Undoubtedly a Seller’s Market This Spring
Single Family Prices and Volume
154 single family homes sold in February, down 5% from the 162 sold in the same timeframe last year, but not surprisingly up 43% from the 97 that sold the previous month as we emerge from the traditional winter slowdown. For the second time in recorded history, and now in 2 out of first three months of 2017, the average sale price for a single-family home eclipsed the $500k mark. Coming in at $502,696, this figure was an increase of 1.35% from last month’s average, and more notably a 17.51% increase annually. If you’ve been following our commentary for a while now, you’ll be well aware that 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. March’s median price of $479,900 was up 3.2% from February’s levels, and up 20% from a year earlier. We interpret more movement in the median than the average price as a signal that prices for homes at the low end of the market continue to accelerate. With average household incomes in Nanaimo no longer qualifying families for high ratio mortgages at average sale price levels, one could reasonably expect there to be solid demand at the lower end of the market for the foreseeable future.
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 moved upwards to 77% in March from 54% in February, but was down from the unprecedented 90% in March of 2016, a 25% increase from February of 2016.
For the homes that did sell, the sell price/list price ticked up 1 point to 100% from 99% in February, and 2 points from 98% in March 2016. March’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 well 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 number of days on the market decreased a further 7% month-over-month to 25, and more notably was down from 39 days a year earlier. Taken together with a 100% sell price/list price, these figures suggest that buyers are increasingly taking aggressive action to avoid missing choice opportunities.
As of the end of March, the number of active listings is 245, up 2% from February, but down nearly 10% from the 271 listed at the end of March last year. The increase from February follows the typical rise in listing numbers heading into the spring months, however with depressed year-over-year figures, 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.
Days on Market:
- Selling in 0 - 7 days:
- Single Family: 53% at an average of 101.04% of the list price.
- Condo/Strata: 59% at an average of 102.32% of the list price.
- Selling in 8 -31 days:
- Single Family: 30% at an average of 100.15% of the list price.
- Condo/Strata: 27% at an average of 100.01% of the list price.
- Selling in more than 31 days:
- Single Family: 17% at an average of 97.55% of the list price.
- Condo/Strata: 14% at an average of 99.29% of the list price.
Sell Price/List Price:
- Sold above list price:
- Single Family: 40% of homes sold above the asking price - at an average of 4.24% above ask, with 13% the highest premium paid. The average days on market for those selling above the asking price was 14.24, although this was skewed by 2 that required 100+ days to sell.
- Condo/Strata: 48% of condos sold above the asking price at an average of 4.18% above ask. The highest premium paid was 11%, and the average days on market for those selling above the asking price was 6.73.
- Sold at the list price:
- Single Family: 16% of homes sold at the ask price in an average of 18.55 days.
- Condo/Strata: 19% of condos sold at an average of 15.67 days on the market.
- Sold below the list price:
- Single Family: 44% of homes sold, taking an average of 35.91 days.
- Condo/Strata: 33% of condos sold, taking an average of 43.57 days.
There are clearly some key takeaways here:
- Following up on similar market action in February, demand for condo/strata properties appears to have caught up and in some cases, surpassed the competitiveness for single family homes. This is a marked change from 2016 when condo demand and price action still lagged single family home market conditions.
- Homes and condos priced accurately are selling very quickly, in many cases at above the asking price.
- 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, in some cases drastically.
- 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 seller’s expectations normalize over time.
What this means for Buyers: If you are a serious buyer, you need 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: 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 as evidenced by 40% of single family home and 48% of condo/strata sales in March transacting 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
All 18 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. These annual increases range from 3.86% to 29.03%. Top risers month-over-month were North Jingle Pot, Cedar, South Nanaimo, Old City, Pleasant Valley, and Central Nanaimo. Top performers year-over-year were Old City, North Jingle Pot, Lower Lantzville, Cedar and Chase River. It is interesting to note that both of these lists were absent of the consistent top performers (North Nanaimo, Hammond Bay, Departure Bay) in the earlier stages of the current cycle. Looking at volume, risers both monthly and annually included Uplands, Departure Bay, South Nanaimo, Chase River, University District, Extension, and Lower Lantzville. There are two key observations here…Firstly, most price and volume risers are the traditionally more affordable neighbourhoods, supporting our inferences surrounding price action earlier in the report. Secondly, most of these neighbourhoods are near the city limits or in the cases of Cedar and Lower Lantzville, technically beyond. This is textbook market action for a maturing real estate market, as many buyers have now been priced out of the traditionally more desirable and/or more conveniently located neighbourhoods in relation to jobs and amenities, and must head further and further out to find a home in their price range. 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.
Lots were the top performing category in March, kicking off what is poised to be a busy spring/summer building season. The average lot price in Nanaimo was up more than 25% to $249,818, which also represents a 43% increase year-over-year, on volume more than double both the month-over-month and year-over-year figures. Last month’s leader apartment-style condos had another strong showing with prices up 22% month-over-month, 17% year-over-year on strong volume. If you have been following our commentary, this should not come as a surprise as we suggested last spring that while single-family home prices were taking off, condos were essentially late to the party, and still well below the peak levels of the last cycle.
Opportunities
The sell price/list price and sell/list ratios continue to tick upwards, prices are rising, active listings are low, average days on the market is falling, and buyer demand is strong. We are in a SELLER’S market. What should you do in a SELLER’S market? I’ll give you one hint...It isn’t time to go shopping. However, of course, this doesn’t apply to everyone. Circumstances change; job transfers, marriages, divorces, births and deaths, the list goes on. People have valid reasons to both buy and sell at all stages in the cycle, we are simply trying to address where the most optimal opportunities lie given current market conditions. For those looking to downsize in the coming years to lock-in their recent gains and secure an ideal retirement home before masses go into competition and bid up prices on patio homes and ranchers in the next decade, current market conditions present an excellent opportunity.
We’ve used a similar example in past editions of our recap, however, we really want to hit this point home. Downsizing is particularly attractive right now at elevated price levels because 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 demographics, the buy lower option may never come.
We are by no means suggesting that now is the time to sell for everyone, because 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 every 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 Nanaimo March 2017
Source: VIREB