Oct. 12, 2018

Nanaimo Market Statistics September 2018

On Low Volume the Average Home Price in Nanaimo Hits an All-Time High

 

Single Family Prices and Volume

98 single family homes sold in September, 22 less than the 120 sold in August and down over 35.5% from the 152 that sold in the same timeframe last year. The average home price increased almost 3% from August’s average of $566,795 to $582,115, which is over 10.5% higher than last September when the average home price was $526,392. The median sale price increased by 4% in September to $551,700 from August’s $529,000, which is almost 13% higher than last September’s median sale price of $489,252. 171 homes were listed in September representing a 7.6% increase from the 159 listed in August, and a 15% decrease from the 202 listed in September of 2017.

 

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio decreased in September, coming in at 57%, down 24% from both August of this year and September of 2017 when the ratio was 75%.

For the second month running, September’s sell price/list price remained at 97%, down just over 2% from September 2017 when the sell price/list price was at 99%.

The average days on the market decreased by 3 days to 31 which is 24% higher than the average of 25 days on the market in September of last year.

As of the end of September, the number of active listings was 364, down by almost 4% from the 379 active listings in August, but almost 13% higher than inventory levels at the same time last year.

 

Top Performing Neighbourhoods & Categories

14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from August to September, with 16 of the 18 also experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these year-over-year average price changes range from -3.65% in Lower Lantzville to 23.89% in Pleasant Valley. Top risers month-over-month were Extension and Brechin Hill. Top performers year-over-year were Pleasant Valley, Uplands, Central Nanaimo, Brechin Hill, Old City, and Departure Bay. Looking at volume, the only riser both monthly and annually was North Jinglepot.

All categories with the exception of townhouses saw an increase in average sale price from August to September, while single-family waterfront homes, lots, and single-family homes all experienced increases year-over-year.

 

Check out the Nanaimo Market Statistics Here:  Monthly Statistics for September 2018

Source: VIREB

Sept. 6, 2018

Nanaimo Market Statistics August 2018

 

Market Recap - August 2018

Single Family Prices and Volume

120 single family homes sold in August, 11 more than the 109 sold in July, but down 13% from the 138 that sold in the same timeframe last year. The average home price marginally increased from July’s average of $565,388 to $566,795, however, this is still more than 9% higher than last August when the average home price was $518,612. The median sale price decreased by 2% in August to $529,000 from July’s $539,900, but this is still almost 7% higher than last August’s median sale price of $495,000. 159 homes were listed in July representing a 30.5% decrease from the 229 listed in July, and a 27% decrease from the 218 listed in August of 2017.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio increased in August, coming in at 75%, up 56% from 48% in July and up 19% from 63% in August of 2017. This figure should be taken with a grain of salt as the number of homes listed were down 30.5% from July and 27% from August 2018, which partially explains the increase.

The sell price/list price decreased to 97% from July’s reported 106% (which appears as though it may have been erroneously reported by VIREB). In comparison, last August came in at 99% and we have not had seen this figure dip to 97% since December of 2015.

The average days on the market increased almost 48% to 34 days in August up from 23 in July, which is in turn 10 more than the average of 24 days on the market in August of last year; this marks the highest average days on the market since January 2017.

As of the end of August, the number of active listings was 379, down by over 14% from the 442 active listings in July, but more than 10% higher than inventory levels at the same time last year. Again, much of the decrease from July can be attributed to the decrease in the number of new listings.

Top Performing Neighbourhoods & Categories

11 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from July to August, with 16 of the 18 also experiencing increased prices year-over-year. This is actually the first time in nearly 2 years that we have had a sub-area experience a year-over-year decline. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these year-over-year average price changes range from -0.96% in South Jinglepot to 21.31% in Pleasant Valley. Top risers month-over-month were Pleasant Valley and Upper Lantzville. Top performers year-over-year were Pleasant Valley, Uplands, Chase River, Departure Bay, University District, Central Nanaimo, and Brechin Hill. Looking at volume, the only risers both monthly and annually were North Jinglepot and Central Nanaimo.

Single-family homes, single-family waterfront properties (on low volume), and townhouses were the only housing categories that saw an increase in average sale price from July to August, while single-family homes, apartment style condos, patio homes, and townhouses all experienced increases year-over-year.

Check out the Nanaimo Market Statistics Here: Monthly Statistics for August 2018

Source: VIREB

Aug. 9, 2018

Nanaimo Market Statistics July 2018

Market Recap - July 2018

Single Family Prices and Volume

109 single family homes sold in July, up 1 from the 108 sold in June, but down over 28% from the 152 that sold in the same timeframe last year. The average home price increased from June’s average of $556,879 to $565,388, however, this is still almost 8% higher than last July when the average home price was $524,435. The median sale price increased by 2.66% in July to $539,900 from June’s $525,900, which is 11% higher than last July’s median sale price of $485,000. 229 homes were listed in July representing a 2% decrease from June, and a 2% increase over the 224 listed in July of 2017.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio increased slightly in July, coming in at 48%, up from 46% in June. However, more notably this is down over 29% from 68% in July of 2017, 33% from 72% in July of 2016, and down more than 35% from 74% in July of 2015. July’s figure is more representative of balanced market conditions, than the results in the previous year which were more indicative of a Seller’s market.

The sell price/list price rose to 106% in July which is not suggesting every home is selling at 106% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases.

The average days on the market increased to 23 days from 20 in June, which is also 3 more than the average of 20 days on the market in July of last year.

As of the end of July, the number of active listings was 442, up just under 10% from June, and over 31% higher than inventory levels at the same time last year. This is the highest number of active listings since August of 2015.

Top Performing Neighbourhoods & Categories

13 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from June to July, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 1.78% in South Jingle Pot to 18.14% in Uplands. Top risers month-over-month were Cedar and North Jingle Pot. Top performers year-over-year were Uplands, Old City, University District, Chase River, Central Nanaimo, Brechin Hill, and Departure Bay. Looking at volume, the only risers both monthly and annually were North Jingle Pot, Diver Lake, and Upper Lantzville.

Single-family homes and townhouses were the only housing categories that saw an increase in average sale price from June to July, while only single family homes, apartment style condos, and patio homes experienced increases year-over-year. With affordability issues continuing to impact the market, apartment style condos were the only category in July to experience month-over-month and year-over-year sales volume increases.

Check out the Nanaimo Market Statistics Here: Monthly Statistics for July 2018

Source: VIREB

July 5, 2018

Nanaimo Market Statistics June 2018

Market Recap - June 2018

 

Single Family Prices and Volume

108 single family homes sold in June, down 22% from the 139 sold in May, and down over 41% from the 184 that sold in the same timeframe last year. The average home price decreased marginally from May’s average of $563,218 to $556,879 although this is almost 6% higher than last June when the average home price was $526,234 The median sale price decreased by 5% in June to $525,900 from May’s $555,000, but this is still 5% higher than last June’s median sale price of $500,000. Dating back to February, which is often when we see the market start to spring back to life the average price had hovered in a fairly narrow band between a low of $551,392 in March and a high of $563,218 in May, with median prices bottoming out for this time period this past month at $525,900, after peaking last month at $555,000. 234 homes were listed in June representing a 12% decrease from May, and a 10% decrease over the 261 listed in June of 2017.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio continued to decrease in June, coming in at 46%, down from 52% in May and down over 34% from 70% in June of 2017, 45% from 83% in June of 2016, and down more than 31% from 67% in June of 2015.

The sell price/list price remained constant at 99% in June which is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases.

The average days on the market increased to 20 days from 16 in May, which is 1 more than the average of 19 days on the market from June of last year.

