Overall March Market Conditions Surprisingly Resilient in Light of COVID-19
Given the developments of the COVID-19 pandemic in the Month of March, including the proactive measures essentially shutting down much of the local economy that were taken in an effort to flatten the curve, as well as the aggressive moves made by the federal government to lessen the economic blow, we are certainly operating in unprecedented times. As the month of March is when the COVID-19 concerns and subsequent actions really ramped up in our market, March’s market statistics must be looked at in the context of what has just occurred. We realize even producing a monthly recap may seem completely redundant, given what has occurred and how different the world and economic outlook appears than it did just one month ago. However, on the flip side with March being a pivotal month signifying the start of the spring season, we felt it was important to report on what occurred, especially as a follow up to the building signs of a strengthening market, as this may (and I caution “may”) shed some light on what is to come when the COVID-19 concerns begin to lift.
Single Family Price and Volume
90 single-family homes sold in March, up 36% from the 66 that sold in February, but 5% less than the 95 that sold in March of last year. The average sale price slipped back under the $600k mark, coming in at $592,262, down 1.4% from February’s average of $600,648, however, this figure was still up over 8% from last March when the average sale price came in at $546,656. The median sale price decreased by over 3% from $585,000 in February to $565,000 in March, which is 7% higher than the same time frame last year when the median sale price was $530,000. 185 homes were listed in March, which was 45% more than the 128 homes listed in February, but 7% less than the 198 listed in March of 2019.
Insights: The fact that March’s sales volume saw only a 5% decrease from last March is somewhat remarkable given the fact that it was really the second week of March when the industry really started to adapt to combat the COVID-19 threat. Yes, last March’s sales volume was down from the March results in the preceding 5 years, but you have to think had it not been for a week 2 slowdown, sales volume was poised to post a fairly respectable increase over last March.
We had a slight downtick in the average sale price, and a more noticeable decrease in the median price, suggesting more homes were selling at the lower end of the pricing spectrum. While this may not seem to be a huge surprise given that many of the higher-priced homes are sold to out-of-market buyers, whom due to COVID-19 concerns are essentially staying home unless they had a pressing need (eg. new job, etc.) to find a home in our region, it was surprising to see that already 10 home sales have been registered over $800,000 for March, including 6 over $1,000,000. It has been some time since we have seen 6 seven-figure sales in a month, just another confirmation that the market and interest from out-of-town buyers was improving prior to the COVID-19 slowdown.
There were 7% fewer new listings than last March, which again is a bit surprising to see this decline in the single digits, as it would be reasonable to assume that with the area more or less “on pause” for the time being, that sellers may have been fearful of the health risks of having people touring their homes, and listing volume would have decreased substantially. While some people don’t have a choice due to major life changes such as job transfers, etc., for the rest of the “non-urgent” population, it was somewhat surprising to see the volume we did. Despite the figures, many undoubtedly held off on listing their homes, so again, you would have to think we would have seen a noticeably higher number of new listings than we did had it not been for COVID-19. So why do we figure listing volume was higher than expected? While we don’t know with certainty, one theory would be people thought they would try to get their homes sold before market conditions started to deteriorate.
So how did Nanaimo stack up against other Island communities north of Victoria for the month of March? Looking at the average price of a single-family home, Nanaimo up 9% year-over-year was eclipsed to the upside by Port Alberni, which was up 14% on declining volume. The Comox Valley and Cowichan Valley were both up 8%, Parksville/Qualicum was up 5%, and Campbell River was up 3%.
Looking at sales volume in comparison to last March, Comox Valley was up 54%, Campbell River was up 28%, Parksville/Qualicum was up 19%, Cowichan Valley was down 4% and Port Alberni/West Coast had the steepest decline, down 27%.
Looking at the entire Vancouver Island Real Estate Board totals, the average sale price was up 8%, while sales volume overall also rose 8% from March of 2019. These are surprising figures and can only leave one wondering “what would have been?” if not for the current pandemic.
Strength of the Trend
Factors we also look at when analyzing a market to validate its strength are the sell/list ratio; sell price; days to sell, and current inventory numbers:
The sell/list ratio decreased to 49% in March from 52% in February but was up slightly from March of last year when it was 48%.
The average sell price/list price was 98% in March which represents no change from last month or from the same time frame last year.
The average days on the market for the homes that did sell in March decreased by 15% to 29 days from February’s 34 days, which is also 12% lower than in March of last year when days on market averaged at 33.
As of the end of March, the number of active listings was 288, up 19% from February’s 243 active listings, and 8% lower than the same time last year when there were 312 active listings at month-end.
Insights: Of the 8 market indicators we look at in this section, 4 improved, 2 deteriorated, and 2 remained unchanged.
