2018 Nanaimo Market Recap

Single Family Prices and Volume

1,212 single-family homes were sold in 2018, down 24.5% from the 1,605 sold in 2017. The average sale price for a single-family home increased by over 7% to $556,820 from $518,449 a year earlier. While a 7% increase is still quite impressive, the pace of average price growth has decelerated from the previous 2 years where our market had experienced average sale price increases of 16% and 14% respectively. The median sell price, (which we rely upon as a secondary measure to gauge price action as it isn’t skewed by a few high priced homes selling at the top end of the market) for 2018 came in at $534,500, up 9% from $489,900 in 2017. This suggests more affordable homes at the low end of the market experienced more rapid price appreciation than homes priced at the higher end of the pricing spectrum.

What is also important to mention is that with such a notable drop in sales volume (24.5%), and active inventory levels throughout most of the year higher than they were in the same month in 2017, these pricing statistics are only reflective of what did sell. It does not tell the story of the increased number of homes that had listings expired by owners who overshot on their listing price and who were unwilling to price at a level that would have brought the buyer interest, and ultimately secured a sale. Had they priced accurately and sold at a lower price, the likely result would have been lower average price and median price increases. With such prominent media coverage of the shifting real estate market conditions in BC of late, it will be interesting to see if sellers’ expectations of their homes’ values increasingly start to come in line with what the market is telling them, translation: If you have been on the market for 3 months when the average days on market is 25, then you are overpriced.

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 year-over-year to 57% from 70%, suggesting a much lower percentage of homes listed are successfully finding a buyer, which roughly translates to approximately 43% of homes listed not selling. After a number of years of strong market conditions, for many sellers, it appears to have resulted in unrealistic expectations, or dare I say “greed” when pricing their homes. By historical standards, a sell/list ratio of 57% is still quite strong.

The sell price/list price remained constant at 99%. This doesn’t mean that all homes are going to sell for 99% of the list price, as this statistic is only reflecting the homes that did sell. If the approximately 43% of listings that didn’t find a buyer had in fact sold, they likely would have had to do so at less than the price they were asking, which would have resulted in a decreased sell price/list price ratio. Overall 99% reflects strong market conditions, however it should be noted that this figure represents the average for the year and as the year went on, this statistic deteriorated, with 3 of the past 4 months of 2018 coming in at 97%, after a first half that consistently saw this figure at either 99% or 100%.

The average number of days it took a home on the market to sell increased slightly in 2018 to 25 days, up from 24 in 2017. Again, by historical standards, this figure reflects strong market conditions and suggests that homes priced accurately continued to sell quickly throughout 2018.

The number of active listings as the calendar turned over was 256, 65 more than the 191 on the market at the end of 2017. What is interesting to note is that 2018 actually saw 160 less single-family homes hit the market than in 2017. With the end of the calendar year occurring in the midst of the holiday season and winter weather conditions that often deter sellers from having their homes on the market, it is important to look at the inventory from another angle to get a better idea of how much choice buyers had throughout the year. With that in mind, the average number of active listings at the end of the month troughout the year was 318, up nearly 15% from the average of 278 in 2017, suggesting that overall, buyers had more homes to choose from in 2018 than in 2017.

Top Performing Neighbourhoods & Categories

In 2018, all but one of the sub-areas defined by the real estate board in Nanaimo experienced a price increase, however, the weight of the increase varied significantly depending on the sub-area. Of these, 5 experienced double-digit average price increases, including top performer Pleasant Valley at 19.74%, followed by Old City, Departure Bay, Diver Lake, and Central Nanaimo. South Jinglepot was the outlier, with the average price decreasing 8.19%. Digging a little deeper into market activity in South Jinglepot you would discover that in 2017, South Jinglepot was actually the top performing sub-area in Nanaimo, with an average price increase of 28.7%, so it is not a huge surprise to see a bit of a correction here after such an acceleration.

Something that is important to remember when looking at real estate markets is despite the headlines, not all neighbourhoods are moving in the same direction all the time. 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.

However, price alone does not tell the story of a market as volume also has to be taken into consideration. Of the 18 sub-areas in Nanaimo, only 2 experienced volume increases, North Jingle Pot and Diver Lake. On the opposite end of the spectrum, the 5 areas that saw the most pronounced drop in sales volume were Cedar, South Jinglepot, Uplands, Hammond Bay, and Brechin Hill.

By category, on declining volume, lots were the top performing category with the average lot sale price increasing 22% in 2018. When looking at lots as a category, you should be cautious to read too much into these figures as lot supply is often limited to a few large developments in town, so depending on where those are, the average lot prices will be significantly influenced. Looking at other categories, condo apartments slightly outpaced patio homes (2017’s top performer by category), up 32%, followed by single-family homes, townhouses, and waterfront homes, which were the only category to see average prices decline in 2018.

Patio home sales volume was up 53%, signaling continued strength, whereas all other categories experienced declining sales numbers.

Forecast

Be sure to check out our 2019 Forecast, scheduled for release within the next few days, for our take on what is to come in the year ahead.

How’d we do on our 2018 Forecast? See for yourself… Here are some of our insights (in bold) shared back in January of 2018:

Demand:

Beyond the first quarter, the number of new listings hitting the market will play a factor in determining how long it will take to satisfy the pent-up demand that currently exists before markets revert to more balanced conditions. Result: after a fairly strong spring, markets have trended more towards balanced conditions.

We see (that) the number one headwind the Nanaimo housing market currently faces is (that) the largest block of our population is the baby boomers, many of whom are now empty nesters living in the 3,000+ square foot homes they bought in the $200,000 - $300,000 range a decade ago, that are now valued well beyond the grasp of the average household in town based on income qualification. Result: The demand for homes above $750,000 dissipated in 2018, with 243 listings expiring without a sale, up from 133 in 2017. The number of homes selling above $750,000 also dropped despite rising average prices in Nanaimo, down to 194 from 225 in 2017.

Where we do see sustained demand over the next decade is for low-maintenance, stratified properties catering to local empty nesters entering retirement and those increasingly seeking out Central Vancouver Island as their retirement destination of choice. Result: Despite volume decreases across all other categories, patio home sales volume was up 53% in 2018, with average prices increasing 10.13%.

Supply:

Overall, we see inventory levels slightly elevated from 2017 numbers, while subdued inventory levels and outright greed may keep sellers who should be considering listing on the sidelines in hopes of the market continuing to creep higher. Result: For single-family homes, the average number of active listings throughout 2018 was 15% higher than in 2017.

Looking out longer term, the coming years will likely see a significant supply of 3,000+ square feet homes hitting the market as empty nesters downsize to reduce expenses and housekeeping square footage to enjoy retirement. Increased supply without increasing demand at these price points puts downward pressure on pricing. Result: While this is a longer-term prediction, market activity in 2018 showed the impact of this is already starting to take hold. In 2017, 265 homes over 3,000 sqft sold in Nanaimo, with 101 listings expiring. Last year, the sales volume dropped to 199, with 169 listings expiring without a buyer.

(Longer term) the supply of ground-oriented patio homes, condos, and low maintenance detached single story homes is likely to be insufficient to meet the needs of the downsizers. As such, the gap is likely to close, with a premium being paid for housing options well suited for seniors, while larger family and executive homes will likely become more affordable relative to incomes in the coming years. Result: Despite volume decreases across all other categories, patio home sales volume was up 53% in 2018, with average prices increasing 10.13%.

