Average Price in Nanaimo Rises Above $500k.
The Market is on Fire!
Single Family Prices and Volume
56 single family homes sold in January, down 11% from the 63 sold in the same time frame last year, and 21% from the 71 homes that sold last month. The average sale price for a single family home jumped significantly, and for the first time in Nanaimo finished north of the half-million dollar mark at $512,063 up nearly 33% from the January 2016 average of $385,993. That said, the movement in the average price isn’t the only determining factor in assessing the strength of a market. 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. January’s Median price actually eclipsed the average, coming in at $516,000, which represented a 47% year-over-year, and 24% month-over-month increase. These numbers are remarkable, and clearly reflective of the current market strength and pent up buyer demand. The fact that the median price outpaced the average price is also extremely rare, a strong indicator that there are a significant number of homes selling at the higher end of the pricing spectrum.
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 was down 21% to 56% in January, but up 12% from January of last year.
The sell price/list price remained strong at 98%, down slightly from 99% in December. However, this figure was up from 97% a year earlier. Generally anything 96% and above reflects strong market conditions.
The average number of days on the market increased from 28 to 40 month-over-month, however it was down from 49 days in January 2016, representing an 18% decline year-over-year, suggesting that attractive offerings continue to sell quicker than seen over the past number of years during the winter months and explaining why buyers still need to act quickly to avoid missing choice opportunities. One important point on the days on the market is that January typically sees a spike in days on the market as market participants (buyers & sellers) typically pause over the holiday season, before new listings resume and buyers get back out in force a few weeks into January. With that said, the 40 days on market is likely not reflective of how quickly prime listings are selling, as most are snapped up within days, many in multiple-offer situations resulting in prices at or above the listing price.
As of the end of January, the number of active listings is 196, up slightly from 190 in December, but down significantly from 275 in January 2016. With subdued inventory levels, it is no surprise that buyers continue to struggle to find suitable properties.
Only Found Here
***New for 2017: In this section we provide some insight into a sample of our team’s proprietary analysis data analysis, as well as sharing how we make use of this information to formulate effective strategies for our buyers and sellers.
You’ve heard the headlines: Average prices have reached historic highs, inventory levels are at historic lows and many homes are selling at or above the asking price, often in multiple offer situations which is forcing buyers to act very quickly to avoid missing out. With some notable details lacking in the reported statistics, this inevitably leads buyers to wonder if this is all just media and/or Realtor driven hype, after all the average days on market in January was 40, and the average sell price/list price ratio was only 98%. These statistics don’t really support you having to act instantly and often pay thousands of dollars above the asking price to secure an accepted offer. For your viewing pleasure, here are the facts for single family homes sold in January:
Days on Market:
• Homes selling in 0 - 7 days: 56% at an average of 101.2% of the list price
• Homes selling in 8 – 31 days: 14% at an average of 99.5% of the list price
• Homes taking at least 32 days to sell: 30% at an average of 97.3% of the list price, on the market for an average of 68.5 days.
Sell Price/List Price:
• Sold above list price: 35% of homes sold above the asking price at an average of 3.44% above the asking price. The highest premium paid was 8%, and the average days on market for those selling above the asking price was 4, which would have been lower if not for the fact that many sellers are now holding off on offers for a few days in order to ideally drive a bidding war.
• Sold at list price: 21% of homes sold at the asking price with the average days on market for this category at 14.
• Sold below list price: 44% of homes sold below the asking price at an average of 97.13% of the list price, and on the market for an average of 44 days.
There are clearly some key take-aways here:
1. Homes priced accurately are selling very quickly, in many cases at above the asking price.
2. If a home has not been priced accurately and has not sold within a week, the market appears to be moving on with the average days on the market jumping drastically.
3. There is a strong correlation (or inverse relationship if you would like to get technical) between days on market and sell/list price. 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 sellers’ expectations normalize over time.
What this means for Buyers: If you are a serious buyer, you need to be pre-approved 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: You need to price accurately to maximize interest. 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 bidding situation which in 35% of January sales resulted in sale price above the asking price. Working with a Realtor with a very strong marketing platform is vital, as is working with an experienced negotiator who can guide you through a potential multiple offer situation.
Top Performing Neighbourhoods & Categories
16 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. These annual increases range from 6.88% to 25.35%. Top risers month-over-month were the Old City, University District, and Upper Lantzville. Top performers year-over-year were Departure Bay, North Jingle Pot, Chase River, North Nanaimo, and South Nanaimo. Of note, South Nanaimo has experienced a significant volume spike in both monthly and annual contexts. 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.
Townhouses were undoubtedly the top performing category in January, up 38% month-over-over month and up more than 32% year-over-year. Yes, 38% is correct… If you have been following our commentary, this should not come as a surprise as it continues to highlight the impending mass-downsize the baby boomers are poised to drive over the coming years. Lots and single family homes were other categories that had strong showings in January.
Opportunities
With upward pressure on pricing remaining strong, driven by solid demand and limited supply, we view purchases in the Nanaimo residential market for investment purposes at this point in the market cycle as speculative. Without a very low-ratio mortgage, finding cash flowing residential investment properties are nearly impossible. In other words, if you are buying a rental property in Nanaimo in January 2017, the only guarantee you have is that you are going to lose money every month, basically crossing your fingers that the market is going to continue upwards. While the short term demand-driven outlook looks promising, there is really no underlying long-term economic support for it to do so. Our primary concern here is average household incomes in Nanaimo don’t support the average housing prices as buyers simply won’t qualify if prices get much higher. Factor in recent government intervention in lending limiting what buyers are qualifying for and there are some major questions about the viability of a continued run up in prices. This is not to say we don’t have another 6 months, 1 year, even 2 years left in the current run. Timing is what is most challenging to predict. The outcome is not…
The reality is the markets will peak, and they will turn downwards. Real estate markets are cyclical, and this move is inevitable, it’s just a matter of when. What we always tell investor clients who are thinking of selling is to pick a number and stick to it, because if the market turns and you get caught, there is a good chance you will ride it down, in hopes of one day getting back to the number that you happily would have sold at in the first place. If this section sounds like a near repeat of a few of our market recaps in late 2016 it’s because it is. We want to hammer this point home...Despite what the average Realtor will tell you (an individual who is also feeding their family based on real estate commission cheques), we are not at the start of a 7-year cycle...
So if it is not abundantly clear by this point in this section, we see opportunities on the sell side, leveraging low inventory numbers and rising prices to maximize recent gains. If you are downsizing, lock in a great return on your primary residence and find your retirement home before the crowd. If you are an investor looking to exit the Nanaimo market in the coming years, while it may be tempting to try to maximize your portfolio growth by timing the top, the better approach is often a more defensive strategy, whereby you look to lock in reasonable gains and protect your downside risk exposure. We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. What we are saying is that if you are risk averse, and seeing an investment property value down $50,000 - $100,000 from its current value would cause you to lose sleep at night, the spring market may present you with a good opportunity to get out with a very respectable return. For a consultation specific to your situation, please feel free to contact us anytime.
If you have any questions about market conditions or would like more details specific to your neighbourhood, please contact us at info@jahelkagroup.com and we would be happy to help.
Check out the Nanaimo Market Statistics Here.
Source: VIREB