The sell/list ratio at 49% is a marginal decrease and still relatively strong considering world events in the month of March. Similarly, the average sell price/list price held constant at 98%, the same figure as both last month and last year. This is not to say all home sales are being sold at a 2% discount to list price, as both stale and overpriced listings are factored in here, that may see negotiated transaction prices at higher percentages below the asking price. What this figure also may suggest is that so far for all those deal hunters out there, COVID-19 has not resulted in sellers in mass being willing to accept lower offer prices for fear that market conditions get worse and they may not be able to get as much in the future as they could today.
Average days on the market for homes that sold dropped when compared against last month’s and last year’s figures. While at first glance this may be surprising, really it shouldn’t be. We still have buyers that made decisions pre-COVID 19, such as selling their home or accepting a job transfer, that put them in a position of needing to find a place to live. As such, Buyers who were actively still in the market despite the health concerns, by and large, were motivated. Depending on how long the COVID-19 concerns persist, we would expect the level of urgency overall to decline, and as such days on market figures overall (as it is an average) will likely increase. That’s not to say if you need to sell and you have an extremely unique offering that it will not sell quickly, you will just need to ensure that comparatively speaking you stand out from the competition, so working with a real estate Advisor in tune with economic conditions, competition, with a strong marketing platform maximizing exposure to your target market, and pricing accurately and competitively will be as important as ever to best position you to achieve the results you are looking for.
Lastly, the 288 homes on the market at the end of the month is slightly below where March of 2019 ended, but above what we had in the 3 preceding years. Looking back further, the period from 2012 to 2015 had listing numbers at the end of March slowly declining from 554 in 2012 to 426 in 2015, before the big drop to 271 in 2016. So in a broader historical context, listing volume is quite low. What this means is buyers have less choice and that is something that is different than when we were hit with other major macroeconomic events such as the 2008 Financial Crisis. Coming out of the COVID-19 crisis, it will be interesting to see where inventory numbers are, but if we had to make a call, we would suggest they likely won’t be overly elevated unless the market is flooded with new listings from those holding off because people who don’t “need” to sell likely won’t be taking the risk while health concerns persist, and if market conditions are poor following the health concerns subsiding, in the absence of a need to sell, it would make sense to wait for market conditions to improve to list. Again, we do not have a crystal ball, but we do see the lower current inventory levels as a positive that could help with a speedy recovery once the health concerns dissipate.
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 February to March, with 12 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 -11.93% in North Jinglepot to 14.05% in Upper Lantzville. The top risers month-over-month were Lower Lantzville, Extension, and Cedar. Top performers year-over-year were Upper Lantzville, Cedar, Hammond Bay, and South Nanaimo. Looking at volume, 7 of the 18 sub-areas saw increases month-over-month with Lower Lantzville coming in as the top riser, while 6 of the 18 sub-areas also saw increases year-over-year, with Departure Bay the top riser in this respect.
Insights: Difficult to draw any significant conclusions here. From a volume perspective, both top performers (Departure Bay and Lower Lantzville) are both areas that historically have been attractive to out-of-town buyers, based on the lifestyles offered. Aside from this, some neighbourhoods are up, some are down, with seemingly no particular rhyme or reason. This raises an important point…Not all neighbourhoods and classes of real estate move up and down at the same rate throughout the cycle. If you are considering a purchase that extends beyond the lifestyle considerations of a principal residence, given the economic uncertainty we are entering into, working with a realtor that has a good pulse on neighbourhood profiles and historic market action is very important.
Single-family waterfront homes and patio homes (both on low volume), apartment-style condos, and townhouses were categories that all saw an increase in average sale price from February to March, while all categories, with the exception of lots, experienced increases in average sale prices year-over-year. Month-over-month increases in sales volume were only reported in single-family homes and single-family waterfront homes, while only patio homes, townhouses, and lots posted year-over-year increases.
Insights: While the lower volume must be factored in, seeing waterfront homes and patio homes post strong average price gains, is likely a result of (at least in early March) a resurgence of out-of-town buyers looking to secure their retirement residence of choice. We’ve talked in past market recaps about how improving Lower Mainland conditions are poised to positively impact certain categories and styles of real estate in our area. These 2 categories would be benefactors in this regard…With that said, we are not sure whether there will be any follow-through on this or if current economic challenges may again delay out-of-town buyers from returning on mass to our area.
Firstly, in light of the current COVID-19 pandemic, it is important to emphasize that if at all possible it is best for everyone to do their part to help flatten the curve. What this means for most is to put their purchase or sale of real estate on hold until the authorities have confirmed that it is safe to resume more regular daily activities without the heightened risk of contracting or spreading COVID-19. However, the Government of British Columbia has deemed real estate agent services a COVID-19 Essential Service, as for a small percentage of the population there is an urgent need to complete a real estate transaction. With this being the case, efforts are being made where possible to conduct business virtually, but for those that do insist on or require physical showings of properties, strict protocols are in place following all regulatory guidelines to help minimize the risk of any adverse health implications for anyone involved.
