Nanaimo Real Estate Market stats for June 2020 is in and the housing market is in full rebound mode across the country, far sooner than most Realtors and analysts expected.
Across the country sales have rebounded strongly with the average price of a home in Toronto hitting an all time high in June — while Vancouver saw an 18% rise in sales year over year. Online Realtor.ca saw 42% more visitors hit the website this June than last, along with an 18% decrease in new listings.
Here in Nanaimo we saw an 8% rise in sales of all property types with a rise of 19% in the number of single family homes sold this June vs. last June. Our benchmark price is up 3% for the year to $576,000.
Nationally the second quarter was severely supply-constrained as Buyers were back at it well ahead of Sellers who’ve been more hesitant to join the party. Here in Nanaimo our listings in June were fairly close to 2019 levels. Moving forward towards fall, inventory levels are expected to rise nationwide as more and more people become comfortable listing their homes for sale. And some may decide to sell as we get closer to September when mortgage deferrals expire.
Meanwhile the US is a slow moving disaster both in regards to the spread of Covid, and economically, as some major states may need to reinstate lockdowns for a second time, potentially accentuating the depth of the recession already in effect.
In 2008 it took nearly a year for the US economic contagion to really hit Canada. We will not escape it this time either, even if we keep Covid at bay. Our economy is simply too intertwined with, and reliant upon, the US economy for the outcome to be otherwise.
Domestically you don’t have to go far to find negative economic news. Such as the four biggest Canadian banks publicly stating that prices have hit their peak and credit defaults are rising, while the head of the CMHC pounds the table publicly predicting a decent drop in prices.
Yet apparently many, many Buyers have decided that they aren’t buying any of it and instead are out buying houses in fairly large numbers.
There are many theories as to how and why there’s such a dichotomy between the news and reality on the street. One possible explanation is a concept known as collective, or crowd wisdom.
The theory stems from a book published in 2004 by James Surowiecki called The Wisdom of Crowds.
“Under the right circumstances,” he argues, “groups are remarkably intelligent, and are often smarter than the smartest people in them.”
“If you ask a large enough group to make a prediction or estimate a probability,” the errors they make cancel one another out, he says. “Subtract the error, and you’re left with the information.” The studio audience of Who Wants To Be A Millionaire guessed the right answers 91 per cent of the time; but chosen advisers only 65 per cent.
An anecdote from the book…
“In 1906, the English scientist Francis Galton visited a livestock fair and stumbled upon an intriguing contest. An ox was on display, and the villagers were invited to guess the animal’s weight after it was slaughtered and dressed. Nearly 800 gave it a go and, not surprisingly, not one hit the exact mark: 1,198 pounds. Astonishingly, however, the average of those 800 guesses came close – very close indeed. It was 1,197 pounds.”
As counter-intuitive as it sounds, the mathematics behind The Wisdom of Crowds works so long as Surowiecki’s three key criteria – independence, diversity and decentralisation – are satisfied.
Home buyers are by definition: very independent; very diverse; and all over. In other words real estate meets the criteria hands down.
Perhaps the current crowd of buyers snapping up homes across the country know something collectively the experts don’t.
Only time will tell.
Market still in balance, for now.
As I explained last month, a key indicator of market trends is the Sales-to-New-Listings-Ratio (SNLR). An easy to read yet powerful indicator.
If the ratio is above 60%, the market is a seller’s market – where prices are expected to rise. If the ratio falls below 40%, it’s a buyer’s market – where prices are expected to fall. Between 40% and 60% is a balanced market, and prices are considered balanced. No indicator is 100% accurate and foolproof, so exercise some caution. Again we want to see a trend over several months to avoid falling for monthly aberrations.
In May Nanaimo’s ratio was 44% for the whole market. By the end of June it jumped to 58% for all property types. For single family homes it was a bold 67%. It will be interesting to see what July looks like. I suspect the trend will continue.
In the end 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.