As of the end of June, the number of active listings was 402, up over 12% from May, and almost 25% higher than inventory levels at the same time last year. This is the highest number of active listings since September of 2015.

Top Performing Neighbourhoods & Categories

12 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from May to June, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from under 1% in Lower Lantzville to 20.77% in Uplands. Top risers month-over-month were Extension, Pleasant Valley, Departure Bay, and Uplands. Top performers year-over-year were Uplands, Extension, Central Nanaimo, Brechin Hill, and University District. Looking at volume, the only risers both monthly and annually were Upper Lantzville and Diver Lake.

Single family waterfront properties, apartment style condos, and patio homes saw an increase in average sale price from May to June, while all categories saw increases year-over-year. On low volume, single family waterfront properties were the only category in June to experience month-over-month and year-over-year sales volume increases.

Author’s Comments

You may have noticed that this market recap has been very much scaled back and stripped of all interpretation and value-added content. If you have been one of the many who have relied on our monthly commentary as your go-to source for market information, we sincerely apologize for these modifications that we have reluctantly had to make to our recap to ensure we are onside with the new real estate rules and regulations governing the province that came into effect June 15. It is our genuine hope that sometime soon we will once again be able to deliver the value-added commentary on a mass scale that reflects our true advisory approach to the business.

With June seeing the average price down, median price down, sales volume down, sell/list ratio down, days on market up, and inventory levels for single-family homes reaching near three year highs, we believe that if there ever was a time the market needed interpretation and expert insight, it is right now. While for the time being, we cannot provide it through our monthly recap, if you have any questions about what all these statistics mean for you as a buyer, seller, investor, or observer of the market, feel free to contact us directly at 250-751-0804 or info@jahelkagroup.com.

Check out the Nanaimo Market Statistics Here: Monthly Statistics for June 2018

Source: VIREB

June 7, 2018

Nanaimo Market Statistics May 2018

May's Results Highlight an Increasing Tale of 2 Markets  

 

Single Family Prices and Volume

139 single family homes sold in May, up almost 14% from the 122 sold in April, but down by just under 22% from the 178 that sold in the same timeframe last year. The average home price increased marginally from April’s average of $553,352 to $563,218 although this is 7% higher than last May when the average home price was $526,234  The median sale price also increased by 4% in May to $555,000 from April’s $537,500, which is over 15.5% higher than last May’s median sale price of $480,000. 266 homes were listed in May representing an almost 18% increase over April, and an almost 4% increase over the 256 listed in May of 2017. While the average price increased nearly 1.8% in May, this comes on the heels of 3 months of relatively flat price action, as the past quarter has seen only a 2% increase. While it would be reasonable to suggest a 2% quarterly increase equates to an 8% plus annual return, which is still quite impressive, it is important to remember we are in the midst of the spring market which is generally when a significant percentage of the annual appreciation occurs due to strong market activity. Looking back over the previous 3 years, the February to May period saw annual average price increases of 8.96%, 8.77%, and 6.10%, respectively.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio decreased in May, coming in at 52%, down from 54% in April and down almost 26% from 70% in May of 2017. With the spring market typically bringing strong buyer demand, it is worth noting that taken together, the sell/list ratio for April and May is well below the level in the last couple of years, at 62%/70% in April/May 2017, and 79%/76% in  April/May 2016. Echoing our comments from last month in this slot, while Realtors continue to lament that there is just not enough inventory, it appears there may be more to the story than that. It is actually more of a case of there not being enough inventory at various price levels to meet the buyer demand at those price levels. Put another way, too many sellers are listing properties with unrealistic price expectations, beyond the prices that buyers are willing to pay. In May there were 266 homes listed in Nanaimo, while the last 30 days has brought 79 single family home price reductions, 129 across all categories, and this does not include listings that were cancelled and re-entered at lower prices. Translation, the market spoke and (at least) 79 times homes were overpriced. At the other end of the spectrum, there are sellers who understand the value of pricing accurately and competitively and are being rewarded with quick sales, in many cases with multiple offers and well above the asking price. While demand at higher price points has also been impacted by rising interest rates, stricter mortgage qualifying requirements, and the implementation of the foreign buyers tax and speculation tax, the divergence in pricing strategy has never been so evident and with the sell/list ratio hovering just north of 50%, at some point the remaining unrealistic sellers will need to react to a lack of demand at their price levels and adjust their pricing accordingly.

The sell price/list price remained constant at 99% in May which is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects fairly strong market conditions.

The average days on the market decreased to 16 days from 19 in April, which mirrors the number of days on the market from May of last year. Further to the comments in the paragraph above, this figure only factors in the homes that were priced accurately and competitively and that are selling, with many properties continuing to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years.  While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances of a strong initial offer or even a bidding war leading to a sale above the asking price.

As of the end of May, the number of active listings was 358, up over 16% from April, and over 20.5%  from inventory levels at the same time last year. While these are not major increases, if this trend continues, it should be a positive for buyers, as more inventory means more choice and hopefully less competition. While a lack of supply has been a key factor in the rapid price increases we have witnessed earlier in this market cycle, with a sell/list ratio just above 50% and inventory levels continuing to rise, it would be reasonable to expect to see more balanced market conditions in the coming months.

Top Performing Neighbourhoods & Categories

12 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from April to May, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 6.86% in Pleasant Valley to 23.54% in Brechin Hill. Top risers month-over-month were Chase River, Upper Lantzville, Pleasant Valley, and University District.  Top performers year-over-year were Brechin Hill, Uplands, Diver Lake, Extension, and University District. Looking at volume, risers both monthly and annually included Brechin Hill, South Nanaimo, Extension, North Jinglepot, and Diver Lake, with the exception of North Jinglepot, historically more affordable areas,  which is no surprise with affordability increasingly being a challenge.

All categories saw an increase in average sale price from April to May, with lots topping the bill on low volume, as well as year-over-year with the exception of Single Family Waterfront properties, which on low volume experienced a decrease in average sale price.  Townhomes lead the way in volume increase in May, followed by single-family homes, while year-over-year, all categories except for patio homes experienced a decrease in sales volume, which is no surprise given the demand for ground-oriented residences that is only increasing on the back of downsizing baby boomers increasingly settling in for their retirement years.

Only Found Here

At first glance, market information seems somewhat contradictory. The average price for a single-family home reached an all-time high in May, the number of days on market for sold properties is extremely low at 16, the average sale price is 99% of the list price… all bullish indicators. However, with the sell/list ratio hovering just above 50%, something doesn’t appear to be right. This month we took a look at the current supply of active listings, breaking down the various price levels where properties are listed, as well as where homes are selling, with some interesting findings:

- Under $300,000: 2.56% of May Sales, 1.27% of current listing inventory, 87.95% sell/list, 39.67 average days on market

- $300,000 - $399,999: 11.97% of May Sales, 4.02% of current listing inventory, 99.25% sell/list, 14.21 average days on market

- $400,000 - $499,999: 22.22% of May Sales, 14.16% of current listing inventory, 100.04% sell/list, 12.69 average days on market

- $500,000 - $599,999: 32.48% of May Sales, 18.39% of current listing inventory, 100.21% sell/list, 17.07 average days on market

- $600,000 - $699,999: 11.97% of May Sales, 18.60% of current listing inventory, 99.58% sell/list, 17.93 average days on market

- $700,000 - $799,999: 8.55% of May Sales, 9.73% of current listing inventory, 99.16% sell/list, 15.70 average days on market

- $800,000 - $999,999: 7.69% of May Sales, 16.70% of current listing inventory, 97.29% sell/list, 33.56 average days on market

- $1,000,000 +: 2.56% of May Sales, 17.12% of current listing inventory, 98.14% sell/list, 13.33 average days on market

What this means: This is really the tale of 2 markets…

Under $600,000, the percentage of May sales outpaces the current percentage of listings in that price category, days on the market are low by historical standards (with the exception of under $300,000) and the sell to list ratio is strong (again, with the exception of the sales under $300,000, which are likely properties with significant issues).  

