Some Positive Signs for the Nanaimo Market in November
Single Family Prices and Volume
100 single-family homes sold in November, 3 more than the 97 that sold in October, and 24 more than what sold in November of last year. The average home price went up 1.6% in November to $565,632 from October’s average of $556,717 and this figure was 6.3% higher than reported last November when the average home price was $532,299. The median sale price increased marginally from $539,500 in October to $547,500 in November, which is also 10.6% higher than the same time frame last year when the median sale price was $495,000. 93 homes were listed in November, which was 36% less than the 145 homes listed in October, and 25% less than the 124 reported as being listed in November of 2018.
Insights: 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 certainly doesn’t 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.”
For much of the year, subdued sales volume has been a leading story. November bucked this trend with nearly 32% more sales occurring than we saw a year ago, also representing a slight increase from October of this year. While a positive sign heading into next year, it is important to remember that a single month does not make a market. What will be important is to keep a close eye on the volume stats over the next few months as we emerge from the winter slowdown and into the traditionally busier spring market. Looking at the past 12 months, sales volume is down 14% from the preceding 12-month period, and down 9% year-to-date.
Single-family homes are not the only category feeling the slowdown...On a trailing-12 basis, acreage sales are down 11%, apartment sales are down 26%, patio homes are down 18%, townhomes are down 5%, half duplexes are down 21%, mobile homes are down 17%.
However there was some improvement overall with these numbers, and apartment-style condos also had a good showing from a volume perspective in November, with 42% more units selling than in November of last year, and the highest number of condo sales in the past five Novembers. Again, what is important to monitor here is the follow-through in the coming months.
Another interesting observation where we have had a bit of follow-through (at least for the second month in a row) is in the slowdown in the number of new listings. Last month we reported the number of homes listed was down just shy of 28% from the number of homes listed the previous October and November followed through on this with 25% fewer homes listed than in November of last year. So while the pundits are quick to point out that the market has cooled due to government intervention (stress tests, speculation tax, foreign buyer tax), essentially implying that the slowdown is due to subdued demand, what about the supply side? What is interesting is that year-to-date the number of listings is down 9%, which mirrors the decline in sales volume year-to-date which also comes in at 9%. If there is actually something to this, possibly a more reasonable explanation of the slowdown would be a combination of government intervention reducing both overall demand as well as the demand at higher price points based on the stress tests reducing qualifying amounts, meanwhile the supply side is experiencing an insufficient number of homes coming to market to meet the demands of the buyers that are still in the market at the price points that they are looking to buy. We are not talking about the higher end of the market here where there certainly is some excess supply. With both subdued demand and supply, volume has dropped and average prices have stayed relatively flat for the better part of the past year and a half. As we have commented before, the Nanaimo area so far has fared quite well relative to other markets across the province and country since the beginning of 2016. If the supply shortage at low to mid-tier price points is playing a more significant role in the slowdown than has been widely recognized, a resurgent demand without increased supply would set the stage for upward pressure on pricing. Again, important to wait and see on follow through.
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 there are 6 registered sales of homes over $800k in Nanaimo, including 2 over $1,000,000. With 108 homes currently on the market priced at $800k plus, this would equate to 18 months' worth of supply.
So how did Nanaimo stack up against other Island communities north of Victoria for the month of November? Looking at the average price, Nanaimo up 6% year-over-year was eclipsed to the upside by Parksville/Qualicum up 7%, Cowichan Valley up 10%, Comox Valley up 12%, and Campbell River up 13% from November of 2018. To the downside, Port Alberni/Westcoast saw average sales prices fall 5% from November 2018’s average.
Looking at sales volume, Nanaimo up 42% led the way, followed by Parksville/Qualicum up 21%, Campbell River up 10%, and Comox Valley up 2%. To the downside, Port Alberni/West Coast was down 27%, while the Cowichan Valley was down 36%.