Interest Rates:

Given macroeconomic conditions across the country, we see the prime lending rate gradually increasing throughout 2018, with the first hike as early as this month based on solid economic numbers of late. The consensus among economists is that we are likely to see three .25% rate hikes this year, which we feel is a reasonable forecast. Result: The Bank of Canada increased the overnight lending rate .25% three times.

Government Intervention:

(Federally), we are expecting the Government will take a wait-and-see approach, evaluating how recent intervention will impact the market, with many analysts predicting the housing market will cool nationally in 2018. If conditions nationally do cool, government intervention is not likely to have a major impact in 2018. Result: Markets nationally did cool, and federal government intervention did not have a major impact in 2018.

Closer to home, there has been talk that continued strength in BC could see the 15% foreign buyer tax implemented in areas outside of the Lower Mainland. While we saw the Vancouver market largely rebound after the cooling that immediately occurred when this tax was brought in back in 2016, the impact would likely be greater in smaller centers where many foreigners have been buying higher end real estate to avoid this tax. Result: The foreign buyer tax was implemented outside of the Lower Mainland, and the impact was significant, largely reducing the number of foreign buyers entering our market.

Other Markets:

For buyers coming from out of town, Nanaimo is always being compared to other markets and affordability plays a huge role here. The Greater Vancouver market is really the “straw that stirs the drink” in our provincial housing market... if the Lower Mainland was to be hit by a more serious correction, a ripple effect is likely to impact Vancouver Island communities, which would no longer be as attractive from an affordability standpoint relative to Vancouver. Result: The Greater Vancouver market was hit by a more serious correction with significant volume decreases and buyer demand from the Lower Mainland cooled.

Opportunities

The primary opportunity we see in 2018 remains undoubtedly on the sell side. Buyer demand is still quite strong, the sell/list ratio is high, days on market is low, and competition about 30% of the time is driving transaction prices above the asking price and likely beyond market value. Markets can turn quickly, while we don’t know how much further this market cycle has to run, we do know conditions are solid currently and trying to time a top is a recipe for disaster. Result: Markets conditions have shifted to more balanced conditions, with a lower percentage of homes listed selling and inventory levels rising.

Current market conditions present a solid opportunity for those looking to downsize in the coming years to lock-in their recent gains. We have already started to see increasing demand for properties well suited to senior living, such as patio homes (prices up 32% in 2017), ranchers, etc., and we expect this trend to continue in the coming years. With this being the case, we see price appreciation is more likely in these categories of housing than others, so 2018 may present a good opportunity for those empty nesters in larger homes to transition to their retirement home at a reasonable price point before prices continue to be bid up to an unreasonable level. Result: Sales volume for larger homes at the higher end of the pricing spectrum dropped, while patio home sales volume was up 53%.

In our view, given the rapid price acceleration in recent years, it may be prudent for investors to take some money off the table to move into other markets that appear to have more immediate upside potential, or in a worst-case scenario, to limit exposure to a possible market correction in years to come. Result: So far, it appears the best of this market cycle is likely behind us. While there are no major signs of impending doom, the significant volume drops in other major markets, mortgage lending growth reaching the lowest level in years, and an increasing supply of purpose-built rental apartment units make Nanaimo less attractive as a real estate investment destination, as it is still very difficult to find cash flowing property without a significant down payment, and the prospects for continued above-average appreciation are not great for the foreseeable future.

For developers, we see the best opportunity in developments catering to the aging, downsizing population. Low-maintenance, ground-oriented, stratified properties with higher-end finishings, enough room for family to visit, and plenty of storage for all that “stuff” should garner strong demand. Single detached ranchers, and lifestyle properties in close proximity to golf courses and marinas should also be well received. Result: Despite volume decreases across all other categories, patio home sales volume was up 53% in 2018, with average prices increasing 10.13%.

With shifting market conditions, real estate is once again in the headlines. Be cautious with whose information you are relying upon to guide your real estate decisions.

All the best for 2019!

250.751.0804 | info@jahelkagroup.com | www.jahelkagroup.com

Source: VIREB

Nanaimo Median Single Family Sales Price Falls More Than 10% in Past 2 Months

Single Family Prices and Volume

76 single-family homes sold in November, 45 less than the 121 sold in October, over 34% less than the 116 that sold in the same timeframe last year, and the lowest number of single-family home sales since January 2017. The average home price decreased by almost 5% in November to $532,299 from October’s average of $559,149, which is only marginally higher than last November when the average home price was $531,307. This decrease comes on the heels of a 3.95% decrease from September. Taken together, the average single-family home price in Nanaimo has dropped 8.56% in the last two months. The median sale price dipped back under $500,000 for the first time since January 2018, coming in at $495,000 which is 6% less than October’s $525,000, more than 10% below September’s median price, and just over 3% less than last November’s median sale price of $512,000. 124 homes were listed in November representing a decrease of over 38% from the 201 listed in October, and a decrease of 8% on the 135 listed in November of 2017.

Insights: For the second consecutive month we have seen a significant decrease in average and median sale prices for single-family homes, leaving the average single-family home price down 8.56% and the median single-family home price down 10.27%. The market has essentially given back any gains it achieved in 2018 with the average price marginally above and the median price hovering around the range we experienced from May to December of 2017. On its own, is this enough to hit the panic button? Probably not, however, is it a strong warning sign to stay on high alert? You bet it is! The other figure that stood out was the 37% month-over-month and 34% year-over-year decrease in sales volume. While there are fewer listings now than October, this is historically the case as colder weather and the upcoming holiday season keeps many sellers on the sidelines. Despite the decreased number of new listings, the active inventory of 313 was higher than we have had in 24 of the last 36 months, and we have only had 4 months with lower sales volume, all occurring in either December or January. So what is going on? Have you turned on your Vancouver-based evening news lately? If you have, you know the sky is falling...May I reference our 2018 Market Forecast, in reiterating “the Greater Vancouver market is really the “straw that stirs the drink” in our provincial housing market…(and) if the Lower Mainland was to be hit by a more serious correction, a ripple effect is likely to impact Vancouver Island communities, which would no longer be as attractive from an affordability standpoint relative to Vancouver.” The reality is that real estate market volatility is driven by fear and greed. I’d suggest one of the primary reasons sales numbers were down significantly month-over-month and year-over-year is media-induced fear. Social media and other digital marketing has magnified the impact of fear and greed on our society, and while we have benefited through one of the greatest upswings our market has seen over the past four years, please don’t underestimate the power of the media and the fear factor when looking at the downside risks for our local 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 increased by 1% to 61% in November, which is a 29% reduction from November of 2017 when the ratio was 86%.

November’s sell price/list price increased to 98% from October’s 97%, which is down just over 1% from November 2017 when the sell price/list price was at 99%.

The average days on the market decreased almost 13% to 27 in November from 31 in both October of this year and November of last year.

As of the end of November, the number of active listings was 313, down 6.5% from the 335 active listings in October, but over 18% higher than inventory levels at the same time last year.

Insights: Looking at each of these figures on their own, there are no major concerns, in fact, we actually have some improvements from some of October’s figures. However, the untold story here is that these figures are largely based on the homes that did sell, which was significantly less than November sales figures for the last 3 years. Had there been more sales, these figures would not have appeared so rosy. With inventory levels at 313 and only 76 sales, the reality is there were 237 sellers that weren’t willing to price their property at a level where there was demand from a buyer. Eventually, if they would like to sell, something will have to give. For the 76 sellers in November something already has, and as a result, the average price was down nearly 5% with the median price down nearly 6%.