Above $600,000, the current percentage of listings exceeds the percentage of May sales in these price categories, and the sell to list ratio starts to creep up. Particularly noteworthy is the $800,000 to $999,999 category with 7.69% of sales, but 16.70% of active listings, and even more pronounced, the +$1,000,000 category, currently representing 17.12% of active listings, but with merely 2.56% of sales occurring in this category.

So what is happening here? Increasing affordability challenges on the back of new mortgage qualification requirements and rising interest rates are playing a factor, undoubtedly limiting demand at higher price points. Additionally, foreign buyer demand has been strong the past few years, especially in the $600,000 + categories. The foreign buyers’ tax and speculation tax are definitely having a significant impact on the demand for $600,000+ properties, as the local population with a median income of $62,822 based on the last census, simply can’t even come close to affording and absorbing the volume of listings priced in this range. Over the next few years, interest rates are likely to rise and increasingly downsizing empty nesters are going to be looking to sell their 3,000+ square foot homes, creating a likely scenario of oversupply, and limited demand.

Dating back to the 2017 Forecast, and again echoed in our 2018 Forecast, we have been repeatedly highlighting how higher price points will be oversupplied in the coming years, while affordability challenges and buyer preferences will limit demand. While buyers may wish to buy $800,000 ocean view homes, if they only have the ability to finance a $400,000 purchase, their $800,000 dreams are just that, dreams. The market needs support at various price levels. Otherwise, sellers will need to price reduce, and the domino effect will likely push price levels back down towards where supply and demand are more balanced.

Opportunities

In May 2018, there were 12 sales above $800,000, significantly less than the 23 that occurred in May of 2017. More pronounced, May 2018 had 3 homes transact over $1,000,000, less than a third of the 10 that occurred in May of 2017. With rising interest rates, more stringent mortgage qualifications, and the introduction of the foreign buyer tax in Nanaimo, there is simply less demand for homes at higher price points. So what does all this mean for buyers? Well, if you are looking above the $800,000 mark, it is less likely that you will be in competition, and as the days on the market increase, the likelihood of being able to find a motivated seller and being able to negotiate a “decent” deal should be greater.

On the flip side, if you are looking to unload your home in the $800,000+ range, you will be selling into a much different market than just 1 year ago. It’s not to say that a quick sale will not happen, but it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. If you have been trying to time a market top to list (which in our view is nearly impossible and highly risky), in our opinion you have likely missed your opportunity, so you may want to take this opportunity to get your home listed, hopefully ahead of a further erosion of demand at higher price levels. Below $600,000 demand remains relatively solid, however, there is no guarantee that these market conditions will persist for any sustained period of time. The reality is, people need to buy homes, so we’d expect demand to remain relatively solid below $600,000 for the foreseeable future.

With that said, investors (especially in the sub-$600k range) may want to capitalize on the remaining spring market to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.

We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Monthly Statistics May 2018

Source: VIREB

 

May 4, 2018

Nanaimo Market Statistics April 2018

April Stats Suggest The Market May Be Running Out of Steam...

 

Single Family Prices and Volume

122 single family homes sold in April, up almost 21% from the 101 sold in March, but down by over 12% from the 139 that sold in the same timeframe last year. The average home price increased marginally from March’s average of $551,392 to $553,352 although this is more than 11% higher than last April when the average home price was $497,224. The median sale price also decreased slightly to $532,000 from March’s $537,500, however, this is still an almost 11% increase from last April’s median sale price of $480,000. 226 homes were listed in April representing a 17% increase over March, and a less than 1% increase over the 225 listed in April of 2017. Taken together, there are no major surprises here, however, it appears demand driven upward pressure on pricing has definitely subsided over the past 3 months, as February, March, and April average sale prices came in within a $1,960 range (0.36%), with sales volumes for these 3 months all down year-over-year.
Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio increased slightly in April, coming in at 54%, up from 52% in March and down almost 13% from 62% in April of 2017. With the spring market typically bringing strong buyer demand, it is worth noting that taken together, the sell/list ratio for March and April is well below the level in the last couple years, at 77%/62% in March/April 2017, and 90%/79% in March/April 2016. While Realtors continue to lament that there is just not enough inventory, it appears there may be more to the story than that. It is actually more of a case of there is not enough inventory at various price levels to meet the buyer demand at those price levels. Put another way, too many sellers are listing properties with unrealistic price expectations, beyond the prices that buyers are willing to pay. In April there were 226 homes listed in Nanaimo, while the last 30 days has brought 82 price reductions, and this does not include listings that were cancelled and re-entered at lower prices. Translation, the market spoke and (at least) 82 homes were overpriced. At the other end of the spectrum, there are sellers who understand the value of pricing accurately and competitively and are being rewarded with quick sales, in many cases with multiple offers and well above the asking price. The divergence in pricing strategy has never been so evident and with the sell/list ratio hovering just north of 50%, at some point the remaining unrealistic sellers will need to react to a lack of demand at their price levels and adjust their pricing accordingly. Having said that, based on the first 3 days in May, it looks like it may actually be occurring, with 21 properties reducing prices in the first 3 days of the month, a pace that far exceeds the rate we have experienced so far this year.

The average days on the market decreased to 19 days from 20 in March, however, this is 12% higher than the average of 17 days on the market from April of last year. Further to the comments in the paragraph above, this figure only factors in the homes that were priced accurately and competitively and are selling, with many properties continuing to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years. While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances of a strong initial offer or even a bidding war leading to a sale above the asking price.

As of the end of April, the number of active listings was 308, up over 13% from March, and 11% from inventory levels at the same time last year. While these are not major increases, if this trend continues, it should be a positive for buyers, as more inventory means more choice and hopefully less competition. While a lack of supply has been a key factor in the rapid price increases we have witnessed earlier in this market cycle, with a sell/list ratio just above 50% and inventory levels continuing to rise, it would be reasonable to expect to see more balanced market conditions in the coming months.

Top Performing Neighbourhoods & Categories

14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from March to April, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 6.62% in Cedar to 23.64% in Uplands. Top risers month-over-month were Extension, Brechin Hill, and Departure Bay. Top performers year-over-year were Uplands, Extension, Brechin Hill, South Jinglepot, Lower Lantzville, and Central Nanaimo. Looking at volume, risers both monthly and annually included Chase River, Extension, and Central Nanaimo, historically more affordable areas, no surprise with affordability increasingly being a challenge.

Single-family homes were the only category to see an increase in average sale price from March to April, albeit at less than 1%, although year-over-year they were joined by apartment-style condos and lots. Single-family homes were also the top performing category by volume in April, followed by townhomes and patio homes, while year-over-year, patio homes and apartment-style condos were the top performers.

Opportunities

In April 2018, there were 8 sales above $750,000, significantly less than the 21 that occurred in April of 2017. With rising interest rates, more stringent mortgage qualifications, and the introduction of the foreign buyer tax in Nanaimo, there is simply less demand for homes at higher price points. So what does all this mean for buyers? Well, if you are looking above the $750,000 mark, it is less likely that you will be in competition, and as the days on the market increase, the likelihood of being able to find a motivated seller and be able to negotiate a “decent” deal should be more likely.

