The Kelowna Housing Crash… Down 70% Or More!
Kelowna is a tiny city - yes, a tiny one - of only around 107,000 people (according to the 2006 census). We are situated in the Okanagan Valley, a greater area that is home to a little over a quarter million people across 3 Cities and 7 satellite communities. Compared to major metropolitan and culturally-rich areas such as Vancouver, Edmonton, Calgary, Montréal and Toronto, our home prices should be downright cheap. And yet, Kelowna has some of the most expensive homes in the entire country.
Over the last eight years we have experienced a greater than three-fold increase in the cost of an average home. In 1998, the average home was about $160,000. In March of 2008, that value sat at $553,000. In just ten years, the average home price in Kelowna had risen so that 2008 prices were 346% that 1998 prices.
Sit back and think of that for a minute. At no other time in Kelowna history have homes appreciated so much in so short a time. As well, there is no other metropolitan area in North America that has seen this level of home price appreciation in the decade leading up to its market peak. And finally, Kelowna home prices have ended up being some of the most expensive in Canada, exceeding all other cities save Vancouver. In fact, a 2008 study placed Kelowna as the 13th most unaffordable place to live on the planet, and the most unaffordable place in Canada.
There were many in Kelowna who said that our home prices might moderate in 2008 or 2009, but that prices would continue to rise through 2010. I knew that they were wrong -- that we had been caught up in perhaps the largest wealth bubble to have ever hit the Kelowna area, and that we would be in for a very hard landing.
How hard?
Think a home price decline of 70% - or more - peak-to-trough.
Yes, I am serious. No, I am not a candidate for a padded room and experimental pharmaceuticals. On this website, and in this Articles section (links to the left), I will spell out exactly why this bubble could not continue, and why homes in Kelowna are destined for a minimum of a 70% decline in values before 2012.
And the scary thing is, I am trying my best to make these estimates optimistic -- that I am using logic, reason and rationality to find the most “middle path” possible!