Strong Market Continues, Particularly for more Affordable Options
Single Family Prices and Volume
97 single family homes sold in February, down 13% from the 111 sold in the same time frame last year, but not surprisingly up 73% from the 56 that sold the previous month given the traditional slowdown January often experiences coming out of the holiday season. The average sale price for a single family dipped slightly to $495,997, down from $512,063 in January. However, this figure still represents a nearly 20% increase over February of last year. It should be noted 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. February’s median price dipped 9% to $465,000 from January’s levels, which when taken together with the lower average price suggests more properties moved at the lower end of the market on a percentage basis than what transpired in January. Again, not surprising with young families commonly staying on the sidelines in January as kids head back to school after the holiday break.
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 marginally (2%) from 56% to 54% in January, and down 25% from February of 2016. While somewhat surprising, this could be a possible leading indicator of sellers who are starting to become somewhat unrealistic, dare I say greedy, with their listing prices. With a lack of listings, it could also be reflective of Realtors attempting to “buy” listings by overshooting on their recommended list prices to secure a listing, before recommending reducing the price when the listing fails to attract an offer. Sellers, be very careful not to overshoot on your listing price…You have one chance to make a first impression, and you don’t want buyers to rule you out due to being overpriced, as they are likely not coming back for a second look should you decide to price drop.
For the homes that did sell, the sell price/list price ticked up 1 point from 98% to 99%, and was significantly higher than the 95% experienced in February of 2016. February’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 well above the list price in many cases. For a general frame of reference, typically anything 96% and above reflects strong market conditions.
The average number of days on the market decreased 33% to 27, down from 40 in January. It was also a 41% decrease from the average of 46 days in February 2016, 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.
As of the end of February, the number of active listings is 240, up 22% from the 196 listed in November, but down 17% from the 288 listed at the end of February last year. The increase from January 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: 64% at an average of 100.83% of the list price.
- Condo/Strata: 49% at an average of 102.64% of the list price.
- Selling in 8 -31 days:
- Single Family: 21% at an average of 98.87% of the list price.
- Condo/Strata: 34% at an average of 99.89% of the list price.
- Selling in more than 31 days:
- Single Family: 15% at an average of 96.46% of the list price.
- Condo/Strata: 17% at an average of 95.98% of the list price.
Sell Price/List Price:
- Sold above list price:
- Single Family: 36% of homes sold above the asking price - at an average of 4.2% above ask. The highest premium paid was 20%, which was an outlier as the next highest was 8%. The average days on market for those selling above the asking price was 11.93, although this was skewed by 1 that required 166 days to sell.
- Condo/Strata: 35% of condos sold above the asking price at an average of 4.7% above ask. The highest premium paid was 11%, and the average days on market for those selling above the asking price was 5.58.
- Sold at the list price:
- Single Family: 19% of homes sold at the ask price in an average of 25.57 days.
- Condo/Strata: 24% of condos sold at an average of 38 days on the market, skewed upwards by one property on the market for 270 days.
- Sold between 95% and the list price:
- Single Family: 39% of homes sold, taking an average of 20.7 days.
- Condo/Strata: 26% of condos sold, taking an average of 19.1 days.
- Sold below 95% of the list price:
- Single Family: 7% of homes sold, taking an average of 88.8 days.
- Condo/Strata: 15% of condos sold, taking an average of 66.5 days.
There are clearly some key takeaways here:
- 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 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 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 as evidenced by 36% of single family home and 35% of condo/strata sales in February 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
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 January to February, with all 18 experiencing increased prices year-over-year. These annual increases range from 1.25% to 25.80%. Top risers month-over-month were Cedar, South Jingle Pot, Chase River, and Pleasant Valley, most of which are traditionally neighbourhoods at the lower end of the pricing spectrum. Top performers year-over-year were Departure Bay, Chase River, Lower Lantzville, and North Nanaimo. Looking at volume, risers both monthly and annually included Uplands, South Nanaimo, Cedar, Extension, and Lower Lantzville. There are two key observations here…Firstly, most price and volume risers are the traditionally more affordable neighbourhoods. 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.
Apartment style condos were undoubtedly the top performing category in February, up 11% month-over-over month and 29% year-over-year on increasing 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. Waterfront homes which are in extremely short supply are also seeing significant price increases.
Opportunities
Current market conditions present an excellent opportunity 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.
Now is also a smart time for investors to take some money off the table in anticipation of a market correction in years to come or alternatively to move into other markets that appear to have more immediate upside potential. Without a substantial down payment, finding cash flowing residential properties is nearly impossible. It is our view that purchasing a negative cashflow property has only one certainty...You will lose money...While we don’t know how long this will be the case as rents generally do rise over time, buying a home and speculating that prices will rise in the coming years is a flawed strategy when you could buy in other markets or asset classes (e.g. commercial) and guarantee positive cash flow.
For buyers, as noted above we see opportunity for downsizers to potentially secure their retirement residence at decent price levels. Yes prices are up for all asset classes, but 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, as 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 February 2017
Source: VIREB