On the flip side, if you are looking to unload your home in the $750,000+ range, you will be selling into a much different market than just 1 year ago. It’s not to say that a quick sale will not happen, but it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. If you have been trying to time a market top to list (which in our view is nearly impossible and highly risky), there are enough warning signs that we may be there that you may want to take this opportunity to get your home listed, hopefully ahead of a further erosion of demand at higher price levels. Below $600,000 demand remains relatively solid, however, there is no guarantee these conditions will persist, in fact increasingly, the statistics seem to be telling the story of a market cooling.

With that said, investors may want to capitalize on the remaining spring market to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.

We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Monthly Statistics April 2018

Source: VIREB

April 6, 2018

Nanaimo Market Statistics March 2018

Market Conditions Stable in March, But Are Conditions Turning?

 Single Family Prices and Volume

101 single family homes sold in March, up almost 19% from the 85 sold in February, but down by over 34% from the 154 that sold in the same timeframe last year. The average home price decreased marginally from February’s average of $551,961 to $551,392 although this is an almost 10% increase from last March when the average home price was $502,696. The median sale price also decreased slightly to $537,500 from February’s all-time high of $545,000, however, this is still a 12% increase from last March’s median sale price of $479,900. If you have been following our commentary, including our 2018 forecast, you will be familiar with our expectations that we should see strong demand in to the spring market to satisfy pent-up 2017 demand, with supply levels ultimately determining how long it will take to satisfy it, which in turn, directly corresponds to the amount of upward pressure on pricing we see from buyers. While not unexpected as we transition into the Spring market, the 193 homes listed in March represented a 38% increase over February, but a 3.5% decrease from the 200 listed in March of 2017.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio continued to decrease in March, coming in at 52%, down 14.75% from 61% in February, and down over 32% from 77% in March of 2017. A possible explanation for this is that Sellers are increasingly listing properties with unrealistic price expectations. While accurately priced properties are selling quickly, in many cases in multiple offers and well above the asking price, those who continue to test the market at unsupported price levels are having discouraging listing experiences.

The sell price/list price remained constant at 100% in March which is not suggesting every home is selling at 100% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average days on the market decreased to 20 days, from 30 in February, which is also a 20% decrease on the 25 average days on the market from March of last year. Further to the comments in the paragraph above, overpriced homes are going to sit on the market for longer. While the average single-family home price actually decreased slightly, many properties continued to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years. While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances at a strong initial offer or even a bidding war leading to a sale above the asking price.

As of the end of March, the number of active listings is 272, up over 29.5% from February, and 11% from inventory levels at the same time last year. This appears to be a positive for buyers, as more inventory means more choice and hopefully less competition. Lack of supply has been a key factor in the rapid price increases we have seen. Should the number of active listings continue to rise, expect to see more balanced market conditions in the coming months.

Top Performing Neighbourhoods & Categories

15 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from February to March, with all 18 experiencing increased prices year-over-year. When looking at these  neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 8.11% in North Nanaimo to 23.28% in South Jingepot. Top risers month-over-month were Lower Lantzville, Brechin Hill, and Uplands. Top performers year-over-year were once again South Jinglepot, Uplands, Upper & Lower Lantzville, University District, and Central Nanaimo. Looking at volume, risers both monthly and annually included Hammond Bay, Old City, and Diver Lake. Similar to last month, we continue to see a wide-ranging assortment of price and volume top performers than we have experienced over the course of this market cycle. Initially, we had in-demand areas such as North Nanaimo, Hammond Bay, and Departure Bay continually outperforming, then as affordability increasingly became a challenge in these areas, areas that were historically more affordable began to outperform. More recently, the general trend has been a prominence of neighbourhoods on the outskirts of the city experiencing strong price action. This past month, again, throw a few darts at a map, as there doesn’t seem to be any rhyme or reason.

On low volume, lots were the top performing category in March, followed by townhomes, and patio homes, while apartment-style condos, single family (water), and single family homes were all down month-over-month, though all categories were up year-over-year.

Only Found Here

We took a look at the residential market (all categories included) for the first quarter of 2018, and here are the findings:

Days on Market:
- Selling in 0 - 7 days: 47% at an average of 101.78% of the list price in an average of 2.91 days.
- Selling in 8 -31 days: 27% at an average of 99.13% of the list price in an average of 16.51 days.
- Selling in more than 31 days: 25% at an average of 98.15% of the list price in an average of 84.9 days.

Sell Price/List Price:
- Sold above list price: 35% sold above the asking price - at an average of 3.69% above ask, with 22.61% the highest premium paid. The average days on market for those selling above the asking price was 10.06.
- Sold at the list price: 18% of homes sold at the asking price in an average of 10.37 days.
- Sold below the list price: 46% of homes sold, taking an average of 39.46 days.

Sales by Price Level:

There are clearly some key takeaways here:

I. The majority of properties sold at or above the asking price.
II. The average premiums paid when homes sell above the asking price are less than what we were seeing during the spring market.
III. Unless sold very quickly (representative of the most attractive listings priced accurately), properties are taking longer to sell, as properties that didn’t sell within the first month took an average of 84.9 days to sell.
IV. There is a noticeable inverse relationship between days on market and sell/list ratio. In general, the lower the days on the market, the higher the price relative to list price. Homes selling well below the asking price (that were overpriced by greedy sellers with unrealistic expectations) are sitting on the market for a significant amount of time as the seller’s expectations normalize over time.
V. Demand is strongest in the $200,000 to $600,000 range where 73% of transactions occurred, supported by a sell/list ratio above 100% and a lower average days on market (DOM).
VI. Sales volume above $750,000 is subdued, with only 7% of the transactions in this range, with a sell/list ratio below the market average, and a higher average days on market.

What this means for Buyers: For properties priced between $200,000 - $600,000, demand remains strong, with bidding wars still a common occurrence. However, above this price point more sales are occurring below the asking price, so there look to be more opportunities to find a home without competition and potentially finding a “deal” under the asking price. By historical standards, properties are still selling quickly, so if you are a serious buyer, it is still important to be pre-approved for a mortgage and very clear on what you are looking for so that you can offer immediately on the best new options hitting the market.

What this means for Sellers: Below $600,000, buyer demand is strong. Above $600,000 demand is not as strong as it once was, necessitating the need to price accurately to maximize interest. For the last number of months, sellers have been caught up in the hype and media attention on the housing market and in many cases are still going to market with unrealistic expectations. This is not the “leave a little room for negotiation” market. Pricing accurately will minimize the days on market (and inconvenience to your family), as well as best position you for a competitive offer or ideally a multiple-offer situation. As you can see above, the longer a home sits on the market, the more likely it is to transact below the listing price as the listing becomes stale. Working with a Realtor with a very strong marketing platform is vital, however, pricing accurately has never been more important, so make sure the Realtor you select has a proven track record of pricing accurately and with average days on the market well below the market average.

Opportunities

Looking at the first quarter results, there is no doubt that affordability challenges primarily driven by more stringent mortgage qualification requirements are having an impact on the market. While demand remained strong, more than 80% of residential sales transacted below the $600,000 mark. People are simply not qualifying for as much as they were previously, lowering demand at higher price points. This is no surprise as the market has experienced significant price appreciation for the last number of years, and as we have suggested in past market recaps, we believe the market has reached a point where continued price appreciation is no longer sustainable due to these affordability concerns. In our 2018 Forecast, we discussed how, based on CMHC’s Affordability Calculator, the average household income in Nanaimo would qualify for a mortgage of $284,237. The qualifying rate and mortgage rates have increased since we ran this scenario. Therefore the qualification amount would be reduced, while the average home price in March came in at $551,392. We consider this divergence concerning, and the expectation is interest rates will continue to rise over the next few years, which will continue to constrain mortgage qualification amounts.