For the vast majority of buyers, if you were thinking about a spring purchase, now is a great time to really familiarize yourself with the local real estate market. I heard someone recently use the term “calibrate your opinion of value”, and this struck me as an accurate description of how I feel you could be effectively using this time to educate yourself on the local market so that you know a great offering when you see one. What does this involve? First, get familiar with the various neighbourhoods in town and the types of lifestyle benefits, conveniences, and amenities they offer. Determine where new construction is happening, and what these newer less familiar neighbourhoods have to offer. For the neighbourhoods that meet your lifestyle requirements, go online and see what homes are selling for in these neighbourhoods, and how they compare. From here you may have a neighbourhood or two that you want to keep a close eye on. By closely following new listings and sales that are happening, it will help you to better understand how far your dollar will stretch, and also help you quickly recognize when a solid offering hits the market that may be underpriced or offer significant value.
If you haven’t already done so, now is also a great time to reach out to a trusted mortgage broker or your bank, as well as possibly your investment advisor to proactively get your finances in order to ensure you are in a position to act when the COVID-19 health concerns dissipate. While we realize most are experiencing some financial pain right now, engage your financial team early to have them be part of the solution and have you well-positioned to act when the timing is right. They will also be able to answer many of your questions, such as how a temporary layoff may impact your ability to obtain financing.
If you haven’t already connected with a Realtor, now would also be a great time to do so. Typically at this time of year, Realtors are flat out trying to keep up with the demands of the spring market. This year Realtors have more time available and many are eager to assist with helping out however they can, making sure you are well informed and ready to act when more regular market conditions resume. Take your time in finding a well-respected Realtor with a proven track record who knows the market well and will put your interests first at all times. Once you have found a good option, get your Realtor working for you. As a Buyer, in most cases this costs you absolutely nothing, so why not take advantage of this assistance as early on as you can in your home search process. Start with an initial consultation which can be done remotely via video conferencing technologies or phone call, and take it from there…
For Sellers, is now a good time to sell? Really, that depends on your personal circumstances, what you are selling, and what you are looking to achieve. Consulting with a trusted Realtor, who can help you weigh the pros and cons would be an important early step. Above all else, make staying safe your number one priority. For those with vacant homes, if you must sell, now is a time where a vacant home may have an advantage over an occupied home, as naturally there are no health risks to the occupants and it is easier to coordinate showings. Whatever the case, if you are listing make sure your Realtor has a strategy to best position you to minimize the COVID-19 concerns for not only you and your family but for everyone else involved (Buyers, Realtors, Inspectors, etc.). This would include showing schedules and protocols intended to minimize the possible transmission of germs but also having a solid online marketing platform to showcase your home that will help minimize foot traffic. Now is not the time to list with your “For Sale Sign & Cell Phone Picture” Realtor.
For investors, with us, it always gets back to the numbers. From an appreciation standpoint, there are headwinds right now and a purchase represents increased risk that you could find yourself in, in the coming months holding a property with a value lower than when you purchased it. If you are a long-term investor and you can find an exceptional deal on paper and you are not subjecting yourself to increased health risk, possibly by using the technologies at hand and physically walking through the listings, then maybe you don’t want to rule out a purchase this spring. The reality, unfortunately, is that mass economic slowdowns create financial hardship, which inevitably at some stage will likely result in some good buying opportunities. While we don’t have a crystal ball, it is our take that things are likely to get worse before they get better, especially if the COVID-19 concerns linger longer than expected. We believe on the buy side, patience is likely going to be rewarded. Remember, much of your ultimate return is derived from your entry point, the price you were able to purchase at. Right now sub-$700k, most homes are still being listed at all-time highs. So, for most investors, stay safe, educate yourself on the local market, be patient, watch out for deals if and when they emerge, make sure you are running the numbers, and if the numbers work, be ready to act. In this regard, don’t feel shy to reach out and get the conversation going with a good investment-focused realtor. They are here to help.
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, at least in a short-to-medium timeframe. Right now we have reason to believe we may be more likely on the way to a valley than the peak, but only time will tell. 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.
Above all else, stay safe, do your part in flattening the curve, and we wish you and all those close to you the best of health!
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: Market Statistics March 2020
Disclaimer: The information presented is intended for general information purposes only and should not be construed as Real Estate advice. Each client’s situation is unique and therefore we recommend consulting directly with your professional advisors (Realtor, Accountant, Lawyer, Investment Advisor, etc.) prior to making any real estate decisions. Not intended to induce breach of an existing agency agreement or solicit properties currently listed for sale or individuals currently under contract with a Brokerage.