Market Strength Continues as Average Home Price Increases Accelerate in May
Single Family Prices and Volume
178 single family homes sold in May, down 15% from the 210 sold in the same time frame last year, but up 28% from the 139 that sold the previous month. Last year, volume peaked in May, so it will be interesting to see how volume progresses this year considering the excessive pent up demand. The average home price jumped almost 6% month-over-month to $526,234, which was an increase of nearly 17% year-over-year. If you’ve been following our commentary for a while now, you’ll be well aware that the average price isn’t the only determining factor in assessing the strength of a market. The median sell price is relied upon as a secondary measure which will not be skewed by a few high priced homes selling at the top end of the market. May’s median price of $480,000 mirrored April’s levels, however, this figure represented a nearly 19% increase from the same period last year. With the spread between the median and average price again widening, we interpret this as a signal that properties at the higher end of the market are seeing more action. Watch for price action in the coming months to substantiate whether this is the case.
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 moved upwards to 70% in May from 62% in April, but down from the 76% posted in May of 2016.
For the homes that did sell, the sell price/list price remained at 100%, up 1 point from 99% in May 2016. May’s figure 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 well 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 number of days on the market decreased nearly 6% month-over-month to 16, down 41% from a year earlier. Taken together with a 100% sell price/list price, these figures suggest that buyers continue to take aggressive action to avoid missing choice opportunities. This number would potentially be even higher if it was not for sellers holding off on reviewing offers for a few days to ensure ample exposure for their listing in an effort to drive multiple offer situations.
As of the end of May, the number of active listings is 297, up 7% from April, but down 4% from the 310 listed at the end of May last year. There were 256 new listings in May, which is down 7% from last year’s figure of 275 for May.
With strong buyer demand, rising average prices, a respectable sell/list ratio, the average sell price/list price at 100% and the average number of days on the market at cycle lows, all signals are suggesting that one could reasonably expect continued competitive market conditions for the foreseeable future.
Only Found Here
Days on Market:
- Selling in 0 – 7 days:
- Single Family: 60% at an average of 102.65% of the list price.
- Condo/Strata: 56% at an average of 102.30% of the list price.
- Selling in 8 -31 days:
- Single Family: 26% at an average of 98.42% of the list price.
- Condo/Strata: 30% at an average of 98.10% of the list price.
- Selling in more than 31 days:
- Single Family: 14% at an average of 98.18% of the list price.
- Condo/Strata: 14% at an average of 99.89% of the list price.
Sell Price/List Price:
- Sold above list price:
- Single Family: 32% of homes sold above the asking price – at an average of 5.82% above ask, with 18% the highest premium paid. The average days on market for those selling above the asking price was 3.65.
- Condo/Strata: 30% of condos sold above the asking price at an average of 5.4% above ask. The highest premium paid was 18%, and the average days on market for those selling above the asking price was 7.69.
- Sold at the list price:
- Single Family: 23% of homes sold at the ask price in an average of 15 days.
- Condo/Strata: 33% of condos sold at the ask price in an average of 16 days on the market.
- Sold below the list price:
- Single Family: 45% of homes sold below the list price, taking an average of 21.6 days.
- Condo/Strata: 37% of condos sold below the list price, taking an average of 22.81 days.
There are clearly some key take-aways here:
- Premiums paid to secure accepted offers, in other words how far above the list price buyers are having to go to win bids, are increasing for both homes and condos.
- Homes and condos priced accurately are selling very quickly, in many cases at above the asking price.
- If a home has not been priced accurately and has not sold within a week, the market appears to be moving on with the average days on the market jumping, in some cases drastically.
- There is a strong correlation (or inverse relationship if you would like to get technical) between days on market and sell/list price. In general, the lower the days on the market, the higher the price relative to list price. Homes selling well below the asking price (that were overpriced by greedy sellers with unrealistic expectations) are sitting on the market for a significant amount of time as the seller’s expectations normalize over time.
What this means for Buyers: If you are a serious buyer, you need 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: You need to price accurately to maximize interest. This is not the “leave a little room for negotiation” market. Pricing accurately will minimize the days on market (and inconvenience to your family), as well as best position you for a competitive bidding situation as evidenced by 32% of single family home and 40% of condo/strata sales in May transacting above the asking price. Working with a Realtor with a very strong marketing platform and one who employs effective strategies to drive and manage multiple offers is vital on the sell side. While the exact number is not known, the number being thrown around in the industry is that around 30% of accepted offers in multiple offer situations are falling apart. Make sure your Realtor has a proven ability to help you select the transaction most probable to complete. While the highest price often seems the most attractive, if it doesn’t complete due to financing, buyers remorse, etc., it is as good as useless and you will have killed the momentum with buyer interest. The right Realtor will help limit your risk exposure in this area.
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 April to May, with all 18 experiencing increased prices year-over-year. These annual increases range from 6.28% to 33.41%. Top risers month-over-month were Upper Lantzville, Lower Lantzville, Extension, Uplands, and Pleasant Valley. Top performers year-over-year were Old City, Pleasant Valley, Lower Lantzville, Chase River, Cedar and South Nanaimo. As has been the case the last few months, it is interesting that both of these lists were absent of the consistent top performers (North Nanaimo, Hammond Bay, Departure Bay) from the earlier stages of the current cycle. Looking at volume, risers both monthly and annually included Uplands, Old City, Hammond Bay, Chase River, and Central Nanaimo. Two key observations remain consistent with those noted the last few months. Firstly, most price and volume risers are the traditionally more affordable neighbourhoods. Secondly, most of these neighbourhoods are near the city limits or in the cases of Cedar and Lower Lantzville, technically beyond. This is textbook market action for a maturing real estate market, as many buyers have now been priced out of the traditionally more desirable and/or more conveniently located neighbourhoods in relation to jobs and amenities, and must head further and further out to find a home in their price range. With real estate being location specific, it is vital to know what is going on in your area when determining whether the timing may be right to sell your home. For buyers, neighbourhoods will experience differing price action throughout the cycle. Again, it pays to know what is happening in each sub-area, to determine whether a purchase or sale would be prudent.
On rising volume, apartment-style condos were the top performing category in May, followed by lots and single family homes.
With the market conditions only strengthening, we are in a SELLER’s market. The opportunities undoubtedly are on the sell side. With approximately 32% of homes selling above the list price, there has never been a better opportunity for sellers for a quick sale at top dollar. If you have previously listed a property that didn’t result in a sale, now may be the perfect opportunity to re-enter the market. With prices rising rapidly, there is a strong chance that you would be able to list for more than you had previously and arrive at a sale in a timely fashion.
For investors, could there be a momentum play to jump into the market for a quick flip? It looks that way. Would we recommend it…No, not our style. It is always important to protect your downside. To buy a negative cash-flow property and bet on appreciation is a risky proposition. Your only guarantee is you will lose a few hundred dollars every month. If you can locate a positive cash-flow property and you are comfortable holding on for a while if market conditions reverse, that is a different story.
For a consultation specific to your situation, or if you have any questions about market conditions, please contact us at firstname.lastname@example.org and we would be happy to help.
Check out the Nanaimo Market Statistics Here: Monthly Statistics Nanaimo May 2017