So what does all this mean for buyers and sellers? Well, under the $600,000 mark, demand is as strong as ever, so if you are a buyer in this price range, unfortunately, we don’t have any good news...yet.

Above $600,000 the days on market are higher, sales volumes are down, and the sell/list ratio is revealing that there is starting to be some room for negotiations. If you have been following our commentary, and more specifically our annual forecasts the last couple of years, you may remember us expressing a concern about where the demand for the 3,000+ square foot homes was going to come from given the demographics trends, affordability challenges, and consumer preferences. If you didn’t see this past January’s annual forecast, it went something like this:  “... the number one headwind the Nanaimo housing market currently faces is the largest block of our population is the baby boomers, many of whom are now empty nesters living in the 3,000+ square foot homes they bought in the $200,000 – $300,000 range a decade ago, that are now valued well beyond the grasp of the average household in town based on income qualification. This leads us into the consideration of demand for different asset classes. With the aging population, it is no secret that baby boomers now becoming empty nesters will be looking to downsize in the coming years. However, selling their 3,000+ square foot homes requires buyers, buyers require financing, and buyers will likely not be qualified to finance the homes coming onto the market at higher price points. You know where this is going…” Well, 3 months later and a neighbourhood we know very well, the newer section of the Eaglepoint neighbourhood consisting of 3,000+ square foot homes, primarily built after 2000 in a prime north end location close to shopping, schools, restaurants, beaches, parks, and amenities, and we have 9 active listings with an average time on market of 42 days (4 of which are 56 days or more) and 0 sales. 2017 during the same period, 7 sales, with an average days on market of 6.7 days. Don’t tell me the market isn’t changing... So what happens when homes aren’t moving? Sellers start to adjust prices downward or become more open to negotiating. Long story short, if you are looking at $750,000 plus, your chances of finding a deal are increasing. Beyond $1,000,000, with an average sell price/list price ratio of 95.56% and an average of 80 days on the market so far this year, your chances of being able to avoid competition and negotiate a reasonable price are much improved.

With that said, depending on your investment strategy and price point, this spring may present a good opportunity for investors to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.

We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Market Statistics March 2018

Source: VIREB

March 2, 2018

Nanaimo Market Statistics February 2018

February Average and Median Prices Set All-Time Highs

Single Family Prices and Volume

85 single family homes sold in February, down over 4.5% from the 89 sold in January, and over 12% from the 97 that sold in the same timeframe last year. The average home price increased, however, by almost 6% from January’s average of $522,608 to $551,961 and more than 11% from last February when the average home price was $495,997. The median sale price has also increased to an all-time high of $545,000 which is a 9% increase over January’s $499,900 and a 17% increase from last February’s median sale price of $465,000. If you have been following our commentary, including our 2018 forecast, you will be familiar with our expectations that we should see strong demand in to the spring market to satisfy pent-up 2017 demand, with supply levels ultimately determining how long it will take to satisfy it, which in turn, directly corresponds to the amount of upward pressure on pricing we see from buyers. Put simply, many buyers competing for very few listings results in competition and aggressive price wars. The average and median price increases we saw from January to February are significant. One of the primary drivers...lack of listings...in fact, there were 22% or 40 fewer homes listed this February than we saw listed during the same timeframe last year.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

Interestingly, the sell/list ratio continued to decrease in February coming in at 61%, down over 17% from 74% in January, although up 13% from 54% in February of 2017. A possible explanation for this is that Seller’s are increasingly listing prices with unrealistic expectations. While accurately priced properties are selling quickly, in many cases in multiple offers and well above the asking price, those who continue to test the market at unsupported price levels are not having the same success.

The sell price/list price increased to 100% in February, a 1% increase month-over-month, and year-over-year from 99% collectively. February’s figure is not suggesting every home is selling at 100% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average days on the market increased to 30 days, up from 26 in January, which is also an 11% increase on the 27 average days on the market from February of last year. Further to the comments in the paragraph above, overpriced homes are going to sit on the market for longer. While you don’t want to leave money on the table in a rising market, there is a fine line, as more often than not, the best chance to maximize your return is to price reasonably to maximize your interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and chances at a competitive offer.

As of the end of February, the number of active listings is 210, up 16% from January, but down over 12% from inventory levels at the same time last year. By historical standards, listings numbers remain very low. In our view, the current market cycle began its strong upward ascent in 2015, and to provide some context around listing numbers and how they have been steadily declined, the past 4 February’s have ended with 382 (2015), 289 (2016), 240 (2017), and down to 210 (2018). As we have explained, limited supply and strong demand is a condition that sets the stage for strong price action. A 6% average and 9% median month-over-month price increase provides ample evidence of this type of market action taking place.

Top Performing Neighbourhoods & Categories

14 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from January to February, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 9.04% in North Nanaimo to 23.24% in Upper Lantzville. Top risers month-over-month were the Old City, Chase River, and Central Nanaimo. Top performers year-over-year were Upper Lantzville, South Jinglepot, Uplands, University District, and Central Nanaimo. Looking at volume, risers both monthly and annually included Hammond Bay, Upper Lantzville, Old City, and Extension. What is interesting to note is that this is probably the most diverse, wide-ranging assortment of price and volume top performers that we have experienced over the course of this market cycle.  Initially, we had in-demand areas such as North Nanaimo, Hammond Bay, and Departure Bay continually outperforming, then as affordability increasingly became a challenge in these areas, areas that were historically more affordable began to outperform. Most recently, the general trend has been a prominence of neighbourhoods on the outskirts of the city experiencing strong price action. This past month, throw a few darts at a map, as there doesn’t seem to be any rhyme or reason.

Apartment style condos were the top performing category in February, followed by patio homes, and single-family homes, while townhouses and lots were down month-over-month, though still up year-over-year. On low volume, apartments showed very strong year-over-year price action. With affordability increasingly becoming a challenge and new lending qualification guidelines coming into effect this past January, it is no surprise that condos (as one of the historically most affordable categories), is seeing strong price action from those priced out of purchasing other property categories at higher price points.

Opportunities

With the number of active listings still near cycle lows and strong buyer demand, we are undoubtedly still in a SELLER’s market.

Without a crystal ball, timing the market top is nearly impossible. What we do know is that we’ve had significant price appreciation for the last number of years, that we believe is reaching a point that is no longer sustainable due to affordability concerns. In our 2018 Forecast, we discussed how based on CMHC’s Affordability Calculator, the average household income in Nanaimo would qualify for a mortgage of $284,237. The qualifying rate and mortgage rates have increased since we ran this scenario. Therefore the qualification amount would be reduced, while the average home price in February increased to $551,961. We see this divergence concerning, and the expectation is interest rates will continue to rise over the next few years, which will continue to constrain mortgage qualification amounts.

With that said, depending on your investment strategy, this spring may present a good opportunity for investors to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea. Right now in Nanaimo, finding cash flowing residential properties is nearly impossible. If you follow our commentary, you should be well aware of our position that a negative cash flow property has only one certainty...It will cost you money. While we don’t know for how long as rent does generally rise over time, buying a home and speculating that prices will rise is a flawed strategy when you consider the alternative, that you could buy in other markets or asset classes (eg. commercial) and guarantee positive cash flow. In fact, these other markets may even be at a point in their market cycle where the chance for appreciation is stronger.

