a lunch time snack in a restaurant.
The most important aspect of the internet I have found out is not to do with the quality of the video or the blogging but the reach of the product, the success of the distribution.
What is the point of spending thousands of dollars on fancy video production if nobody is going to see the video. Search engine optimization is the most critical area for you to learn about if you are interested in being successful on the internet.
It does not matter if you are writing a Kindle eBook, putting out a video or creating a web page for your audience, your search engine ranking is what will make you or break you. Many internet millionaires have made their fortunes publishing Kindle eBooks. In many instances, they never wrote a single word of copy. Their expertise was in the digital marketing the book with Search Engine Optimization techniques that blow most of us out of the water.
I recently gave a web seminar on “Video Marketing for your business” which was oriented to Realtors but is appropriate for almost any company/organization. It was received very well and so I have decided to make it available to you here.
Feel free to reach out if you have questions and please take the time to look and see how simple it can be to use the internet to truly market your business.
On Wednesday evening I drove through the Bow Valley in Alberta. It is my old home town... the first place Jackie and I moved to in 1988 when we emigrated. We ended up setting up home there and living there for almost 15 years.
After a very wintry drive from BC I passed the Park Gates and on my left was the small hamlet of Harvie Heights. I peered through the darkness to see if I could locate the cottage Jackie and I rented from a lovely couple when we first arrived.
Rundle Ridge Chalets was a small chalet rental village on the side of the Trans Canada highway. Jim and Bea Cocking, the managers welcomed Jackie and I with open arms as a young 25 year old couple including quite a large bump and a lively young Labrador.
Jackie was five months pregnant and we needed to settle in. On this Wednesday evening, the weather was pretty much the same as it was when we arrived. Snow and ice crystals hanging in the air, a starry evening cloaking the silhouette of the majestic Rockies. We were (almost) in heaven!
Memories came flooding back of all the friendly people who we met and helped this young couple get a start in their life. The feeling of excitement as we embarked on a new journey together.
I am experiencing the same feelings as my young son and his wife put together their first business in Kelowna. Muninn’s Post at 575 Bernard Avenue will be North America’s first Viking themed bar. With a distinct norse twist and an appetite for community, discussion and board gaming (plus they have some great Ales lined up) served with some wonderful food. I am sure they will be successful. What is helping their success though is the generosity of people they are coming across who are finding them or offering them some great prices on equipment for their kitchen and restaurant. It is the same warm, Canadian generosity that made Jackie and me feel so welcome as new immigrants to Canada.
Last night I delivered one of the most important presentations of my life. The biggest adventure I have ever attempted is being shared with a crowd of entrepreneurs in Calgary. My business partner and adventure buddy, Andre Voskuil is here too to expand on the business opportunity we have been able to create with this amazing worlds first adventure.
The flying car project is “taking off” literally, the wheels are up, we are gaining altitude and in a matter of months will be undergoing flight training, physical and mental training and filming a multi part documentary series for global TV distribution. In fall of 2016 the plan is to land two flying cars at YLW and share with Kelowna an amazing victory and a brand new aviation world’s first record.
Did that young 25 year old immigrant, sitting in a tiny wooden cabin back in 1988 share that dream with his Golden Labrador and pregnant wife? No. I came over to Canada to be a ski bum. I wanted to climb and ski in the Rockies. But then, I have always been a dreamer.
Dreaming is good - don’t stop.
More The Accidental Journey articles
The views expressed are strictly those of the author and not necessarily those of Castanet. Castanet does not warrant the contents.
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- How low can you go? Oct 3
- Finding the smart money Sep 26
- Disruptive innovation Sep 19
- Brangelina and Celebrity vs Philanthropy Sep 12
- Managing your personality Sep 5
- New Real Estate Brokerage in town Aug 29
- What is a journey without a destination? Aug 22
- Going home to a bully! Aug 15