One note on the sell/list ratio which for November still looks fairly strong at 61%. Historically November sees a sell/list ratio higher than normal as the number of new listings hitting the market typically decrease heading into the holiday season and pent-up buyer demand eats through much of the existing inventory. As such, the last 3 Novembers have experienced sell/list ratios of 104%, 77%, and 86%, so while 61% is respectable, it is down noticeably from the last 3 Novembers, and potentially a leading indicator of dwindling buyer demand heading into the new year.

Top Performing Neighbourhoods & Categories

9 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 15 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 -5.69% in South Jingle Pot to 20.85% in Pleasant Valley, with Pleasant Valley holding the number one spot dating back to August. Top risers month-over-month were Cedar (for a second month) and Diver Lake. Top performers year-over-year were Pleasant Valley, Old City, Departure Bay, Diver Lake, Chase River, and Uplands. Looking at volume, the only month-over-month risers were North Jingle Pot, Diver Lake, and Upper Lantzville with no areas experiencing increases both monthly and annually.

Insights: While there are markets that are still showing increases on a month-over-month and year-over-year basis, the number of decreasers is on the rise, and year-over-year percentage increases are trending downwards. While there are some anomalies, the gainers are the historically more affordable neighbourhoods, while the underperformers are the historically higher priced neighbourhoods, which are first to rise in the early stages of a boom, but first to reach the point where affordability comes into question and buyer demand cannot sustain further upward pressure on prices, as buyers are forced to the more affordable, and often further out locations, which explains why late in this cycle we are seeing these areas outperforming.

Single-family (waterfront) on low volume, townhomes, and lots were the only categories that saw an increase in average sale price from October to November, although all categories, except single-family (water), saw increases year-over-year. Lots were the only category to experience month-over-month and year-over-year increases in sales volume.

Insights: Really not much to add here. Month-over-month, volume was down between 33 and 45 percent for single-family, waterfront, apartments, patio homes, and condos. With low volume across the board, a few higher or lower priced sales can have a pronounced impact, and as such, some categories are up and some are down, but there are really no noticeable trends or insights to highlight. Lot sales volume increased, however, if you caught our November newsletter, you may remember that we highlighted that we had seen a tremendous decrease in lot sales over the preceding six months relative to the past few years. Given the time of year, it would be expected that a few lots would move as builders shore up their spring projects.

Opportunities

In a best case scenario, we believe the market is moving towards more balanced market conditions. Pent-up buyer demand has dissipated, either being satisfied by increasing inventory levels, reduced based on government intervention (speculation tax, etc.), stricter lending requirements, higher interest rates, or investors recognizing that the opportunity to acquire cash flowing residential property in the area is now pretty much impossible.

What this means is that discerning buyers who were patient through the heights of the market craziness will now have more selection. With a sell to list price for the four months in the 97 to 98% range, there once again may be some room for negotiation. The drop in sales volume further supports this point as more properties are sitting on the market, so sellers needing to sell are going to be getting increasingly anxious heading into the winter months, and may be ripe for fairly reasonable price concessions. This brings me to another point... As a group when we look back over the past number of years, we often reference the period from about December 20 to January 10, as producing some of the most incredible buys for our clients. "Why?" you ask...Well, who is it that has their house on the market in December, especially if it extends into the holiday season? While this generalization won’t apply to everyone, those on the market need to sell. Whether it be a job-related move, the sellers have purchased another property (possibly subject to sale), divorce, death, or mounting financial pressures, the reality is there is no better time of year for those looking for a deal to find one. However, to maximize your potential savings, ensure when selecting a Realtor that they have the proven negotiating skills and market expertise to be able to put together a strong business case to support getting you the very best price in this shifting market.

If you have been following our market updates, you know that in this segment for many months our commentary has become quite repetitive…“ the opportunity is clearly on the sell side".  So, for sellers, if you have been trying to time a market top to list, (which is nearly impossible and highly risky in our opinion), increasingly you have likely missed your opportunity. With that said, the average price is now only 8.5% below the all-time high, the list/sell ratio of 61% is still reasonably strong for November, and the average days on market is still low by historical standards. While we don’t have a crystal ball to tell you where the market is going (at least not until next month when we will release our 2019 Market Forecast), we do know that unless you bought at any time after May 2017, in all likelihood you are going to be able to lock in some substantial gains should you decide to list in early 2019. However, with more listings currently on the market and fewer buyers, it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. Selecting a Realtor with a strong marketing platform and an active approach to marketing your home is becoming increasingly important. While we went through a period for the last few years where a For Sale sign and an MLS listing were enough to entice buyers to write an offer, (definitely not our approach), in this market that haphazard approach is simply not going to cut it.

For investors, on the buy side, patience is going to be rewarded. If you are considering an income property, you are likely best served by looking at other markets or waiting it out as there is no way you are going to cash flow on a leveraged purchase. Given what we have outlined above, we would not recommend speculating on further price appreciation with a negative cash flow property in this market. Just our take…

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. 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. On that note, a word of caution: Be very careful where you get your information on the real estate market. The reality is most who are providing an opinion (us included), have their income level influenced by the real estate market and therefore have a vested interest in keeping this juggernaut going. Be cautious… watch the headlines...Make sure you get the full story…

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 for November 2018

All the best for a joyful holiday season with those closest to you!

Source: VIREB

Market Appears to be Trending Towards More Balanced Conditions

Single Family Prices and Volume

121 single family homes sold in October, 23 more than the 98 sold in September and 6% less than the 129 that sold in the same timeframe last year. The average home price decreased by almost 4% in October to $559,149 from September’s average of $582,115, however, this is still over 8% higher than last October when the average home price was $516,354. The median sale price decreased by almost 5%, down to $525,000 from September’s $551,700, but this is still almost 12% higher than last October’s median sale price of $469,000. 201 homes were listed in October representing an increase of more than 17.5% from the 171 listed in September, and a 6% increase on the 189 listed in October of 2017.

Insights: While the average and median prices are down, it is important to consider that September experienced a noticeable dip in sales volume, which, based on the median price reaching an all-time high in September, suggests that fewer homes were selling at the lower end of the market, so the homes that were selling at higher price points were having a larger pull on the average price than otherwise would have been the case. With that said, October’s figures are relatively in line with what the market has been experiencing dating back to February of this year. While listing volume is up, year-over-year it is not overly pronounced, and is falling in line with the general trend towards more normalized listing volume after a couple of years of subdued listing volume. Translation: no major concerns on these figures alone.

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 60% in October, up from a ratio of 57% in September of this year but down by almost 12% from October of 2017 when the ratio was 68%.

For the third month running, October’s sell price/list price remained at 97%, down just over 2% from October 2017 when the sell price/list price was at 99%.

The average days on the market remained at 31 for a second month, which is 24% higher than the average of 25 days on the market in October of last year.

As of the end of October, the number of active listings was 335, down by almost 8% from the 364 active listings in September, but over 11% higher than inventory levels at the same time last year.

Insights: Looking at each of these figures, all have deteriorated from last October. However, in the context of a market cycle, all remain stable, with no signs of impending doom. The fact is market conditions experienced in 2016 & 2017 were unsustainable. What we are experiencing here appears to be more of a normalization or a gradual return to more balanced market conditions.

