October Market Conditions Raise Further Questions
Single Family Prices and Volume
129 single family homes sold in October, down 15% from the 152 sold in September, but up 13% from the 113 that sold in the same timeframe last year. The average home price was down nearly 2% from September’s average of $526,392 in October at $516,354.
Also interesting to note is that while the average price is still significantly (9.12%) above the average home price for the same period last year, the year-over-year spread on price appreciation has been decelerating. For example, July’s average price was 17.61% above July 2016, August 13.92% above the previous year, September up 10.43%, with October up 9.12%. More noticeable, the median price of $469,000 was down 4.14% from September suggesting there are more homes selling at lower prices than in previous months. In terms of median price, the year-over-year gain was just 4.22%. Comparatively, September’s median price was up 16% from last year, August was up 18%, July 26%. When reviewing market conditions from time to time we have deviations from the trend from one month to the next. However, when we start to see patterns 3, 4, 5 months in a row, which are all relatively consistent, it is probably time to take note.
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 declined to 68%, down 9% from 75% in September. Year-over-year, this ratio was down almost 12% in October, suggesting a lower percentage of homes listed are resulting in successful sales. It should be noted that a 68% sell/list ratio is still relatively strong by historical standards.
The sell price/list price held at 99%, with no change month-over-month, or year-over-year. October’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.
The average days on the market held constant from September at 25. This figure is up 25% from the average of 20 which occurred during October of 2016.
As of the end of October, the number of active listings is 301, down nearly 7% from October, but up 29% from inventory levels at the same time last year. While the month-over-month decrease is not overly surprising given the time of year, the sizeable year-over-year increase is worth taking note of and watching moving forward as sustained higher listing numbers will provide more choice for buyers. Longer term, more supply will serve to satisfy pent-up demand as we head towards more balanced market conditions. The upward pressure on pricing we have experienced the last few years has primarily been a result of demand for homes outpacing supply. Once there is enough supply to satisfy demand, eg. balanced conditions, motivated sellers will begin to price more attractively to separate their offerings from the competition. If listing numbers (supply) eventually substantially outpace the number of buyers (demand), increasingly motivated sellers will need to cut prices to move their homes as control of the market shifts back towards buyers. In a nutshell, the economics of a price correction has just been outlined. Keeping an eye on listing numbers and sell/list ratio will be important moving forward.
Aside from the average days on market holding constant month-over-month at 25 days, and the number of sales being up year-over-year (possibly due to having almost a third more listings available), basically every other metric we have covered has deteriorated. This is not the first month we have reported similarly in this spot. As we stated last month, when you consider these metrics in addition to impending changes to the mortgage qualification process and the expectation of interest rates continuing to rise through 2018, the market may have or may be very close to a cyclical top. With October marking the fifth consecutive month without any significant forward progress in the Nanaimo market, as we approach 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: 45% at an average of 101.33% of the list price.
- Condo/Strata: 43% at an average of 100.99% of the list price.
- Selling in 8 -31 days:
- Single Family: 32% at an average of 98.85% of the list price.
- Condo/Strata: 38% at an average of 97.77% of the list price.
- Selling in more than 31 days:
- Single Family: 24% at an average of 97.23% of the list price.
- Condo/Strata: 19% at an average of 97.71% of the list price.
Sell Price/List Price:
- Sold above list price:
- Single Family: 31% of homes sold above the asking price – at an average of 3.29% above ask, with 10% the highest premium paid. The average days on market for those selling above the asking price was 5.
- Condo/Strata: 22% of condos sold above the asking price at an average of 3.84% 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: 14% of homes sold at the asking price in an average of 13 days.
- Condo/Strata: 19% of condos sold at an average of 84 days on the market.
- Sold below the list price:
- Single Family: 55% of homes sold, taking an average of 36 days.
- Condo/Strata: 59% of condos sold, taking an average of 31 days.
There are clearly some key takeaways here:
- The percentage of homes selling above the asking price is significantly less than what was occurring earlier this year.
- The majority of properties sold below the asking price
- The most attractive are still selling quickly, with 45% of single family homes and 43% of strata properties selling in less than 7 days.
- The average premiums paid when homes sell above the asking price are less than what we were seeing during the spring market.
- 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 bidding wars. However, for the rest of the market the majority of sales are now happening 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: You need to price accurately to maximize interest, especially with the number of active listings just shy of 2-year highs. 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 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 September to October, 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 single high priced or low priced transaction 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 7.05% in Hammond Bay to 31.24% in Lower Lantzville. Top risers month-over-month were Divers Lake, North Jinglepot, Central Nanaimo, Lower Lantzville, and Uplands. Top performers year-over-year were Lower Lantzville, South Jinglepot, Cedar, South Nanaimo, and North Jinglepot. Similar to the past couple of months, and more so than in previous months, the top performers were a bit scattered, however year-over-year 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 Uplands, Old City, and South Jinglepot.
Interestingly, on low volume, waterfront homes were the only category to see average prices rise in October, as condos, townhomes and patio homes (on light volume), all experienced fairly significant pullbacks in average price month-over-month.
While still considered a SELLER’s market, this year’s 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 reasonably good time to consider listing your property, as we don’t know what the future will bring. 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 near 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 buyers, the number of active listings remains near the highs last seen in the fall of 2015. 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 are now seeing the majority of transactions are occurring below the list price. 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 firstname.lastname@example.org and we would be happy to help.
Check out the Nanaimo Market Statistics Here: Monthly Stats Nanaimo October 2017