We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Monthly Statistics February 2018

Source: VIREB

Feb. 2, 2018

Nanaimo Market Statistics January 2018

January Provides Reasons For Optimism

 

Single Family Prices and Volume

89 single family homes sold in January, down 26% from the 120 sold in December, but up 59% from the 56 that sold in the same timeframe last year. The average home price decreased marginally, by just over 1% from December’s average of $529,724 to $522,608 which notably is only a 2% increase from last January. The median sale price slipped back under $500,000, coming in at $499,900, down 1% from December’s median price of $505,000, and down 3% from last January’s median sale price of $516,000. If you have been following our commentary, including our 2018 forecast, you will be familiar with our expectations that we should see strong demand in to the spring market to satisfy pent-up 2017 demand, however with rising interest rates and new mortgage qualification requirements, we stated that affordably is increasingly becoming an issue given average household incomes in Nanaimo. So what happened in January…

I. Sales volume was up 59% from last January - check.

II. The average home price and volume were lower, implying there is more activity at the lower end of the pricing spectrum, in other words, affordability challenges may be starting to emerge - check.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio decreased in January to 74%, down 41% from 125% in December, although up 32% from 56% in January of 2017. One note here, you may be looking at the 125% figure for December and be questioning how this is possible. Well, in December what happens is there is typically a very limited number of new listings heading into the holidays, so in addition to the December listings that sell, older listings dating back to September, October, November are also selling, leading to a higher number of sales than listings. This has been the case for the last 3 years in December (2015 at 116%, 2016 at 120%).

The sell price/list price increased to 99% in January, a 1% increase month-over-month, and year-over-year from 98% collectively. January’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

The average days on the market decreased to 26 days, down from 31 in December, which is a 35% reduction on the 40 average days on the market from January of last year. We see this as an important indicator of strong buyer demand, with qualified buyers ready to pounce when the right home hits the market.

As of the end of January, the number of active listings is 181, down 5% from December, and 8% from inventory levels at the same time last year. Folks, this is the lowest number of active listings that we have had since at least January 2015 (when our group began tracking this statistic), which also in our opinion marked the start of this strong upward swing we have seen in the Nanaimo market. Limited supply and strong demand is a condition that sets the stage for strong price action. However, the unknown variable here is affordability for locals. We’d expect the sub $500k market to be the primary benefactor here.

Top Performing Neighbourhoods & Categories

10 of the 18 sub-areas defined by the real estate board in Nanaimo saw an increase in the average selling price (trailing 12 months) from December to January, with all 18 experiencing increased prices year-over-year. When looking at these neighbourhood figures, it is important to note that we use trailing 12-month figures to limit volatility caused by lower transaction volumes in some neighbourhoods, where a few high priced or low priced transactions could tremendously skew results. A trailing 12 figure will always be slower to react than simple month-over-month, so that is why the results here are not going to be as pronounced as the figures used in the stats we report above. Moving on, these annual increases range from 10.33% in Departure Bay to 27.13% in South Jinglepot. Top risers month-over-month were Departure Bay, Pleasant Valley, and Upper Lantzville. Top performers year-over-year were South Jinglepot, Cedar, Uplands, South Nanaimo, and Brechin Hill. Looking at volume, risers both monthly and annually included Lower & Upper Lantzville, Uplands, Old City, Cedar, Chase River, and Extension. You’ll notice that many of the average price and volume risers are found either in the outskirts of town or in the historically more affordable neighbourhoods, with early cycle gainers and traditionally most expensive neighbourhoods such as Hammond Bay and North Nanaimo having less price appreciation and lower volume. In fact, year-over-year, volume has been down in North Nanaimo for 11 months in a row. Why?... Affordability challenges are limiting demand, despite buyer preferences to be in this neighbourhood.

Lots were the top performing category in January, followed by townhouses and patio homes, while apartment style condos and single-family homes were down month-over-month, though still up year-over-year. On low volume, both patio homes and apartments showed very strong year-over-year price action. Downsizing baby boomers...you got it.

Opportunities

With active listings at cycle lows and strong buyer demand, we are undoubtedly still in a SELLER’s market.

For Buyers purchasing principal residences, one area that we continue to discuss is low-maintenance strata properties, particularly those ground-oriented options ideal for our aging population. For the better part of the last year patio homes have been amongst the category leaders, with 8 of the last 12 months showing year-over-year average price increases exceeding 25%. While you may think it is getting frothy now, the reality is this particular party is just getting started. While other areas of the market are being impacted by investors, international and interprovincial speculation, etc., patio home demand is demographically driven. In the next decade, no matter what happens in other categories, you will see a wave of baby boomers, (many of whom are underfunded for retirement) looking to simplify their lives and many cases top off their retirement nest egg by downsizing. However, there is currently a fixed supply of ground-oriented townhomes, limited development land, and limited demand from developers to venture into executive quality townhomes, because it is simply not as profitable as other development opportunities. What does this all mean...Even if we experience a correction, ranchers, patio homes, luxury condos and higher end townhomes with primarily main level living, are not going on sale. While we have had a run-up on prices recently, we see that there is still an opportunity to get in at a reasonable level now, despite how painful it is to look back 12 months and think about the prices you could have shored up your retirement home for.

Which leads us to the next section…If you are an empty nester living in your 3,000+ square foot home and have recently opened your property assessment and noticed the assessed value has nearly doubled over the past decade, now is a great opportunity to sell into a strong market. With affordability increasingly becoming a challenge, and tastes and preferences of the next generation shifting towards a more simplified living arrangement where bigger is not better, there are headwinds poised to limit demand and price action in the coming years for this category of housing, as there simply won’t be the demand at higher price levels. Remember, if you purchased your home for $400,000 in your peak earning years a decade or more ago, this home is now likely worth more than $800,000, average household income growth has not kept pace with housing appreciation and mortgage qualification has got significantly tougher. Those in a similar situation to you when you (possibly) maxed out your qualification to purchase at that price point, would now (possibly) qualify for less than you would have back then. The current $800,000 price point is only supported by demand at that level. If there is insufficient demand, prices start dropping.

So where are the opportunities for investors? Our preferred approach to real estate investing is to lead with a focus on cash-flow potential. In our view, opportunities to acquire cash-flowing properties in the residential market are extremely limited at this point in the cycle. For those investors who are game, looking at other asset classes could be an option.

Downtown Nanaimo is stale, poised for revitalization. Our downtown has the potential to be a world-class destination, however, a challenging political climate, excessive vacancy, concentrated ownership by those who have not spent money to keep their holdings modern, and in some cases a lack of vision for what is possible, has stunted growth over the past decade. While there are signs the tides are turning. New money is coming into Nanaimo, and developers are increasingly seizing opportunities. However, we are still early in this movement and commercial real estate remains affordable. There have been fantastic opportunities for land assemblies on key transportation routes in the past 12 months where you could purchase property at a valuation that would pay you a decent return to either wait for values to increase and sell into increasing developer demand in the future, or redevelop /re-fit aging properties to their highest and best use.

Another commercial opportunity which we are very familiar with (being the listing agents) is a 2,083 square foot space in Pacific Station, a mixed-use development which includes 50,000 square feet of professional office space. At the asking price, this particular space is a first phase unit, discounted to $272.68 per square foot. Comparatively, there is no other new commercial space currently available in Nanaimo for less than $330 per square foot. In fact, the phase 3 units in Pacific Station are selling with strong demand closer to $400 per square foot, and the future occupant of this phase 1 space is poised to equally benefit from the synergies of locating in North Nanaimo’s premier business community (with professional practices such as doctors, physiotherapists, chiropractors, architects, engineers, wealth managers, notaries, mortgage brokers, etc.), all in an easily accessible location with great visibility, and supported by the built-in consumer demand of the 76-unit residential component of the development. With no rental restrictions, leasing out the space could result in a very respectable return not available in the residential market, and as the commercial community rounds out, and construction of the last residential phase completes, any uncertainty inherent in earlier stages of the development will have been removed, increasing demand for commercial space, and ultimately real estate values.