Top Performing Neighbourhoods & Categories

11 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 September to October, with 16 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 -5.63% in Lower Lantzville to 24.30% in Pleasant Valley, with both areas holding these same spots for a second month running. Top risers month-over-month were Cedar and Old City. Top performers year-over-year were Pleasant Valley, Old City, Uplands, Departure Bay, Brechin Hill, and Central Nanaimo. Looking at volume, the only risers both monthly and annually were Lower Lantzville, Upper Lantzville, and Diver Lake.

Insights: Looking at the various sub-areas and market action, we are looking to identify trends and patterns. However, this month there doesn’t appear to be any prominent patterns, as some neighbourhoods are up, and some are down on both volume and price. This would also support the fact that we are trending towards more normalized conditions. While the figures for each neighbourhood are not included in this report, what we can say is that while there is still a large spread on year-over-year price action from lowest -5.63% in Lower Lantzville to 24.30% in Pleasant Valley, figures overall are not as pronounced as we are seeing more single digit and lower double-digit year over year price increases than earlier in the cycle upswing. Of course, this makes sense with the average home price up just over 8% year over year, which is coming on the heels of a 16% average price increase in 2017, and 14% in 2016. Again, consistent with the figures above, we are simply seeing a market boom decelerating and a return to more balanced market conditions.

Apartment-style condos, patio homes, and townhomes were the only categories that saw an increase in average sale price from September to October; and these same categories, with the addition of single-family homes, also saw increases year-over-year. All categories, except waterfront homes, experienced month-over-month increases in sales volume, though only lots and patio homes (both on relatively low volume) reported increases year-over-year.

Insights: With rising interest rates, stricter lending guidelines, and affordability continuing to impact the market, it is no surprise at this stage in the cycle that the more affordable categories (condos, patio homes, and townhomes) are still experiencing both month-over-month and year-over-year price increases.

Not mentioned above, but notable is the lot category, and more specifically the volume of lot sales. In the trailing 6 months (May - October), there have only been 12 residential lot sales. This is slightly more than a quarter of the 46 that sold in the same period for 2012, and the 91 that sold in the same period for 2016, when the transaction volume reached its high point for this cycle. When investigating why this may be the case, naturally one of the first questions is regarding the supply of lots. Has there been a shortage? Not exactly...there are currently 107 residential lots for sale in Nanaimo, or based on the past 6 month’s market activity, 53.5 months worth of supply. While it likely won’t take four and a half years to eat through the current lot supply, it does highlight the fact that builders are not actively seeking out new opportunities, likely trying to get their existing lots built on and to market to reduce the risk of being caught if the market continues to moderate or heads towards a more drastic correction. As builders, at least the good ones, are generally on top of market conditions, the volume of lot sales is generally a pretty good indicator of where we are in the market cycle. As such, these figures on their own would imply market activity has peaked for this cycle and we are on the downswing. The question is will it be more of a soft landing as conditions gradually return to more of a balanced market, or will it be a more aggressive correction. So far, it appears we are in more of a gradual return to more balanced conditions. For the sake of homeowners and the general economy, let’s hope it stays this way.

Opportunities

At the risk of sounding like a broken record, we believe the market is moving towards more balanced market conditions. Inventory levels have been increasing and pent-up buyer demand has dissipated, either being satisfied by increasing inventory levels, reduced based on government intervention (speculation tax, etc.), stricter lending requirements, higher interest rates, or investors recognizing that the opportunity to acquire cash flowing residential property in the area is now pretty much impossible.
What this means is that discerning buyers who were patient through the heights of the market craziness will now have more selection. With a sell to list price for the last few months averaging at 97%, there once again may be some room for negotiation. Remember this when selecting a Realtor and ensure they have the proven negotiating skills and market expertise to be able to recognize that the market is shifting and that a strong business case must be put together to support getting you the very best price.

For sellers, if you have been trying to time a market top to list (which is nearly impossible and highly risky), in our opinion you have likely missed your opportunity. With that said, the average price is now only 4% below the all-time high, and the list/sell ratio of 60% is still implying that we are marginally in “seller’s market” territory, so you may want to take this opportunity to get your home listed, hopefully ahead of a further erosion of demand, especially at higher price levels. However, if you do need to sell with more listings currently on the market and fewer buyers, it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. Selecting a Realtor with a strong marketing platform and an active approach to marketing your home is becoming increasingly important. While we went through a period for the last few years where a For Sale sign and an MLS listing were enough to entice buyers to write an offer (definitely not our approach), in this market that haphazard approach is simply not going to cut it.

For investors, on the buy side, patience is going to be rewarded. If you are considering an income property, you are likely best served by looking at other markets or waiting it out as there is no way you are going to cash flow on a leveraged purchase. Given what we have outlined above, we would not recommend speculating on further price appreciation with a negative cash flow property in this market. Just our take…

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. 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. On that note, a word of caution: Be very careful where you get your information on the real estate market. The reality is most who are providing an opinion (us included), have their income level influenced by the real estate market and therefore have a vested interest in keeping this juggernaut going. Be cautious… watch the headlines. Is the market up 8% in October (year-over-year) or down 4% (month-over-month)? Same market, 2 different stats... Make sure you get the full story...

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 for October 2018

Source: VIREB

On Low Volume the Average Home Price in Nanaimo Hits an All-Time High

Single Family Prices and Volume

98 single family homes sold in September, 22 less than the 120 sold in August and down over 35.5% from the 152 that sold in the same timeframe last year. The average home price increased almost 3% from August’s average of $566,795 to $582,115, which is over 10.5% higher than last September when the average home price was $526,392. The median sale price increased by 4% in September to $551,700 from August’s $529,000, which is almost 13% higher than last September’s median sale price of $489,252. 171 homes were listed in September representing a 7.6% increase from the 159 listed in August, and a 15% decrease from the 202 listed in September of 2017.

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 in September, coming in at 57%, down 24% from both August of this year and September of 2017 when the ratio was 75%.

For the second month running, September’s sell price/list price remained at 97%, down just over 2% from September 2017 when the sell price/list price was at 99%.

The average days on the market decreased by 3 days to 31 which is 24% higher than the average of 25 days on the market in September of last year.

As of the end of September, the number of active listings was 364, down by almost 4% from the 379 active listings in August, but almost 13% higher than inventory levels at the same time last year.

Top Performing Neighbourhoods & Categories

14 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 August to September, with 16 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 -3.65% in Lower Lantzville to 23.89% in Pleasant Valley. Top risers month-over-month were Extension and Brechin Hill. Top performers year-over-year were Pleasant Valley, Uplands, Central Nanaimo, Brechin Hill, Old City, and Departure Bay. Looking at volume, the only riser both monthly and annually was North Jinglepot.

All categories with the exception of townhouses saw an increase in average sale price from August to September, while single-family waterfront homes, lots, and single-family homes all experienced increases year-over-year.

Check out the Nanaimo Market Statistics Here:  Monthly Statistics for September 2018

Source: VIREB

Market Recap - August 2018

Single Family Prices and Volume

120 single family homes sold in August, 11 more than the 109 sold in July, but down 13% from the 138 that sold in the same timeframe last year. The average home price marginally increased from July’s average of $565,388 to $566,795, however, this is still more than 9% higher than last August when the average home price was $518,612. The median sale price decreased by 2% in August to $529,000 from July’s $539,900, but this is still almost 7% higher than last August’s median sale price of $495,000. 159 homes were listed in July representing a 30.5% decrease from the 229 listed in July, and a 27% decrease from the 218 listed in August of 2017.

