Average Single-Family Homes Price Sets All-Time Record High in January
Single Family Prices and Volume
43 single-family homes sold in January, 36% less than the 67 that sold in December, and 12 less than the number sold in January of last year. On this lower volume, the average home price went up 6% in January to $603,720 from December’s average of $571,519 which was 11% higher than reported last January when the average home price was $544,902. The median sale price increased by 5% from $553,250 in December to $579,000 in January, which is 8% higher than the same time frame last year when the median sale price was $535,000. 105 homes were listed in January, which was 52% more than the 69 homes listed in December, but 30% less than the 150 listed in January of 2019.
Insights: On its own, the average sale price of $603,720 represents the highest monthly average sale price for a single-family home in Nanaimo’s history, and the first time the figure has crossed over the $600k threshold. It is also the third consecutive month of increasing average prices, and the jump in median price (albeit not as drastic), also supports that it is not just a seven-figure sales in a low volume month really skewing the results. With that said, the sales volume at 43 homes sold was, in fact, a 5-year low, so this must also be taken into consideration when you see these significant percentage moves. If you follow our commentary, you know our position that one, even two months does not make a market. While three lower volume months isn’t enough to suggest we are once again in a confirmed uptrend, it does make us pause and take note, and gives reason for continued optimism (at least for sellers) as we head towards the traditionally more active spring market.
Listing volume was down 30% from last January, which means buyers had less new supply to choose from, which undoubtedly impacted the number of offers that were written and accepted. However, what also must be taken into consideration is the weather. Nanaimo in January experienced the highest level of precipitation in over a year, and we had nearly a week where snow was significantly impacting our transportation. It is likely that the weather not only kept buyers from viewing homes but also kept sellers from listing, as the weather has a significant impact on the marketing material generated for homes being listed, as well as on the first impression that is made when a buyer views a home for the first time. This is particularly relevant for lifestyle properties, ocean view homes, and oceanfront homes. If you can’t see the ocean through the fog, the emotional draw of the view is certainly minimized, and for many buyers, emotions drive offer decisions. It is our opinion based on results over the past 5 years in this market, that timing the weather for a listing to go live has much more of an impact than most people would give it credit for (including their realtors who have photography shot on a stormy day in a rush to get a listing live).
The market is back...up 6.3% from last November...OK, hold on, maybe that isn’t exactly the case. However, depending on where you get your real estate news, that may be what you have heard. While a 6.3% increase in the average sale price is a positive sign, we have to look at this figure in context. If instead it was reported that the average price was actually down .71% from September, down 4.67% from May’s average, and down 2.83% from the average sale price 15 months ago in September of 2018, all of which are accurate, your opinion of the current state of the market may be significantly different than just hearing that the average home price is up 6.3%. Statistics can certainly be misleading, and a single month does not make a market. The reality is last November’s average price was an outlier, the lowest monthly average since January of 2018, $26,850 below October 2018’s average, and $42,656 below December 2018’s average. This is why it is so important to look at the bigger picture and the stats that are being reported in the context of the market. With that out of the way here comes the clip that hasn’t changed for a number of months now in this section: “The average home price continues to be fairly range-bound, a trend that has persisted since early 2018, coinciding with a time period when we started to really notice a decrease in sales volume. Over the past 20 months or so, this range-bound average price has fluctuated between a low of $532,299 (November 2018) and a high of $593,326 (May 2019). It seems it is a few months up, a few months down, as the market has failed to gain any significant traction one way or another. This is consistent with the notion that we are trending towards a more balanced market, and the market is in a bit of a consolidation pattern after a few years of sustained upward pressure on pricing.”
Something we have been keeping a close eye on now for a number of months is the sales volume at the higher end of the market. So far for January, there are 2 registered sales of homes over $800k in Nanaimo, both over $1,000,000. With 93 homes currently on the market priced at $800k plus, and 47 of these over $1,000,000, there is certainly no shortage of supply at the higher end of the market. Our take is that continued improvement in the Lower Mainland market should help with absorption at higher price levels, but to what extent is hard to say. At some stage, more SOLD signs will drive more listings, as we still have the looming mass-downsize for those empty nesters who are looking to trade in their 3,000+ square foot family homes for the convenience of a lower maintenance option to allow them to enjoy the golden years. It will be interesting to see how this all plays out as local buyers simply don’t have the qualifying incomes to be able to purchase these larger homes at current price levels. We see the volume of out-of-town buyers (both domestic and international) with the qualifying income to buy these homes as a significant variable that will impact the mid to high end of the market over the next decade. As many domestic buyers are targeting Central Vancouver Island as their retirement destination of choice, the likelihood that they are looking to buy a 20-year old, 3,000+ square foot home that is functionally and aesthetically in need of a 6-figure update, just because the home has a decent ocean view I would suggest may not be an overly likely scenario to play out. What I see as potentially the best chance for mass absorption of these larger, now aging homes wrapping from North Nanaimo around to Departure Bay on the view corridor is increasing foreign buying on the back of mass media exposure for Vancouver Island. Families, and in some cultures, multi-generational families require space, and these cookie-cutter spec homes built to capitalize on the ocean views when building costs were much lower, provide a solid option, budget permitting.
