I ended last month’s Nanaimo Real Estate Report with…
“If Vancouver continues to rebound, then our local market will likely be a beneficiary…”
Well, Vancouver is rebounding, the snow is gone, foresters are back to work, and I’m getting that January 2017 feeling again.
Calm before the storm.
The stats and weather here in Nanaimo in January 2019 were in some ways very similar to January 2017.
Then as now we saw horrible weather in January along with a drop in new listings, and soft sales.
Off to a slow start, by the end of 2017 the Nanaimo housing market had a solid 16% increase in average detached home prices.
After a strong December 2019 here in Nanaimo we saw a drop in both new listings and unit sales here in January 2020 where new listings fell by 30% from the same time a year ago, and detached home sales dropped by 22%.
Of course past performance is, well, the past and there is absolutely no guarantee 2020 will see lofty price gains, but it does go to show that real estate markets can sometimes start the year in one direction, and end in another.
Feeder Markets Rising
We are a secondary market where more than half our buyers come from elsewhere.
When trying to predict our local market in Nanaimo, you really need to look at the “feeder” markets; Victoria, Toronto, and especially Vancouver.
Toronto Buyers are getting crushed with fast rising prices and multiple offers.
Victoria saw a 25% rise in home sales in January.
Vancouver residential home sales jumped again in January by 42%, (with snow), after jumping 55% in November and a whopping 88% in December.
When you look at those Vancouver numbers, remember that unit sales are often lagging indicators. That means that unit sales reported in one month often reflect demand from 1-2 months earlier when the deal was done, completing 1-2 months later. New listings on the other hand are for the month reported.
That means that Vancouver likely started to “rebound” earlier than November.
We’ll see what February numbers look like but my read is that the market there has come back to life after a lackluster 2018-2019 and if history tells us anything about Vancouver, when it rebounds it often does so with a vengeance.
The inventory problem here in Nanaimo is one of the worst in the country. Why? In a typical domestic market people sell their home and buy another one, in the same city.
In Nanaimo with more than half the buyers of homes here having sold their old home elsewhere, we can quickly reach a crisis in inventory.
And those newcomer buyers in Nanaimo who sold their house in Vancouver — did so in a market with average home prices nearly triple ours.
As if this weren’t enough to create a rise in demand, and I think eventually a rise in prices, add the following demand boosting factors to the list:
- Mortgage rates are a full 1 point lower than a year ago;
- A slight relaxation of the stress test on insured mortgages will add purchasing power for many Buyers;
- The provincial and national economies are doing well;
- The forestry strike on the island is finally over.
Following are some potential demand dimishing factors on the radar:
- Stress Test: Based on local income levels, I believe Guideline B-20 and the Stress Test will continue to skew local buyer demand towards homes priced below $600K. Of course many Vancouver sellers walk away with cash and are not affected by the Stress Test;
- Income: Nanaimo needs more well paying jobs. Local Median Family Income here, although up by 17% in the last 5 years, still falls short of the BC average. Also some Nanaimo residents have been hit hard by the downturn in Alberta employment with some young families once dependent on those jobs, now earning less. On the plus side, the forestry strike has finally ended and many Buyers come from off island with cash, and so local income levels matter less here than in a more islotaed location.
- COVID-19 (Coronavirus): This is the big wildcard. No one knows what if any effect it may have on the economy and/or the market.
Super low interest rates; relaxed stress test rules; super low inventory levels; end of the forestry strike; a rebound in the lower mainland market…
Be ready for a crazy spring market.
Own a home? Don’t forget to fill out your vacancy tax declaration.
If you own a residential property in Nanaimo or Lantzville you will need to complete a declaration stating that you live in the house or you may get hit with the BC vacancy tax. You need to fill out the declaration form every year. You should have received a copy in the mail.
Questions? I’d love to hear from you!
Call/text me at 250-797-7028
OR send an email to firstname.lastname@example.org
PS No one has a crystal ball.This monthly newsletter is my effort to take today’s data and then try to look ahead 2-3 months, beyond that things become far less predictable. It is also based on all things remaining pretty much as they are today. Readers should do their own research if important.