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 in August, coming in at 75%, up 56% from 48% in July and up 19% from 63% in August of 2017. This figure should be taken with a grain of salt as the number of homes listed were down 30.5% from July and 27% from August 2018, which partially explains the increase.

The sell price/list price decreased to 97% from July’s reported 106% (which appears as though it may have been erroneously reported by VIREB). In comparison, last August came in at 99% and we have not had seen this figure dip to 97% since December of 2015.

The average days on the market increased almost 48% to 34 days in August up from 23 in July, which is in turn 10 more than the average of 24 days on the market in August of last year; this marks the highest average days on the market since January 2017.

As of the end of August, the number of active listings was 379, down by over 14% from the 442 active listings in July, but more than 10% higher than inventory levels at the same time last year. Again, much of the decrease from July can be attributed to the decrease in the number of new listings.

Top Performing Neighbourhoods & Categories

11 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 16 of the 18 also experiencing increased prices year-over-year. This is actually the first time in nearly 2 years that we have had a sub-area experience a year-over-year decline. 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 -0.96% in South Jinglepot to 21.31% in Pleasant Valley. Top risers month-over-month were Pleasant Valley and Upper Lantzville. Top performers year-over-year were Pleasant Valley, Uplands, Chase River, Departure Bay, University District, Central Nanaimo, and Brechin Hill. Looking at volume, the only risers both monthly and annually were North Jinglepot and Central Nanaimo.

Single-family homes, single-family waterfront properties (on low volume), and townhouses were the only housing categories that saw an increase in average sale price from July to August, while single-family homes, apartment style condos, patio homes, and townhouses all experienced increases year-over-year.

Check out the Nanaimo Market Statistics Here: Monthly Statistics for August 2018

Source: VIREB

Market Recap - July 2018

Single Family Prices and Volume

109 single family homes sold in July, up 1 from the 108 sold in June, but down over 28% from the 152 that sold in the same timeframe last year. The average home price increased from June’s average of $556,879 to $565,388, however, this is still almost 8% higher than last July when the average home price was $524,435. The median sale price increased by 2.66% in July to $539,900 from June’s $525,900, which is 11% higher than last July’s median sale price of $485,000. 229 homes were listed in July representing a 2% decrease from June, and a 2% increase over the 224 listed in July of 2017.

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 slightly in July, coming in at 48%, up from 46% in June. However, more notably this is down over 29% from 68% in July of 2017, 33% from 72% in July of 2016, and down more than 35% from 74% in July of 2015. July’s figure is more representative of balanced market conditions, than the results in the previous year which were more indicative of a Seller’s market.

The sell price/list price rose to 106% in July which is not suggesting every home is selling at 106% 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.

The average days on the market increased to 23 days from 20 in June, which is also 3 more than the average of 20 days on the market in July of last year.

As of the end of July, the number of active listings was 442, up just under 10% from June, and over 31% higher than inventory levels at the same time last year. This is the highest number of active listings since August of 2015.

Top Performing Neighbourhoods & Categories

13 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 June to July, with all 18 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 annual increases range from 1.78% in South Jingle Pot to 18.14% in Uplands. Top risers month-over-month were Cedar and North Jingle Pot. Top performers year-over-year were Uplands, Old City, University District, Chase River, Central Nanaimo, Brechin Hill, and Departure Bay. Looking at volume, the only risers both monthly and annually were North Jingle Pot, Diver Lake, and Upper Lantzville.

Single-family homes and townhouses were the only housing categories that saw an increase in average sale price from June to July, while only single family homes, apartment style condos, and patio homes experienced increases year-over-year. With affordability issues continuing to impact the market, apartment style condos were the only category in July to experience month-over-month and year-over-year sales volume increases.

Check out the Nanaimo Market Statistics Here: Monthly Statistics for July 2018

Source: VIREB

Market Recap - June 2018

Single Family Prices and Volume

108 single family homes sold in June, down 22% from the 139 sold in May, and down over 41% from the 184 that sold in the same timeframe last year. The average home price decreased marginally from May’s average of $563,218 to $556,879 although this is almost 6% higher than last June when the average home price was $526,234 The median sale price decreased by 5% in June to $525,900 from May’s $555,000, but this is still 5% higher than last June’s median sale price of $500,000. Dating back to February, which is often when we see the market start to spring back to life the average price had hovered in a fairly narrow band between a low of $551,392 in March and a high of $563,218 in May, with median prices bottoming out for this time period this past month at $525,900, after peaking last month at $555,000. 234 homes were listed in June representing a 12% decrease from May, and a 10% decrease over the 261 listed in June of 2017.

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 continued to decrease in June, coming in at 46%, down from 52% in May and down over 34% from 70% in June of 2017, 45% from 83% in June of 2016, and down more than 31% from 67% in June of 2015.

The sell price/list price remained constant at 99% in June which 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.

The average days on the market increased to 20 days from 16 in May, which is 1 more than the average of 19 days on the market from June of last year.

As of the end of June, the number of active listings was 402, up over 12% from May, and almost 25% higher than inventory levels at the same time last year. This is the highest number of active listings since September of 2015.

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 May to June, with all 18 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 annual increases range from under 1% in Lower Lantzville to 20.77% in Uplands. Top risers month-over-month were Extension, Pleasant Valley, Departure Bay, and Uplands. Top performers year-over-year were Uplands, Extension, Central Nanaimo, Brechin Hill, and University District. Looking at volume, the only risers both monthly and annually were Upper Lantzville and Diver Lake.

Single family waterfront properties, apartment style condos, and patio homes saw an increase in average sale price from May to June, while all categories saw increases year-over-year. On low volume, single family waterfront properties were the only category in June to experience month-over-month and year-over-year sales volume increases.

Author’s Comments

You may have noticed that this market recap has been very much scaled back and stripped of all interpretation and value-added content. If you have been one of the many who have relied on our monthly commentary as your go-to source for market information, we sincerely apologize for these modifications that we have reluctantly had to make to our recap to ensure we are onside with the new real estate rules and regulations governing the province that came into effect June 15. It is our genuine hope that sometime soon we will once again be able to deliver the value-added commentary on a mass scale that reflects our true advisory approach to the business.

With June seeing the average price down, median price down, sales volume down, sell/list ratio down, days on market up, and inventory levels for single-family homes reaching near three year highs, we believe that if there ever was a time the market needed interpretation and expert insight, it is right now. While for the time being, we cannot provide it through our monthly recap, if you have any questions about what all these statistics mean for you as a buyer, seller, investor, or observer of the market, feel free to contact us directly at 250-751-0804 or info@jahelkagroup.com.

Check out the Nanaimo Market Statistics Here: Monthly Statistics for June 2018

Source: VIREB

May's Results Highlight an Increasing Tale of 2 Markets  

Single Family Prices and Volume

139 single family homes sold in May, up almost 14% from the 122 sold in April, but down by just under 22% from the 178 that sold in the same timeframe last year. The average home price increased marginally from April’s average of $553,352 to $563,218 although this is 7% higher than last May when the average home price was $526,234  The median sale price also increased by 4% in May to $555,000 from April’s $537,500, which is over 15.5% higher than last May’s median sale price of $480,000. 266 homes were listed in May representing an almost 18% increase over April, and an almost 4% increase over the 256 listed in May of 2017. While the average price increased nearly 1.8% in May, this comes on the heels of 3 months of relatively flat price action, as the past quarter has seen only a 2% increase. While it would be reasonable to suggest a 2% quarterly increase equates to an 8% plus annual return, which is still quite impressive, it is important to remember we are in the midst of the spring market which is generally when a significant percentage of the annual appreciation occurs due to strong market activity. Looking back over the previous 3 years, the February to May period saw annual average price increases of 8.96%, 8.77%, and 6.10%, respectively.

