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September Raises Further Concern…Are The Tides Turning?

 

Under Nanaimo

 

Written by on October 4th, 2017

September Raises Further Concern…Are The Tides Turning?

Single Family Prices and Volume

152 single family homes sold in September, down 4% from the 158 sold in the same timeframe last year, but up 10% from the 138 that sold in August. This rise in volume was not unexpected as those who took some time to enjoy the summer months have renewed their focus on their home search heading into fall. After slipping slightly in August, the average home price rose 1.5% in September to $526,392, which also marked a 10% increase from last September’s average price of $476,691. While the average price was up month-over-month, September’s median price of $489,252 was a slight decrease from August’s median price of $495,000. However, it is important to note that the median price was up more than 16% from last September.

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 rose by 19% to 75 from 63 in August. While this is a notable improvement, it is still lagging last September’s figure of 87%.

The sell price/list price held at 99% month-over-month, one point up from the 98% figure for September 2016.  September’s figure is not suggesting every home is selling at 99% of the asking price as it is just an average, with some selling well below asking, and the most attractively priced offerings going into multiple offer situations and selling above the list price in many cases. For a general frame of reference, typically anything 96-97% and above reflects strong market conditions.

For the fourth consecutive month, the average number of days on the market increased, albeit marginally from 24 to 25 days. This figure is just 1 day higher than last year’s average of 24 days. On this note, it is interesting to note that during our team meeting this morning we had one of our Advisors commenting that it seems like for the first time in months, most of the properties that showings are being requested for are available. While this isn’t quantitative data, it is an interesting observation nonetheless, a possible early warning sign that pent-up buyer demand may be dissipating.

As of the end of September, the number of active listings is 323, down nearly 6% from August, but up 39% from inventory levels at the same time last year.  This is a trend that will be important to watch as this is the fourth consecutive month where we have seen heightened year-over-year inventory levels. The number of new listings has also been rising year-over-year, with the past 4 months experiencing heightened listing numbers over last year’s new listing figures. With lack of supply being a major driver of recent price gains, it will be interesting to see whether rising inventory levels continue leading to more balanced market conditions in the coming months.

While we saw some improvements over last month’s figures, we are still experiencing deteriorating metrics in other areas. September is often a strong indicator of the strength of the fall market and when compared to last September, we have more listings, fewer sales, an inferior sell/list ratio, a higher average days on market, and 39% more active listings. Taken together, folks you have your warning sign. The market may have reached or may be very close to a cyclical top. With September marking the fourth consecutive month without any significant forward progress in the Nanaimo market, interest rates on the rise, and nearly approaching the slower winter months, keeping a close eye on the market over the coming months will be important to determine if this is more of a consolidation or balancing of market conditions before a further move upwards in the spring or whether this could be the start of a more prolonged move downwards.  

Only Found Here

Days on Market:

  • Selling in 0 – 7 days:
    • Single Family: 41% at an average of 102.41% of the list price.
    • Condo/Strata: 36% at an average of 100.56% of the list price.
  • Selling in 8 -31 days:
    • Single Family: 29% at an average of 98.31% of the list price.
    • Condo/Strata: 43% at an average of 98.30% of the list price.
  • Selling in more than 31 days:
    • Single Family: 30% at an average of 98.20% of the list price.
    • Condo/Strata: 21% at an average of 97.35% of the list price.

Sell Price/List Price:

  • Sold above list price:
    • Single Family: 29% of homes sold above the asking price – at an average of 5.58% above ask, with 19% the highest premium paid. The average days on market for those selling above the asking price was 17.
    • Condo/Strata: 24% of condos sold above the asking price at an average of 3.46% above ask. The highest premium paid was 5%, and the average days on market for those selling above the asking price was 12.
  • Sold at the list price:
    • Single Family: 9% of homes sold at the asking price in an average of 21 days.
    • Condo/Strata: 17% of condos sold at an average of 84 days on the market.
  • Sold below the list price:
    • Single Family: 62% of homes sold, taking an average of 30 days.
    • Condo/Strata: 59% of condos sold, taking an average of 26 days.