So how did Nanaimo stack up against other Island communities north of Victoria for the month of January? Looking at the average price, Nanaimo up 11% year-over-year was eclipsed to the upside by Port Alberni/West Coast up 22% on low volume, and on par with Cowichan Valley up 11%. Parksville/Qualicum was up a respectable 8%, and Comox Valley saw a modest improvement with their average sale price up 2%. Campbell River was the only decliner, down 3% from last January.
Looking at sales volume, only Parksville/Qualicum up 17% and Port Alberni/West Coast up 14% saw gains. Cambell River, Comox Valley, Cowichan Valley, and Nanaimo all saw significant volume decreases from last January, ranging from 22% to 42%.
Looking at the entire Vancouver Island Real Estate Board totals, the average sale price was up 6% while sales volume declined 16% from January of 2019. With improving market conditions on the Lower Mainland price increases in both Nanaimo and Parksville/Qualicum, we will be keeping a close eye on Central Vancouver Island conditions heading into the spring market, as a strengthening Lower Mainland market would likely be a catalyst for resurgent demand from empty-nesters looking to retire on the Island. The fact that Parksville/Qualicum, the epicentre of retirement destinations, saw a 17% volume increase from last January is a positive early sign in this regard.
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 by 58% to 41% in January, down from 97% in December, but up 11% from January of last year when it was 37%.
The average sell price/list price was 97% in January, up 1% from last month and from January of last year when the ratio was 96%.
The average days on the market for the homes that did sell in January decreased by 12% to 46 days from December’s 52 days, which is 7% higher than January of last year when days on market averaged at 43.
As of the end of January, the number of active listings was 215, up 5% from December’s 205 active listings, and 20% lower than the same time last year when there were 268 active listings at month-end.
Insights: Of the 8 market indicators we look at in this section, 4 improved, while 4 deteriorated.
Given the lower volume of new listings in January and the challenging weather conditions, it is not overly surprising that the sell/list ratio decreased, and average days on market increased, as the homes that couldn’t find a buyer prior to the turn of the calendar year didn’t have a great chance in a bad weather month with low buyer demand competing against the new listings hitting the market.
None of the results here are overly surprising or telling and as such since we probably went a bit overboard above in our insight section, we’ll keep this section light and wait for more telling signs to elaborate on in months to come.
Top Performing Neighbourhoods & Categories
7 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 12 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 -13.12% in North Jinglepot to 11.33% in Upper Lantzville. The top riser month-over-month was Brechin Hill with Departure Bay the second-highest, however, it is important to mention that the month-over-month variance was minimal, from -2.46% in South Jingle Pot to 2.33% in Brechin Hill. Top performers year-over-year were Upper Lantzville, Hammond Bay, South Nanaimo, South Jingle Pot, and Cedar. Looking at volume, 4 of the 18 sub-areas saw increases month-over-month with Cedar coming in as the top riser, while only Cedar, Departure Bay, Pleasant Valley, and South Jingle Pot saw increases year-over-year.
Insights: As we are using a trailing-12 figure, this section may be confusing… In the opening section of this recap, we are reporting that the average sale price in Nanaimo is up 6% from December, but above we report that the top neighbourhood month-over-month is only up 2.33%. This is simply due to the reporting period and to the fact that a trailing-12 figure, needed to smooth out volatility resulting from low volumes in some neighbourhoods, isn’t going to react as quickly as the month-over-month reporting period does to changing conditions. While not an ideal solution, it is better than having 1 sale in a neighbourhood in a month and then using this single data point as a representation of price action in the neighbourhood overall.
Aside from that, it is difficult to draw any significant conclusions here. Some neighbourhoods are up, some are down, with seemingly no particular rhyme or reason. This raises an important point...Not all neighbourhoods and classes of real estate move up and down at the same rate throughout the cycle. If you are considering a purchase that extends beyond the lifestyle considerations of a principal residence, at this stage in the cycle working with a realtor that has a good pulse on neighbourhood profiles and historic market action is very important.