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 in May, coming in at 52%, down from 54% in April and down almost 26% from 70% in May of 2017. With the spring market typically bringing strong buyer demand, it is worth noting that taken together, the sell/list ratio for April and May is well below the level in the last couple of years, at 62%/70% in April/May 2017, and 79%/76% in  April/May 2016. Echoing our comments from last month in this slot, while Realtors continue to lament that there is just not enough inventory, it appears there may be more to the story than that. It is actually more of a case of there not being enough inventory at various price levels to meet the buyer demand at those price levels. Put another way, too many sellers are listing properties with unrealistic price expectations, beyond the prices that buyers are willing to pay. In May there were 266 homes listed in Nanaimo, while the last 30 days has brought 79 single family home price reductions, 129 across all categories, and this does not include listings that were cancelled and re-entered at lower prices. Translation, the market spoke and (at least) 79 times homes were overpriced. At the other end of the spectrum, there are sellers who understand the value of pricing accurately and competitively and are being rewarded with quick sales, in many cases with multiple offers and well above the asking price. While demand at higher price points has also been impacted by rising interest rates, stricter mortgage qualifying requirements, and the implementation of the foreign buyers tax and speculation tax, the divergence in pricing strategy has never been so evident and with the sell/list ratio hovering just north of 50%, at some point the remaining unrealistic sellers will need to react to a lack of demand at their price levels and adjust their pricing accordingly.

The sell price/list price remained constant at 99% in May which 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 fairly strong market conditions.

The average days on the market decreased to 16 days from 19 in April, which mirrors the number of days on the market from May of last year. Further to the comments in the paragraph above, this figure only factors in the homes that were priced accurately and competitively and that are selling, with many properties continuing to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years.  While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances of a strong initial offer or even a bidding war leading to a sale above the asking price.

As of the end of May, the number of active listings was 358, up over 16% from April, and over 20.5%  from inventory levels at the same time last year. While these are not major increases, if this trend continues, it should be a positive for buyers, as more inventory means more choice and hopefully less competition. While a lack of supply has been a key factor in the rapid price increases we have witnessed earlier in this market cycle, with a sell/list ratio just above 50% and inventory levels continuing to rise, it would be reasonable to expect to see more balanced market conditions in the coming months.

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 April to May, with all 18 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 annual increases range from 6.86% in Pleasant Valley to 23.54% in Brechin Hill. Top risers month-over-month were Chase River, Upper Lantzville, Pleasant Valley, and University District.  Top performers year-over-year were Brechin Hill, Uplands, Diver Lake, Extension, and University District. Looking at volume, risers both monthly and annually included Brechin Hill, South Nanaimo, Extension, North Jinglepot, and Diver Lake, with the exception of North Jinglepot, historically more affordable areas,  which is no surprise with affordability increasingly being a challenge.

All categories saw an increase in average sale price from April to May, with lots topping the bill on low volume, as well as year-over-year with the exception of Single Family Waterfront properties, which on low volume experienced a decrease in average sale price.  Townhomes lead the way in volume increase in May, followed by single-family homes, while year-over-year, all categories except for patio homes experienced a decrease in sales volume, which is no surprise given the demand for ground-oriented residences that is only increasing on the back of downsizing baby boomers increasingly settling in for their retirement years.

Only Found Here

At first glance, market information seems somewhat contradictory. The average price for a single-family home reached an all-time high in May, the number of days on market for sold properties is extremely low at 16, the average sale price is 99% of the list price… all bullish indicators. However, with the sell/list ratio hovering just above 50%, something doesn’t appear to be right. This month we took a look at the current supply of active listings, breaking down the various price levels where properties are listed, as well as where homes are selling, with some interesting findings:

- Under $300,000: 2.56% of May Sales, 1.27% of current listing inventory, 87.95% sell/list, 39.67 average days on market

- $300,000 - $399,999: 11.97% of May Sales, 4.02% of current listing inventory, 99.25% sell/list, 14.21 average days on market

- $400,000 - $499,999: 22.22% of May Sales, 14.16% of current listing inventory, 100.04% sell/list, 12.69 average days on market

- $500,000 - $599,999: 32.48% of May Sales, 18.39% of current listing inventory, 100.21% sell/list, 17.07 average days on market

- $600,000 - $699,999: 11.97% of May Sales, 18.60% of current listing inventory, 99.58% sell/list, 17.93 average days on market

- $700,000 - $799,999: 8.55% of May Sales, 9.73% of current listing inventory, 99.16% sell/list, 15.70 average days on market

- $800,000 - $999,999: 7.69% of May Sales, 16.70% of current listing inventory, 97.29% sell/list, 33.56 average days on market

- $1,000,000 +: 2.56% of May Sales, 17.12% of current listing inventory, 98.14% sell/list, 13.33 average days on market

What this means: This is really the tale of 2 markets…

Under $600,000, the percentage of May sales outpaces the current percentage of listings in that price category, days on the market are low by historical standards (with the exception of under $300,000) and the sell to list ratio is strong (again, with the exception of the sales under $300,000, which are likely properties with significant issues).  

Above $600,000, the current percentage of listings exceeds the percentage of May sales in these price categories, and the sell to list ratio starts to creep up. Particularly noteworthy is the $800,000 to $999,999 category with 7.69% of sales, but 16.70% of active listings, and even more pronounced, the +$1,000,000 category, currently representing 17.12% of active listings, but with merely 2.56% of sales occurring in this category.

So what is happening here? Increasing affordability challenges on the back of new mortgage qualification requirements and rising interest rates are playing a factor, undoubtedly limiting demand at higher price points. Additionally, foreign buyer demand has been strong the past few years, especially in the $600,000 + categories. The foreign buyers’ tax and speculation tax are definitely having a significant impact on the demand for $600,000+ properties, as the local population with a median income of $62,822 based on the last census, simply can’t even come close to affording and absorbing the volume of listings priced in this range. Over the next few years, interest rates are likely to rise and increasingly downsizing empty nesters are going to be looking to sell their 3,000+ square foot homes, creating a likely scenario of oversupply, and limited demand.

Dating back to the 2017 Forecast, and again echoed in our 2018 Forecast, we have been repeatedly highlighting how higher price points will be oversupplied in the coming years, while affordability challenges and buyer preferences will limit demand. While buyers may wish to buy $800,000 ocean view homes, if they only have the ability to finance a $400,000 purchase, their $800,000 dreams are just that, dreams. The market needs support at various price levels. Otherwise, sellers will need to price reduce, and the domino effect will likely push price levels back down towards where supply and demand are more balanced.

Opportunities

In May 2018, there were 12 sales above $800,000, significantly less than the 23 that occurred in May of 2017. More pronounced, May 2018 had 3 homes transact over $1,000,000, less than a third of the 10 that occurred in May of 2017. With rising interest rates, more stringent mortgage qualifications, and the introduction of the foreign buyer tax in Nanaimo, there is simply less demand for homes at higher price points. So what does all this mean for buyers? Well, if you are looking above the $800,000 mark, it is less likely that you will be in competition, and as the days on the market increase, the likelihood of being able to find a motivated seller and being able to negotiate a “decent” deal should be greater.