For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here: Monthly Statistics January 2018

Source: VIREB

Jan. 12, 2018

Nanaimo 2017 Market Recap & 2018 Forecast

2017 Market Recap & 2018 Forecast

 

Single Family Prices and Volume

1,605 single-family homes were sold in 2017, down 5.5% from the 1,699 sold in 2016. The average sale price for a single-family home increased 16% to  $518,449 from 447,440 a year earlier, which was itself a 14% increase in the average sale price for a single-family home from 2015. The median sell price is relied upon as a secondary measure which will not be skewed by a few high priced homes selling at the top end of the market with 2017’s median price coming in at $489,900, up 18% from $415,000 in 2016.

Strength of the Trend

Factors we also look at when analyzing a market to validate its strength are sell/list ratio; sell price; days to sell, and current inventory numbers:

The sell/list ratio decreased year-over-year to 70% from 79%, suggesting a lower percentage of homes listed are successfully finding a buyer, with 30% of homes listed not selling, which in a market with such strong demand and low inventory, suggests some buyers are not being realistic with their pricing expectations or this figure would be higher.

The sell price/list price remained constant at 99%. This doesn’t mean that all homes are going to sell for 99% of the list price, as those selling significantly above the asking price in multiple offer situations are offsetting those sitting on the market for long periods and selling below 99% of asking. What this suggests is that for buyers it is still not deal hunting season. We remain in a sellers market, and if as a buyer you are finding that everything “is overpriced”, it’s not. This is the current state of the market. Limited supply and strong buyer demand means any attractive options are going to sell very close to, at or above asking. In the past, it may have been normal to offer 5-10% below asking to leave some room for negotiating. Not in this market, you likely won’t even get a response.

The average number of days on the market decreased 14% in 2017 to 24 days, down from 28 in 2016. This figure may be a bit misleading as the most attractive options throughout 2017 were consistently selling in less than a week. Where we see higher days on market is when homes are listed beyond their fair market value and have either waited months for the market to come to them or have ultimately had to price drop to secure a sale. With limited inventory and decreasing days on the market, buyers are having to react quickly, and therefore being pre-approved for financing prior to making an offer is all the more vital.

The number of active listings as the calendar turned over was 191, only 1 more than the 190 on the market at the end of 2016. What is interesting to note is that 2017 actually saw 114 more single-family homes hit the market than in 2016. With all this talk about historically low inventory numbers, it is important to point out that the lower inventory numbers are a result of a higher percentage of listed homes selling over the past couple years, than the number of listings being down. For example, if we travel back in time just 5 short years to 2012, there were 2,214 homes listed, less than in 2017. However, the percentage of homes listed that sold was only 46 percent, resulting in higher inventory levels throughout the year, culminating in a year-end inventory of 420 homes, more than double what we ended 2017 with.

Top Performing Neighbourhoods & Categories

In 2017, all 18 sub-areas defined by the real estate board in Nanaimo experienced a price increase, however, the weight of the increase varied significantly depending on the sub-area from 10% on the low end in Departure Bay to 29% on the high end in South Jingle Pot. Despite the headlines, not all neighbourhoods are moving in the same direction all the time. With real estate being location specific, it is vital to know what is going on in your area when determining whether the timing may be right to sell your home. For buyers, neighbourhoods will experience differing price action throughout the cycle. Again, it pays to know what is happening in each sub-area, to determine whether a purchase would be prudent.

There are 8 sub-areas that experienced average price increases of at least 20% - Brechin Hill, Cedar, Extension, South Jingle Pot, South Nanaimo, University District, Uplands, Upper Lantzville - with only South Nanaimo of the 8 also appearing on this same list for 2016.

However, price alone does not tell the story of a market as volume also has to be taken into consideration. Of the 18 sub-areas in Nanaimo, 7 experienced volume increases, with Cedar, Extension, Old City, Uplands and Upper Lantzville all experiencing volume spikes between 10 - 20%.

Patio homes were the top category in terms of the average price increase for 2017, up 32%. Following this, waterfront homes came in second at 26%, followed by lots (25%), single family homes (16%),  apartment-style condos (15%) and lastly townhomes (14%).

Forecast  

Once again time to pull out the old crystal ball...Well not exactly...Here at the Jahelka Real Estate Group we have assembled what is likely the most formally educated, and arguably qualified team in our region to be able to interpret this market and make some sense of where it is going. While market timing is nearly impossible, there are signs and symptoms that do give us reasonable insight into the health of the market. I would equate this to going to a doctor for a check-up. They can’t predict the number of days that you have left, but they can rely on their years of formal education and experience to reasonably accurately determine if you are generally in good health. They will also use their training to identify major risks that could drastically shorten your life expectancy such as the discovery of a tumour or clogged major arteries, before setting out a prescribed set of actions to best deal with the situation. Working with an educated, experienced Realtor is actually quite similar. You can choose to work with those qualified to competently guide you through the various real estate cycles you will encounter over the course of your life, or you can work with the guy you enjoy having a beer with who they just pulled off the scrap heap at the used car lot who will tell you “I don’t know where the market is going, I don’t have a crystal ball”, “We are at the start of a 7 year cycle” or “You should buy now to avoid missing out” or “I don’t see this ever slowing down as Nanaimo has just been discovered.” While we make light of it, these are all responses we have heard in conversations with licensed Realtors during the current market cycle. Again, your choice...Realtors are being paid like Doctors in many cases, shouldn’t they require some level of qualification or understanding of the market to earn your business?

Here’s our take on what is to come:

DemandDemand remains solid as we head into 2018, with 2017 fourth quarter single-family home sales numbers eclipsing 2016’s Q4 figures by 29 percent. While pending changes to lending qualification parameters may have played a role, the spike in sales numbers was likely more a result of the pent-up demand from the previous months and those who are actively searching having more homes to choose from with 25% more new listings hitting the market in Q4 2017 than Q4 2016. We see this pent-up demand carrying over and remaining relatively strong through at least the first quarter of the year. Beyond the first quarter, the number of new listings hitting the market will play a factor in determining how long it will take to satisfy the pent-up demand that currently exists before markets revert to more balanced conditions.

Longer term, you have to look at the underlying factors that drive demand, and here is where we start to have some questions. While Nanaimo’s population growth rate exceeds the provincial average, it is by no means excessive and not driven by any major economic activity that would lead you to believe population growth will play a major role in driving demand beyond a normalized level in the coming years. Although improving, Nanaimo is still a community in transition from a traditionally blue-collar economy to more of a white-collar, service driven economy.

