Market Indicators Either Flat or Down for 3rd Consecutive Month
Single Family Prices and Volume
138 single family homes sold in August, down 17% from the 166 sold in the same timeframe last year and down 9% from the 152 that sold in July. Given the time of year when people are out enjoying the summer, the continued slowdown is not unexpected, however, it is interesting to note that in 2016 volume reached its summer bottom in July. After 3 months hovering around the $525,000 mark, the average sale price for a single family home dipped slightly (1.11%) in August to $518,612, which was an increase of 14% over last year’s August figure. August’s median price of $495,000 was an increase of 2% from July’s median price of $485,000 and an increase of nearly 18% from last August. While not as pronounced as July’s year-over-year figures, we are still talking about sizable gains here.
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 dipped a further 7% from July to 63%, more notably, this represented a 31% decline from the 91% posted in August of 2016.
The sell price/list price held at 99% month-over-month, one point up from the 98% figure for August 2016. August’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 number of days on the market increased by 20% from July to 24 days. This figure is still 11% lower than that of last August, suggesting homes on average sold a few days quicker than they did last August.
As of the end of August, the number of active listings is 342, up 2% from July and 26% from inventory levels at the same time last year. This is a trend that will be important to watch as this is the third consecutive month where we have seen heightened year-over-year inventory levels. The number of new listings has also been rising year-over-year, with the past 3 months experiencing accelerated increases in percentage rises over last year’s new listing numbers. With lack of supply being a major driver of recent price gains, it will be interesting to see whether rising inventory levels continue leading to more balanced market conditions in the coming months.
While the figures in this section remain strong by historical standards, it should be noted that for the third consecutive month, each month-over-month metric was either flat or inferior. While this is not completely unexpected given the time of year and extended heat wave we have experienced making it more attractive to be at the beach than touring properties, it does undoubtedly put our team on alert to be watching for behavioural signs from our clients that buyer sentiment may be changing. Keeping a close eye on the market over the coming months will help determine whether this month’s conditions are just continued seasonal cooling or the start of a larger trend. September will be an important month to watch as historically it has been a good indicator of the strength of the fall market.
Only Found Here
Days on Market:
- Selling in 0 - 7 days:
- Single Family: 41% at an average of 101.07% of the list price.
- Condo/Strata: 38% at an average of 100.18% of the list price.
- Selling in 8 -31 days:
- Single Family: 31% at an average of 99.41% of the list price.
- Condo/Strata: 44% at an average of 99.95% of the list price.
- Selling in more than 31 days:
- Single Family: 28% at an average of 97.88% of the list price.
- Condo/Strata: 17% at an average of 97.39% of the list price.
Sell Price/List Price:Sold above list price
- Sold above list price:
- Single Family: 27% of homes sold above the asking price - at an average of 3.98% above ask, with 16% the highest premium paid. The average days on market for those selling above the asking price was 24, although this was skewed by 2 that required 100+ days to sell.
- Condo/Strata: 27% of condos sold above the asking price at an average of 3.29% above ask. The highest premium paid was 10%, and the average days on market for those selling above the asking price was 13.
- Sold at the list price:
- Single Family: 14% of homes sold at the asking price in an average of 9 days.
- Condo/Strata: 24% of condos sold at an average of 42 days on the market.
- Sold below the list price:
- Single Family: 59% of homes sold, taking an average of 28 days.
- Condo/Strata: 49% of condos sold, taking an average of 24 days.
There are clearly some key takeaways here:
- Homes are not selling nearly as quickly as they did in the spring market
- The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.
- The majority of single family homes and nearly half of the strata properties sold below the asking price.
- 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: At some price levels and locations, you may have an opportunity to have more than an hour to decide if you want to pull the trigger and enter into a bidding war. In fact, there may be increasingly more opportunities to find a home without competition and potentially find a deal here and there under the asking price. However, buyer demand remains strong, so 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, especially with the number of active listings climbing to near 2-year highs. 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. 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
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 July to August, with all 18 experiencing increased prices year-over-year. These annual increases range from 5.63% in Hammond Bay to 33.63 % in the Old City. Top risers month-over-month were Extension, North Jinglepot, South Nanaimo, Old City, and Brechin Hill. Top performers year-over-year were Old City, Central Nanaimo, South Jinglepot, North Jinglepot, and South Nanaimo. Similar to last month, and more so than in previous months, the top performers seem somewhat scattered, with no strong correlation among top performing areas. Looking at volume, risers both monthly and annually included Uplands and Lower Lantzville.
On low volume, for the second month in a row water front homes led in both average month-over-month and year-over-year increases as buyers are captivated by the oceanfront lifestyle that is so attractive this time of year. Month-over-month. Single family, townhouses, and lots all saw declines, with apartment style condos and patio homes experiencing marginal increases. Year-over-year, all categories experienced gains in average prices, with townhomes and single family homes having sizeable gains, in addition to the strong price action on water front homes previously noted.
Opportunities
Heading into fall, we remain undoubtedly in the midst of a SELLER’s market. We continue to see the opportunities firmly on the sell side. If you have previously listed a property that didn’t result in a sale, the fall market may be the perfect opportunity to re-enter the market.
With that said, if you have been following our commentary, you are well aware that the past 3 months have all exhibited flat or deteriorating market conditions across a variety of metrics. While this is not completely unexpected given the time of year, it is a trend to monitor and adds fuel to the fire that we may be nearing a top in the current cycle. Across the country, volume has slowed in major markets, and just this morning the Bank of Canada has announced the second rate hike this summer. With affordability already a challenge, rising interest rates will surely impact the ability of buyers to qualify for mortgages as levels needed to get them into their desired categories of housing. There is also talk that non-insured mortgages may soon require buyers to qualify at the substantially higher qualifying rate, which is currently only applicable to insured, high ratio mortgages. The byproduct of this is less investment capital flowing into the real estate market. Less demand = reduced upward pressure on pricing. So what are we getting at...While, if you are an investor or downsizer trying to maximize your gains and time a market top, there are warning signs suggesting now may be the time. Whether it’s the stock market or the real estate market, timing the top is a fool’s game. It is impossible even for the best of the best. You can look at all the past trends and analysis you want, but if unforeseen circumstances such as government intervention, a natural disaster or major international conflict get in the way, conventional wisdom goes down the toilet. When managing your assets, protecting your downside is every bit as important, if not more than chasing gains on the upside. Remember a decline of 50% requires an increase of 100% just to break even. Selling near the top also positions you to “go shopping” when the market is “on sale.” This is how real acceleration is possible when building your portfolio. While this market may still have some room to run to satisfy the built up demand from the spring market, there is no doubt that it will turn at some point. It always does, markets are cyclical, it is not different this time… Make sure you are protected.
For buyers, the number of active listings is the highest it has been since the fall of 2015. Throughout the summer, we noticed in some cases that competition has somewhat dissipated on the buy side, and homes don’t seem to be snatched up as quickly, supported by rising average days on market. More listings equals more choice for buyers and potentially the opportunity to secure a home without enduring excruciating bidding wars and ultimately overpaying to have an offer accepted. However, September traditionally sees families return to the routine and often has decision makers re-evaluating major life decisions, such as whether it is time to make a move. This often drives fairly robust buyer demand in the early fall months, before buyers and sellers retreat to the sidelines for the holiday season, so this window may close fairly quickly as we head towards the latter part of the month.
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 Stats Nanaimo August 2017
Source: VIREB