On the flip side, if you are looking to unload your home in the $800,000+ range, you will be selling into a much different market than just 1 year ago. It’s not to say that a quick sale will not happen, but it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. If you have been trying to time a market top to list (which in our view is nearly impossible and highly risky), in our opinion you have likely missed your opportunity, so you may want to take this opportunity to get your home listed, hopefully ahead of a further erosion of demand at higher price levels. Below $600,000 demand remains relatively solid, however, there is no guarantee that these market conditions will persist for any sustained period of time. The reality is, people need to buy homes, so we’d expect demand to remain relatively solid below $600,000 for the foreseeable future.

With that said, investors (especially in the sub-$600k range) may want to capitalize on the remaining spring market to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.

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 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 May 2018

Source: VIREB

April Stats Suggest The Market May Be Running Out of Steam...

Single Family Prices and Volume

122 single family homes sold in April, up almost 21% from the 101 sold in March, but down by over 12% from the 139 that sold in the same timeframe last year. The average home price increased marginally from March’s average of $551,392 to $553,352 although this is more than 11% higher than last April when the average home price was $497,224. The median sale price also decreased slightly to $532,000 from March’s $537,500, however, this is still an almost 11% increase from last April’s median sale price of $480,000. 226 homes were listed in April representing a 17% increase over March, and a less than 1% increase over the 225 listed in April of 2017. Taken together, there are no major surprises here, however, it appears demand driven upward pressure on pricing has definitely subsided over the past 3 months, as February, March, and April average sale prices came in within a $1,960 range (0.36%), with sales volumes for these 3 months all down year-over-year.
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 slightly in April, coming in at 54%, up from 52% in March and down almost 13% from 62% in April of 2017. With the spring market typically bringing strong buyer demand, it is worth noting that taken together, the sell/list ratio for March and April is well below the level in the last couple years, at 77%/62% in March/April 2017, and 90%/79% in March/April 2016. While Realtors continue to lament that there is just not enough inventory, it appears there may be more to the story than that. It is actually more of a case of there is not enough inventory at various price levels to meet the buyer demand at those price levels. Put another way, too many sellers are listing properties with unrealistic price expectations, beyond the prices that buyers are willing to pay. In April there were 226 homes listed in Nanaimo, while the last 30 days has brought 82 price reductions, and this does not include listings that were cancelled and re-entered at lower prices. Translation, the market spoke and (at least) 82 homes were overpriced. At the other end of the spectrum, there are sellers who understand the value of pricing accurately and competitively and are being rewarded with quick sales, in many cases with multiple offers and well above the asking price. The divergence in pricing strategy has never been so evident and with the sell/list ratio hovering just north of 50%, at some point the remaining unrealistic sellers will need to react to a lack of demand at their price levels and adjust their pricing accordingly. Having said that, based on the first 3 days in May, it looks like it may actually be occurring, with 21 properties reducing prices in the first 3 days of the month, a pace that far exceeds the rate we have experienced so far this year.

The average days on the market decreased to 19 days from 20 in March, however, this is 12% higher than the average of 17 days on the market from April of last year. Further to the comments in the paragraph above, this figure only factors in the homes that were priced accurately and competitively and are selling, with many properties continuing to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years. While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances of a strong initial offer or even a bidding war leading to a sale above the asking price.

As of the end of April, the number of active listings was 308, up over 13% from March, and 11% from inventory levels at the same time last year. While these are not major increases, if this trend continues, it should be a positive for buyers, as more inventory means more choice and hopefully less competition. While a lack of supply has been a key factor in the rapid price increases we have witnessed earlier in this market cycle, with a sell/list ratio just above 50% and inventory levels continuing to rise, it would be reasonable to expect to see more balanced market conditions in the coming months.

Top Performing Neighbourhoods & Categories

14 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 March to April, with all 18 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 annual increases range from 6.62% in Cedar to 23.64% in Uplands. Top risers month-over-month were Extension, Brechin Hill, and Departure Bay. Top performers year-over-year were Uplands, Extension, Brechin Hill, South Jinglepot, Lower Lantzville, and Central Nanaimo. Looking at volume, risers both monthly and annually included Chase River, Extension, and Central Nanaimo, historically more affordable areas, no surprise with affordability increasingly being a challenge.

Single-family homes were the only category to see an increase in average sale price from March to April, albeit at less than 1%, although year-over-year they were joined by apartment-style condos and lots. Single-family homes were also the top performing category by volume in April, followed by townhomes and patio homes, while year-over-year, patio homes and apartment-style condos were the top performers.

Opportunities

In April 2018, there were 8 sales above $750,000, significantly less than the 21 that occurred in April of 2017. With rising interest rates, more stringent mortgage qualifications, and the introduction of the foreign buyer tax in Nanaimo, there is simply less demand for homes at higher price points. So what does all this mean for buyers? Well, if you are looking above the $750,000 mark, it is less likely that you will be in competition, and as the days on the market increase, the likelihood of being able to find a motivated seller and be able to negotiate a “decent” deal should be more likely.

On the flip side, if you are looking to unload your home in the $750,000+ range, you will be selling into a much different market than just 1 year ago. It’s not to say that a quick sale will not happen, but it is all the more vital that the home is priced accurately and competitively to maximize exposure when interest is the highest. If you have been trying to time a market top to list (which in our view is nearly impossible and highly risky), there are enough warning signs that we may be there that you may want to take this opportunity to get your home listed, hopefully ahead of a further erosion of demand at higher price levels. Below $600,000 demand remains relatively solid, however, there is no guarantee these conditions will persist, in fact increasingly, the statistics seem to be telling the story of a market cooling.

With that said, investors may want to capitalize on the remaining spring market to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.

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 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 April 2018

Source: VIREB

Market Conditions Stable in March, But Are Conditions Turning?

 Single Family Prices and Volume

101 single family homes sold in March, up almost 19% from the 85 sold in February, but down by over 34% from the 154 that sold in the same timeframe last year. The average home price decreased marginally from February’s average of $551,961 to $551,392 although this is an almost 10% increase from last March when the average home price was $502,696. The median sale price also decreased slightly to $537,500 from February’s all-time high of $545,000, however, this is still a 12% increase from last March’s median sale price of $479,900. If you have been following our commentary, including our 2018 forecast, you will be familiar with our expectations that we should see strong demand in to the spring market to satisfy pent-up 2017 demand, with supply levels ultimately determining how long it will take to satisfy it, which in turn, directly corresponds to the amount of upward pressure on pricing we see from buyers. While not unexpected as we transition into the Spring market, the 193 homes listed in March represented a 38% increase over February, but a 3.5% decrease from the 200 listed in March of 2017.

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 continued to decrease in March, coming in at 52%, down 14.75% from 61% in February, and down over 32% from 77% in March of 2017. A possible explanation for this is that Sellers are increasingly listing properties with unrealistic price expectations. While accurately priced properties are selling quickly, in many cases in multiple offers and well above the asking price, those who continue to test the market at unsupported price levels are having discouraging listing experiences.

The sell price/list price remained constant at 100% in March which is not suggesting every home is selling at 100% 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 days on the market decreased to 20 days, from 30 in February, which is also a 20% decrease on the 25 average days on the market from March of last year. Further to the comments in the paragraph above, overpriced homes are going to sit on the market for longer. While the average single-family home price actually decreased slightly, many properties continued to be listed at unsupported price levels in anticipation of further price advances that the market has grown accustomed to over the past 3 years. While it is important for sellers not to leave money on the table, more often than not, the best chance to maximize your return is to price accurately thus maximizing buyer interest when the home initially hits the market. Price too high and you will limit your number of potential buyers, and your chances at a strong initial offer or even a bidding war leading to a sale above the asking price.

