Seasons Greetings!

Dear Friends in Real Estate,

Vernon is booming! And so is the rest of the North Okanagan! Before I get into my predictions for the New Year, let’s look at a bit of real estate history. From 1986 to 1993 house prices in the Vernon area increased about 150%. Thus a house that sold for say, $80,000 in 1986 would have been worth about $200,000 in 1993. From 1993 to 2001 the whole B.C. economy was struggling and house prices drifted down approx. 20%, bringing the $200,000 house down to $160,000. Then the market turned upwards again and since 2002 has increased about 50% which puts the same house at a present value of $240,000. To many people, it looks like house prices have gone out of sight with recent yearly increases of close to 20%. However, if we look at the longer term and compare the 1993 value to the 2005 value ($200,000 - $240,000) the average increase is only about 2% per year. If we compare the 1986 value to today’s value, we are looking at an average increase of about 10% per year or 6% per year compounded over a 20 year period. The 6% per year is probably a reasonable increase to be expected – which still makes real estate one of the best investments for most people. The main thing to remember is that real estate is a long term investment and typically has cycles of 7 years or so. The shape of the cycle can vary dramatically. Sometimes it goes up drastically, as it did between 1986 and 1993 and as it seems to be doing right now. Other times it goes down as it did between 1994 and 2002. Yet other times it may simply flatten out and stay much the same for a while.

The question that many people are asking right now is, “when will the bubble burst”? The so called “experts” have come up with different answers. My prediction is that the Vernon and North Okanagan market will continue to be strong but with a lesser increase in values than in the two previous years. So, instead of 20% increase per year, I can see a 10% increase per year. As more housing projects are being built, the listing inventory will slowly increase, thereby stabilizing prices. In summary, real estate is a very good long term investment and Vernon and North Okanagan is one of the best places to be in.

Have a Merry Christmas and a Happy New Year.



Bjorn Edblad
Re/Max Vernon