Single-family homes, apartment-style condos, patio homes, and lots were the categories that saw an increase in average sale price from December to January, with single-family homes, patio homes, and townhouses also experiencing increases from January of last year. Month-over-month increases in sales volume were reported in apartment-style condos, patio homes, and lots, with the latter being the only category to experience year-over-year increases.
Insights: Again, not much for meaningful conclusions to be drawn as these figures continue to fluctuate from month to month. While we are seeing some improvements, categorically there are not really any trends or patterns that have been confirmed. In our 2020 Look Ahead we mentioned patio homes and single-family as the 2 categories we felt most likely to lead the way for 2020. While it is early and may very well be coincidental, these were the only 2 categories to post month-over-month and year-over-year gains. We’ll be keeping our eyes on follow-through here.
Opportunities
For the better part of the last 2 years, we have witnessed the market trending towards more balanced conditions than we experienced in the preceding 3 years (2015-2017). Nearing the end of 2019 there were some initial signs that the market may be starting to show some signs of life. January results have supported the notion that there is reason to be optimistic about improving market conditions in 2020, and the results coming out of the Lower Mainland for January (Sales volume up 42.4% overall from January of 2019, with a 20.3% decrease in active listings) are also positive signs for our market, as those buyers who have not been able to sell in the past couple of challenging years across the pond appear to now have a more likely probability of selling their homes, paving the way for a move to our region.
Without strong demand from Lower Mainland Buyers, as well as cooled foreign buyer demand on the heels of the foreign buyer tax introduced in 2018, the single-family home market in Nanaimo has seen an increasing divergence, essentially becoming the tale of 2 markets where we don’t have enough quality homes at affordable prices to satisfy the demand at lower price points, and we have an oversupply in the $800k+ category.
What does this mean for buyers? Well, as long as inventory levels remain elevated at higher price points, at some stage motivated sellers are going to adjust their pricing expectations to secure a sale. As Days on Market (DOM) add up for a listing, with each passing day, the likelihood of price reductions or concessions increases if the sellers have some motivation. If you are in the market for and looking in the $800k+ range, some patience, as well as diligence in trying to find signs of motivation (price drops, vacant homes, etc.), could go a long way in securing a solid purchase as price levels fall below where they may have been 2 years ago at the peak of the frothiness.
For sellers, given the lack of quality homes below $700k, if you are thinking about listing, as long as you are priced correctly, you should be well-positioned to sell into fairly strong demand, especially with the right marketing plan maximizing exposure. If, and that is a big if, we do see increasing Lower Mainland and foreign buyer demand at higher price points, then the spring of 2020 may represent the best opportunity since 2017 to sell a quality home at the higher end of the market. However, given the supply, homes will need to be priced accurately and competitively to best position against the competition.
For investors, on the buy side, patience is going to be rewarded. If you are considering an income property, our take is that if you can find an opportunity where the numbers work, eg. positive cash flow, it is worth exploring. If your strategy is to gamble on increasing values, you may be taking on unnecessary risk exposure entering the market at this time if it is a negative cash flow property, as, despite some early signs the market may be improving, the reality is the only guarantee you will have is that you will be paying money out each month until rent levels rise. Again, patience monitoring the market for signs of a sustained uptrend could help you avoid a “false start” scenario. While we understand over time real estate generally appreciates, timing plays a significant role in investment returns, so just be cautious and make sure you are working with a qualified realtor who understands investment real estate and can give you the information you need (both positive and negative) to make smart decisions. Sometimes your best offense is a good defense.
Remember, over time real estate generally appreciates. We just know there are peaks and valleys. Buy on the way to the peak and you are positioning yourself for success, buy on the way to the valley, not so much, at least in a short-to-medium timeframe. It is our mandate to provide you with information that you can use to determine which side of the peak we are on, and ultimately to help you make informed decisions that you will not regret.
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.
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Check out the Nanaimo Market Statistics Here: Market Statistics January 2020
Source: VIREB
Disclaimer: The information presented is intended for general information purposes only and should not be construed as Real Estate advice. Each client's situation is unique and therefore we recommend consulting directly with your professional advisors (Realtor, Accountant, Lawyer, Investment Advisor, etc.) prior to making any real estate decisions. Not intended to induce breach of an existing agency agreement or solicit properties currently listed for sale or individuals currently under contract with a Brokerage.