It is important to consider that demand varies at different price levels and for different asset classes. Starting with price levels, Nanaimo has experienced average single family home price increases of 14% and 16% in 2016 and 2017, so when you consider that the most recent census indicated that the median household income in Nanaimo is $62,822, with an average total income of $76,942, and with mortgage qualification becoming increasingly challenging with the stress tests that have been put in place, it is inevitable that at some point you hit a wall where regardless of whether or not buyers would like to purchase at a certain price level, they are simply unable to qualify for it. Using CHMC’s Mortgage Affordability Calculator in a scenario where a buyer had a downpayment of $25,000, property taxes were $3,000 per year, and heating costs were $150 per month, with no significant consumer debt, at the Bank of Canada’s current qualifying rate of 4.99%, the median household income in Nanaimo would qualify for a mortgage of $244,470, and the average household income would qualify for a mortgage of $284,237. Yes, you read that right. The average household income in Nanaimo would qualify for a mortgage $234,212 less than the average home price in the city… In addition to the mortgage amount, of course, you would add your down payment to this figure to determine your maximum house price, but in the World’s most indebted nation, how many citizens of Nanaimo with a household income of $76,942 or less have $234,212 readily available to use merely to purchase what amounts to an average home? Homeowners who have been in the market a while and rode this cycle upwards resulting in substantial home equity that they could turn over, maybe; first time home buyers and young families just getting established, no chance. Make no mistake, this will have a significant impact on demand and ultimately housing prices. We see this as the number one headwind the Nanaimo housing market currently faces as the largest block of our population is the baby boomers, many of whom are now empty nesters living in the 3,000+ square foot homes they bought in the $200,000 - $300,000 range a decade ago, that are now valued well beyond the grasp of the average household in town based on income qualification. This leads us into the consideration of demand for different asset classes. With the aging population, it is no secret that baby boomers now becoming empty nesters will be looking to downsize in the coming years. However, selling their 3,000+ square foot homes requires buyers, buyers require financing, and buyers will likely not be qualified to finance the homes coming onto the market at higher price points.  You know where this is going… Where we do see sustained demand over the next decade is for low-maintenance, stratified properties catering to local empty nesters entering retirement and those increasingly seeking out Central Vancouver Island as their retirement destination of choice.

Supply: It’s difficult to predict with certainty how the market will react to rising prices, although greed seems to be playing an increasing role. While rising property assessments have many homeowners briefly considering “cashing-out”, the reality is selling your primary residence requires finding somewhere to go. Given the demographics with many baby-boomers becoming empty nesters, it is likely we will see some looking to downsize in the coming years giving serious consideration to making a move this spring to capitalize on heightened values. Overall, we see inventory levels slightly elevated from 2017 numbers, while subdued inventory levels and outright greed may keep sellers who should be considering listing on the sidelines in hopes of the market continuing to creep higher.

Looking out longer term, the coming years will likely see a significant supply of 3,000+ square feet homes hitting the market as empty nesters downsize to reduce expenses and housekeeping square footage to enjoy retirement. Increased supply without increasing demand at these price points puts downward pressure on pricing. Conversely, the supply of ground-oriented patio homes, condos, and low maintenance detached single story homes is likely to be insufficient to meet the needs of the downsizers. As such, the gap is likely to close, with a premium being paid for housing options well suited for seniors, while larger family and executive homes will likely become more affordable relative to incomes in the coming years.

Interest Rates: Given macroeconomic conditions across the country, we see the prime lending rate gradually increasing throughout 2018, with the first hike as early as this month based on solid economic numbers of late. The consensus among economists is that we are likely to see three .25% rate hikes this year, which we feel is a reasonable forecast.

Government InterventionThis area is always a bit of a wildcard. The Feds have continued to take action to try to contain the inherent risks in our country’s rising real estate market and household debt levels. They continue to implement tougher rules on mortgage lending and could clamp down further in this area. We are expecting the Government will take a wait-and-see approach, evaluating how recent intervention will impact the market, with many analysts predicting the housing market will cool nationally in 2018. If conditions nationally do cool, government intervention is not likely to have a major impact in 2018. Closer to home, there has been talk that continued strength in BC could see the 15% foreign buyer tax implemented in areas outside of the lower mainland. While we saw the Vancouver market largely rebound after the cooling that immediately occurred when this tax was brought in back in 2016, the impact would likely be greater in smaller centers where many foreigners have been buying higher end real estate to avoid this tax. At this point, it is still unlikely that the foreign buyer tax will be implemented in Nanaimo anytime soon, it is important to note that government intervention can have a significant immediate impact on real estate markets. Although trying to predict what is to come here would be foolish, given the political climate and market conditions, we just want to caution that market conditions can change very quickly as a result of government intervention.

Other Markets: For buyers coming from out of town, Nanaimo is always being compared to other markets and affordability plays a huge role here. The Greater Vancouver market is really the “straw that stirs the drink” in our provincial housing market. It is important to keep an eye on the Vancouver market as these same affordability challenges are even more prominent. The BCREA predicts the Real Estate Board of Greater Vancouver will see volume decrease by approximately 10%, with overall prices up a further 5.5%, and single-family home prices up slightly at 1.2% in 2018. Should a scenario similar to this unfold in 2018, it should not have a material impact on the Nanaimo market. However, if the Lower Mainland was to be hit by a more serious correction, a ripple effect is likely to impact Vancouver Island communities, which would no longer be as attractive from an affordability standpoint relative to Vancouver.

Opportunities

The primary opportunity we see in 2018 remains undoubtedly on the sell side.

Buyer demand is still quite strong, the sell/list ratio is high, days on market is low, and competition about 30% of the time is driving transaction prices above the asking price and likely beyond market value. Markets can turn quickly, while we don’t know how much further this market cycle has to run, we do know conditions are solid currently and trying to time a top is a recipe for disaster.

Current market conditions present a solid opportunity for those looking to downsize in the coming years to lock-in their recent gains. We have already started to see increasing demand for properties well suited to senior living, such as patio homes (prices up 32% in 2017), ranchers, etc., and we expect this trend to continue in the coming years. With this being the case, we see price appreciation is more likely in these categories of housing than others, so 2018 may present a good opportunity for those empty nesters in larger homes to transition to their retirement home at a reasonable price point before prices continue to be bid up to an unreasonable level.

In our view, given the rapid price acceleration in recent years, it may be prudent for investors to take some money off the table to move into other markets that appear to have more immediate upside potential, or in a worst-case scenario, to limit exposure to a possible market correction in years to come. Without a substantial down payment, finding cash flowing residential properties in Nanaimo is nearly impossible, so we would take extreme caution if you are looking to expand your investment portfolio in Nanaimo. It is our view that purchasing a negative cash flow property has only one certainty...You will lose money...While we don’t know how long this will be the case as rents generally do rise over time, buying a home and speculating that prices will rise in the coming years is a flawed strategy when you could buy in other markets or asset classes (eg. commercial) and guarantee positive cash flow.

For developers, we see the best opportunity in developments catering to the aging, downsizing population. Low-maintenance, ground-oriented, stratified properties with higher-end finishings, enough room for family to visit, and plenty of storage for all that “stuff” should garner strong demand. Single detached ranchers, and lifestyle properties in close proximity to golf courses and marinas should also be well received.

For buyers, as noted above we see opportunity for downsizers to potentially secure their retirement residence at decent price levels. Yes, prices are up for all asset classes, but you are better to sell high on the higher priced property, and buy high on the lower priced property than sell lower, and buy lower down the road. For example, if you sell a larger home for $600,000 and buy a townhome for $300,000, you have an additional $300,000 to fund your retirement. If the market corrects 10% across the board, you now sell for $540,000, buy for $270,000 and have only $270,000 remaining to fund your retirement. It is also important to note that given the demographic-driven demand, the buy lower option may never come.

When we say we see the primary opportunities being on the sell side, we are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. Remember, we all need a place to live and over time real estate generally appreciates. We just know there are peaks and valleys and we have reason to believe we are closer to the peak than the valley.

If you have any questions about market conditions, would like more details specific to your neighbourhood, or for a consultation specific to your situation, please feel free to contact us anytime as we would welcome the opportunity to help.

All the best for 2018!

250.751.0804 | info@jahelkagroup.com | www.jahelkagroup.com

Source: VIREB