NANAIMO AVERAGE PRICE UP NEARLY 22%, VOLUME UP 45% YEAR-OVER-YEAR

Single Family Prices and Volume

158 single family homes were sold in September, down 5% over August, but still up 45% when compared to the same time frame last year when only 109 homes were sold. Despite the marginal decrease in homes sold in September, the average sale price for a single family home increased to $476,691; representing a 5.1% increase from August’s average of $453,729, and up almost 22% from the September 2015 average of $391,803. It is certainly not uncommon to see market trend improvements in the fall after the summer’s traditional slow down but it should be noted that the average selling price has reached an all time high when compared to recent history.  That said, the average price increases aren’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 and September’s median price was $421,000, a less than 0.5% increase month-over-month, although 14% above last year’s figure. The variance between the average and median prices suggests that once again, there is strength at the higher end of the market.

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 slightly month-over-month from 91% in August to 87% in September, although more importantly, was up from 63% a year earlier. 

The sell price/list price settled at 98% again in September. This is down slightly from the 100% we were seeing earlier this year, however with prices continuing to rise and sellers stretching their asking prices to maximize their returns on the back of strong market conditions, this slight adjustment downwards is not unexpected.  The sell price/list price was still up 2 points from 96% in September of last year. 

The average number of days on the market continued to decline, down to 24 days from August’s 27, representing an 11% decline month-over-month and a 35% decline year-over-year when in September 2015 homes were on the market for an average of 37 days, suggesting attractive offerings continue to sell far quicker than we have experienced over the past number of years, requiring buyers to be on the ball to avoid missing choice opportunities. 

Current inventory numbers continue to drop, with 233 active listings in September. This deviates from the typical September surge we have come to expect as kids return to school and families return from their well earned summer vacations. September was down significantly from the 272 active listings in August (which was itself down significantly from 327 in July), signaling little relief for buyers who continue to struggle to find and secure properties; in comparison during the same time frame last year, there were 439 active listings on the market. In other words there are only 53% as many listings as there were for sale last year at this time and there is significantly more buyer interest to satisfy…Great for sellers, not so much for buyers...

Top Performing Neighbourhoods & Categories

Of the 18 sub-areas defined by the real estate board in Nanaimo, 50% saw at the very least a minimal increase in the average price between August and September,  with a third of the sub-areas experiencing an increase in volume month-over-month.  14 of 18 areas had average prices up year-over-year, with 10 of 18 showing stronger volume than the same time last year.  When considering selling your home, it is so important to know what exactly is going on in your area, as real estate is so location specific and not all neighbourhoods are benefiting from the current boom to the same extent. 

For single family homes, North Nanaimo, the Old City and Diver Lake were some of the top performers when both price and volume were taken into consideration.  

The housing categories that led the way in September were apartment style condos, up  almost 18%. Townhouses also had a strong showing up 7%, as did waterfront homes which saw a nearly 14% increase month-over-month, pulling the average price of a waterfront home back up over a million,  further contributing to the 30% rise we have seen in the average price of waterfront homes over the past year. 

Opportunities 

With prices continuing to soar and inventory numbers continuing to decrease, we view purchases in the Nanaimo market at this point in the market cycle as speculative. Without a very low-ratio mortgage, finding cash flowing residential investment properties are nearly impossible. In other words, if you are buying a rental property in Nanaimo in September 2016, the only guarantee you have is that you are going to lose money every month, basically crossing your fingers that the market is going to continue upwards despite no underlying economic support for it to do so. Factor in recent government intervention in lending, which will result in buyers qualifying for significantly less on their mortgages, and the outlook is not overly optimistic. This is not to say we don’t have another 6 months, 1 year, even 2 years left in the current run. Timing is what is most challenging to predict. The outcome is not…

The reality is the markets will peak, and they will turn downwards. Real Estate markets are cyclical, and this move is inevitable, it’s just a matter of when. What we always tell investor clients who are thinking of selling is to pick a number and stick to it, because if the market turns and you get caught, there is a good chance you will ride it down, in hopes of one day getting back to the number that you happily would have sold at in the first place. 

So if it is not abundantly clear by this point in this section, we see opportunities on the sell side, leveraging low inventory numbers and rising prices to maximize recent gains. While investors often try to maximize their portfolio growth by timing the top, the better approach is often a more defensive strategy, whereby you look to lock in reasonable gains and protect your downside risk exposure. We are by no means suggesting that now is the time to sell for everyone, as individual circumstances differ, as do investment objectives, etc. What we are saying is that if you are risk averse, and seeing an investment property value down $50,000 - $100,000 from its current value would cause you to lose sleep at night, the fall market may present you with a good opportunity to get out with a very respectable return. For a consultation specific to your situation, please feel free to contact us anytime.

If you have any questions about market conditions or would like more details specific to your neighbourhood, please contact us at info@jahelkagroup.com and we would be happy to help.

Check out the Nanaimo Market Statistics Here 

Source: VIREB