More reasoned than me

Further to last Friday's post, this letter appeared in the Kelowna paper today:

The Daily Courier (Kelowna), Page A11, 24-Oct-2007

History shows house prices will come down

By Mo Rajabally

This letter is as a result of The Courier's Steve MacNaull's Home out of reach' piece (Oct. 16) and Damon Enns' letter 'Home aren't out of reach...' (Oct. 18).

The intent is to caution any person who may think it is now or never time to own a home. I have lived in this valley for 32 years, and I have observed the ebb and flow cycle of real estate. It is not a line that goes straight up indefinitely. At most, it plateaus and perhaps gradually, it comes down.

The backbone of any economy is the middle class. I would like someone to tell me if this class has had a 10 per cent pay raise per year over the past five or six years.

This is how much the value of real estate has appreciated in Kelowna. When I read the statistics Irene Wilkinson of Express Mortgage Services provided (Courier, Oct. 18), I shudder. Now that the price of a home has jumped over the $500,000 mark, what will be the average mortgage with a 10 per cent down payment?

And, how could a young couple with two incomes pay a monthly mortgage of over $2,689? What happens if there is an accident, an illness, a transfer, or worse still, a loss of a job, not to mention an interest rate hike?

I remember being told in 1988 by a real estate agent if people didn't buy a home then, they would never own one.

Soon after, the market had peaked and I had sold my home. I rented for a year. The following year I bought a lot half the asking price when it came on the market in 1988 because the market had taken a plunge.

It is going to happen again; at least this is what I think, but perhaps not to the same extent. I would request any economist/statistician from UBC Okanagan, or Okanagan College, to do the math.

Of all the baby boomers retiring all across Canada, what percentage would retire in Kelowna?

Also, how many people in Kelowna have cashed in on their house equity and have moved on to cheaper locations?

Everywhere I go, I see apartment buildings, townhouses, and single-family homes under construction.

Will they all be sold at the asking price? Well, it depends on what the market will bear. There is always the possibility some developers could end up holding a bagful because they have missed the last ferry.

The one thing we have going for us in Canada right now is low interest rate and a solid economy.

Recently, MP Garth Turner, visited the Valley. I used to read his investment newsletter and even read his column in one of the local papers.

He warned Kelowna the boom could not continue. Frankly, one does not have to be a rocket scientist to know there is always a goal post and that the sky is not the limit, except perhaps if you sell real estate.

I would, however, caution any prospective buyer to make his or her own decision and not to rely on my observations and comments.

Now I believe in the process of writing this letter, I have created a problem for myself.

Will I find a real estate agent to sell my home? Well there is an open invitation.

Mo Rajabally,
Kelowna

Mo, I'm guessing you'll have line-ups of Realtors wanting to sell your home. I'm pretty sure that in your neck of the woods they've been too busy selling homes to read the paper.

Strathmore condos in Langford dropped their prices today.