As of the end of March, the number of active listings is 272, up over 29.5% from February, and 11% from inventory levels at the same time last year. This appears to be a positive for buyers, as more inventory means more choice and hopefully less competition. Lack of supply has been a key factor in the rapid price increases we have seen. Should the number of active listings continue to rise, expect to see more balanced market conditions in the coming months.

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 February to March, with all 18 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 annual increases range from 8.11% in North Nanaimo to 23.28% in South Jingepot. Top risers month-over-month were Lower Lantzville, Brechin Hill, and Uplands. Top performers year-over-year were once again South Jinglepot, Uplands, Upper & Lower Lantzville, University District, and Central Nanaimo. Looking at volume, risers both monthly and annually included Hammond Bay, Old City, and Diver Lake. Similar to last month, we continue to see a wide-ranging assortment of price and volume top performers than we have experienced over the course of this market cycle. Initially, we had in-demand areas such as North Nanaimo, Hammond Bay, and Departure Bay continually outperforming, then as affordability increasingly became a challenge in these areas, areas that were historically more affordable began to outperform. More recently, the general trend has been a prominence of neighbourhoods on the outskirts of the city experiencing strong price action. This past month, again, throw a few darts at a map, as there doesn’t seem to be any rhyme or reason.

On low volume, lots were the top performing category in March, followed by townhomes, and patio homes, while apartment-style condos, single family (water), and single family homes were all down month-over-month, though all categories were up year-over-year.

Only Found Here

We took a look at the residential market (all categories included) for the first quarter of 2018, and here are the findings:

Days on Market:
- Selling in 0 - 7 days: 47% at an average of 101.78% of the list price in an average of 2.91 days.
- Selling in 8 -31 days: 27% at an average of 99.13% of the list price in an average of 16.51 days.
- Selling in more than 31 days: 25% at an average of 98.15% of the list price in an average of 84.9 days.

Sell Price/List Price:
- Sold above list price: 35% sold above the asking price - at an average of 3.69% above ask, with 22.61% the highest premium paid. The average days on market for those selling above the asking price was 10.06.
- Sold at the list price: 18% of homes sold at the asking price in an average of 10.37 days.
- Sold below the list price: 46% of homes sold, taking an average of 39.46 days.

Sales by Price Level:

There are clearly some key takeaways here:

I. The majority of properties sold at or above the asking price.
II. The average premiums paid when homes sell above the asking price are less than what we were seeing during the spring market.
III. Unless sold very quickly (representative of the most attractive listings priced accurately), properties are taking longer to sell, as properties that didn’t sell within the first month took an average of 84.9 days to sell.
IV. There is a noticeable inverse relationship between days on market and sell/list ratio. 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.
V. Demand is strongest in the $200,000 to $600,000 range where 73% of transactions occurred, supported by a sell/list ratio above 100% and a lower average days on market (DOM).
VI. Sales volume above $750,000 is subdued, with only 7% of the transactions in this range, with a sell/list ratio below the market average, and a higher average days on market.

What this means for Buyers: For properties priced between $200,000 - $600,000, demand remains strong, with bidding wars still a common occurrence. However, above this price point more sales are occurring below the asking price, so there look to be more opportunities to find a home without competition and potentially finding a “deal” under the asking price. By historical standards, properties are still selling quickly, so if you are a serious buyer, it is still important 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: Below $600,000, buyer demand is strong. Above $600,000 demand is not as strong as it once was, necessitating the need to price accurately to maximize interest. For the last number of months, sellers have been caught up in the hype and media attention on the housing market and in many cases are still going to market with unrealistic expectations. 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 offer or ideally a multiple-offer situation. As you can see above, the longer a home sits on the market, the more likely it is to transact below the listing price as the listing becomes stale. Working with a Realtor with a very strong marketing platform is vital, however, pricing accurately has never been more important, so make sure the Realtor you select has a proven track record of pricing accurately and with average days on the market well below the market average.

Opportunities

Looking at the first quarter results, there is no doubt that affordability challenges primarily driven by more stringent mortgage qualification requirements are having an impact on the market. While demand remained strong, more than 80% of residential sales transacted below the $600,000 mark. People are simply not qualifying for as much as they were previously, lowering demand at higher price points. This is no surprise as the market has experienced significant price appreciation for the last number of years, and as we have suggested in past market recaps, we believe the market has reached a point where continued price appreciation is no longer sustainable due to these affordability concerns. In our 2018 Forecast, we discussed how, based on CMHC’s Affordability Calculator, the average household income in Nanaimo would qualify for a mortgage of $284,237. The qualifying rate and mortgage rates have increased since we ran this scenario. Therefore the qualification amount would be reduced, while the average home price in March came in at $551,392. We consider this divergence concerning, and the expectation is interest rates will continue to rise over the next few years, which will continue to constrain mortgage qualification amounts.

So what does all this mean for buyers and sellers? Well, under the $600,000 mark, demand is as strong as ever, so if you are a buyer in this price range, unfortunately, we don’t have any good news...yet.

Above $600,000 the days on market are higher, sales volumes are down, and the sell/list ratio is revealing that there is starting to be some room for negotiations. If you have been following our commentary, and more specifically our annual forecasts the last couple of years, you may remember us expressing a concern about where the demand for the 3,000+ square foot homes was going to come from given the demographics trends, affordability challenges, and consumer preferences. If you didn’t see this past January’s annual forecast, it went something like this:  “... the number one headwind the Nanaimo housing market currently faces is the largest block of our population is the baby boomers, many of whom are now empty nesters living in the 3,000+ square foot homes they bought in the $200,000 – $300,000 range a decade ago, that are now valued well beyond the grasp of the average household in town based on income qualification. This leads us into the consideration of demand for different asset classes. With the aging population, it is no secret that baby boomers now becoming empty nesters will be looking to downsize in the coming years. However, selling their 3,000+ square foot homes requires buyers, buyers require financing, and buyers will likely not be qualified to finance the homes coming onto the market at higher price points. You know where this is going…” Well, 3 months later and a neighbourhood we know very well, the newer section of the Eaglepoint neighbourhood consisting of 3,000+ square foot homes, primarily built after 2000 in a prime north end location close to shopping, schools, restaurants, beaches, parks, and amenities, and we have 9 active listings with an average time on market of 42 days (4 of which are 56 days or more) and 0 sales. 2017 during the same period, 7 sales, with an average days on market of 6.7 days. Don’t tell me the market isn’t changing... So what happens when homes aren’t moving? Sellers start to adjust prices downward or become more open to negotiating. Long story short, if you are looking at $750,000 plus, your chances of finding a deal are increasing. Beyond $1,000,000, with an average sell price/list price ratio of 95.56% and an average of 80 days on the market so far this year, your chances of being able to avoid competition and negotiate a reasonable price are much improved.

With that said, depending on your investment strategy and price point, this spring may present a good opportunity for investors to take some money off the table in anticipation of cooling market conditions or even a market correction in years to come. Taking the opportunity to lock in your gains and diversify into other asset classes or move into other markets that appear to have more upside potential may not be a bad idea.

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 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: Market Statistics March 2018

Source: VIREB