There are clearly some key takeaways here:

  1. The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.
  2. The majority of properties sold below the asking price, with percentages in both categories on the rise.
  3. The most attractive offerings are still attracting significant bidding wars, with 5 homes transacting between 10% – 19% above the list price. Single-family homes were pursued significantly more aggressively than condos.
  4. 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.

What this means for Buyers: While listed properties on average are taking longer to sell, the most attractive offerings are still attracting aggressive bidding wars. However, for the rest of the market, the majority of sales are now happening below the asking price, so there seems to be more opportunities to find a home without competition and potentially finding a “deal” under the asking price. By historical standards, buyer demand remains strong, 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: You need to price accurately to maximize interest, especially with the number of active listings hovering around 2-year highs. Sellers have been caught up in the hype and media attention on the housing market and in many cases are 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 bidding 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.  

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 all 18 experiencing increased prices year-over-year.  These annual increases range from 9.38% in Hammond Bay to 29.87 % in Lower Lantzville. Top risers month-over-month were Lower Lantzville, Cedar, South Nanaimo, Uplands, and Chase River. Top performers year-over-year were Lower Lantzville, South Jinglepot, South Nanaimo, Cedar and Old City. Similar to the past couple months, and more so than in previous months, the top performers were a bit scattered, however, areas on the outskirts of town in various directions featured prominently, not surprising given the affordability challenges in the most in-demand neighbourhoods.  Looking at volume, risers both monthly and annually included Upper Lantzville, Extension, and Old City.

Interestingly, the average sale price for apartment-style condos and patio homes surged in September, up 31% and 21% respectively, month-over-month. Townhomes also had a respectable showing, with condos, patio homes, and townhomes now all up more than 20% year-over-year. For those following our commentary, this should not come as a surprise. With downsizing empty nesters looking for less square footage these categories were poised to rise on the back of heightened demand. Taken together with single-family home prices becoming increasingly out of reach and the fact that as the calendar ticked over into 2016 many stratified properties were still priced below their previous cycle highs (2007/2008), it was the perfect storm for rapid price acceleration. On relatively low volume, month-over-month and year-over-year waterfront homes and lots saw decreases in average sale prices.

Opportunities

While still considered a SELLER’s market, as we transition into the fall market, conditions appear to be trending towards more of a balanced market. Despite buyer demand not appearing quite as strong as it was earlier in the year, this is still a good time to consider listing your property, especially if you have listed in the past number of years and been unsuccessful. While Buyer demand could conceivably get stronger, factors such as higher interest rates, affordability challenges, and speculated further government intervention to cool the housing market, will more likely than not cool buyer demand over the next year or two. Therefore, if you need to sell, with record high average sale prices and market indicators deteriorating, the fall or early spring market may represent your last solid opportunity for some time to exit with ease.

For investors, it is important to remember that when managing your assets, protecting your downside is every bit as important, if not more than chasing gains on the upside. Remember a decline of 50% requires an increase of 100% just to break even. Selling near the top also positions you to “go shopping” when the market is “on sale.” This is how real acceleration is possible when building your portfolio. While this market may still have some room to run to satisfy the built-up demand from the spring market, we are already seeing signs of demand cooling. It always does, markets are cyclical, it is not different this time… Make sure you are protected.

For buyers, the number of active listings remains near the highs last seen in the fall of 2015. The average days on market is increasing, and the majority of transactions are now occurring below the list price.  More listings equal more choice for buyers and potentially the opportunity to secure a home without enduring excruciating bidding wars and ultimately overpaying to have an offer accepted. As we head into winter, buyers will again head to the sidelines, as those with a choice typically prefer to avoid moving during the busy holiday season and challenging winter weather that could follow into the new year. Similarly, if sellers have a choice, they will often wait until the spring market to list. However, major changes in life circumstances, such as job transfers, divorce, etc. will necessitate listings throughout the winter months, and it is often during these times, that buyers can find some of the best bargains of the year.

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 Stats Nanaimo September 2017

Source: VIREB