Looking at the entire Vancouver Island Real Estate Board totals, the average sale price was up 9% while sales volume rose 3% from November of 2018. With improving market conditions on the Lower Mainland and volume and price increases in both Nanaimo and Parksville/Qualicum, we will be keeping a close eye on Central Vancouver Island conditions heading into next year, as a strengthening Lower Mainland market would likely be a catalyst for resurgent demand from empty-nesters looking to retire on the Island.
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 to 108% in November, up from 67% in October, and up 77% from November of 2019 when the ratio was 61%.
The average sell price/list price was 97% in November, up from 96% in October, but down from November of last year when it was 98%.
The average days on the market for the homes that did sell in November decreased by 8.3% to 33 days from October’s 36 days, which is 22.2% higher than November of last year when days on market averaged at 27.
As of the end of November, the number of active listings was 271, down 21.5% from October’s 345 active listings, and 13.4% lower than the same time last year when there were 313 active listings at month-end.
Insights: Of the 8 market indicators we look at in this section, 6 improved, while 2 deteriorated.
The sell/list ratio of 108% is the obvious number that jumps off the page in this section. The lower volume of new listings and higher sales volume makes this figure more pronounced. While we don’t read too much into a single month's results, we’ll be keeping an eye on this, as a few months of high sell/list and we’ll be working through the active inventory, setting the stage for upward pressure on pricing.
The average sell/list price has moved downward from the 99% - 100% we were seeing pretty consistently at the peak of this market cycle, however by historical standards 97% is still quite respectable. With an average days-on-market (DOM) of 33 days, the homes that are selling on average are taking longer to sell than they were a couple of years ago when averages dipped down into the teens, but again, by historical standards, 33 days is still quite solid.
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 October to November, with 11 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 -11.37% in North Jinglepot to 11.58% in Hammond Bay. For the second month in a row, the top riser month-over-month was Extension with Lower Lantzville once again the second highest. Top performers year-over-year were Hammond Bay, South Jinglepot, South Nanaimo, Extension, and Upper Lantzville. Looking at volume, 9 of the 18 sub-areas saw increases month-over-month with South Jinglepot coming in as the top riser, while only Pleasant Valley and Departure Bay saw increases year-over-year.
Insights: 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, waterfront homes (on low volume), and apartment-style condos were the categories that saw an increase in average sale price from October to November, with those same categories also experiencing increases from November of last year. Month-over-month increases in sales volume were reported in single-family homes and, on lower volume, waterfront homes, patio homes, and lots, while single-family homes, waterfront homes, apartment-style condos, and patio homes also experienced 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. At this stage we see the market remaining in more of a consolidation phase, which has started to show possible indications of improving conditions. Stay tuned.
Opportunities
For the better part of the last 2 years, we have witnessed the overall market cool to some degree, as we witness more balanced market conditions than we experienced in the preceding 3 years (2015-2017).
However, it is important to point out that even within the same geographic market (eg. Nanaimo) different categories of real estate and different price ranges can certainly experience quite different market conditions, as the supply and demand factors influencing the categories and price levels are quite different. For example, in these late stages of 2019, the single-family home market continues to be 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 (equivalent to 1.5 years' worth) 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 $700-$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. Depending on your circumstances, if you do not require an immediate move, you are likely best at this stage waiting until the New Year to avoid the holiday slowdown in buyer traffic.
This point takes us back to opportunities for buyers. Because buyer activity nearly dries up for the holiday season, many sellers may take their homes off the market with plans to re-list in the New Year. In fact, some may have already done so. When looking, if days on market are adding up and a home remains on the market through the holiday season, it may be a sign of a motivated seller. In fact, we have used these signals to identify some great buying opportunities for our clients in the past, and will, of course, be looking for these opportunities again this year.
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 the only guarantee you will have is that you will be paying money out each month until rent levels rise. With increasing rental supply locally, it would be reasonable to expect that you won’t be seeing rent levels increasing at the levels they previously were any time soon. 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.
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.
Check out the Nanaimo Market Statistics Here: Market Stats November 2019
Source: VIREB