Why NOW is the best time to buy

Get ready for some facts and figures! Last week I made a statement on my Kamloops Real Estate Insider Podcast that I want to dive further into.  I confidently said "NOW is the best time to buy real estate in the last decade" -- and since last week I've researched facts, figures and data to support that claim.  I've modified my thesis here to add that it will also be the best time to buy real estate in the NEXT decade as well.

Let's dive into some data!

As we know, supply and demand plays an important role in real estate pricing -- or the pricing of any commodity really.  Right now, and moving forward, housing demand is exceeding the available supply.

Currently Canada is estimated to have a 1.8 million unit shortfall in dwellings.  Of any G7 country, Canada has the lowest number of dwellings per 1000 inhabitants.  The major factors contributing to the housing crisis in Canada, according to the Canadian Mortgage and Housing Corporation (CMHC) are: supply chain issues and skilled worker shortage, permit wait times, greater need for densification in cities, and affordability.  Taking into account the ramping up of immigration which will bump up our population over the next few years, after a Covid-related lull, along with the steady (and fairly slow) rate of new builds, we are probably looking at an even tighter supply moving forward.

Onward to interest rates! The Bank of Canada enacted 8 increases to interest rates in the last year. That's A LOT of increases. But, looking at historical data, the current rate of 6.5% is actually fairly low compared to some of the major interest rate spikes since the 70's.  I know -- why does it matter what happened so long ago?  I say it gives us some much needed perspective.  For example, in 1970, the median rate (for 5-year fixed) was 4.79%.  Low! By August 1978, the interest rate jumped to 10.75%.  January 1981, interest rates reached 15.5%.  8 months later in the same year, interest rates reached a peak of 21.75%, the highest interest rates in Canadian history.  From there, we saw the rates drop in a relatively steady downward trend to June 2019 at 5%, with a few blips along the way.

Factoring in the rates over history, the median interest rate over the last 53 years was actually 13.5%.  Compare that to today, and our rate seems low.  This is to illustrate the power of perspective and relativity.  Although it does FEEL like a tight squeeze (and it absolutely is, no denying that) this historical perspective helps us take a step back and view the larger trends.  This broader perspective is helpful to being able to recognize what good opportunities are at our feet right now.

Let's move along to cost and value:  how much does real estate actually cost? I'll be using Kamloops specifically as an example here. Going back to 2013, the median house price in Kamloops (for single family detached home) was $363K.  By 2019 (pre-Covid) that median house price in Kamloops was $455K.  That increase is essentially normal, in that real estate value appreciates over time.

In 2020, ushering in the era of Covid-related inflation, we saw that median house price in Kamloops increase to $513K, and in 2021 jump to $590K.  In 2022, the median house price in Kamloops for a single family detached home was $750K.  Yikes!

Now, that number has decreased already.  This is good! Based on the data I have available for January 2023 home sales, the median house price in Kamloops, estimated by me, has receded to approximately $600K and some change.  A significant decrease!

Using all this data, I can measure that through the Covid era of rapidly inflated house prices, the median house price increased approximately 30%.  They have since come down about 18% since the peak of 2022.  Major banks have reported that we can expect the market will drop a total of 20% from that 2022 peak.

We can conclude, then, that we are almost at the bottom of the trough.  We may see another percentage or two dip in those prices, but we are basically looking at the bottom of the dip -- it is happening RIGHT NOW.

So let me ask you this: Would you could go back and buy stock in a major company like Pepsi, Apple, IBM, etc ANYWHERE near the bottom of trough (meaning, when the value of the stock is at a low point)? Knowing what you know now? Heck yes you would! We all would.

That power of hindsight is an incredible teacher, and we so rarely are able to apply its teachings to situations unfolding before us.  Trust me, this is one of those times.

It's a buyer's market, and the time is right.  In fact, it's right now.

If you want to discuss buying or selling real estate, your real estate investment goals, or even the content of this blog post or otherwise, please reach out to me at any time.