Welcome to NRBs’ Nanaimo Real Estate Report and Nanaimo Area Housing Report for November, 2018. Full of the latest Nanaimo real estate news, information, and of course my on the what it all means at the end.
In my Summer 2018 Market Report back in June, I called the Nanaimo area housing market “schizophrenic”, as selling rates were highly splintered at that time depending upon the price range.
Now the market seems to have settled into it’s own new normal:
- below $500,000 it’s still a Seller’s market, I think due in large part to affordability due to price;
- the market above $700,000 is now a Buyer’s market with a major drop in demand;
- the market between $500K-$700K is more fluid and is in transition.
One key thing to keep in mind is that the change in market conditions is almost entirely driven by the demand side.
“We attribute the weaker sales throughout British Columbia to a decrease in demand rather than oversupply,” says Cameron Muir, Chief Economist, British Columbia Real Estate Association (BCREA). “The mortgage stress test and higher interest rates are taking their toll on housing sales throughout the country.”
I think the negative effects of governmental attempts to attack the demand side of the housing market are now largely factored in, with the exception of the new BC Speculation Tax, which I don’t think will have a big effect on the Nanaimo market.
The number of single-family homes sold in the Nanaimo Region in September were down a whopping 36% from a year ago, while dropping just 5% in October this year, from October last year.
But rising interest rates will have a cooling effect, after the fear of rising rates temporarily pushes up Buyer demand, which may explain why the market has picked up recently.
That being said I think we live in a region with it’s own housing market “life preserver” built in. Muir put it this way, “The broad demographic trend for the VIREB area continues to include baby boomers and retirees, who are less affected by stricter mortgage qualification rules because they don’t typically need mortgages, as a result, even when sales bottom out, they’re doing so at lower levels on Vancouver Island.”
Price matters now more than ever.
The central island market has been on a tear since mid 2013 and needed to take a breather. It was only a matter of time before the market would seek equilibrium between supply and demand, and now Buyer demand is falling almost everywhere in the country, with the exception of Ottawa and Montreal. As a result, Sellers need to price sharply to stay ahead of the market, or risk the market moving further to the downside while they sit there waiting for that one Buyer who’ll pay them their fantasy number.
Remember: More than ever Sellers have just one home to sell — whilst Buyers have the entire market to choose from, a perhaps have time on their side as well.
Market Stats for October 2018 Nanaimo & Parksville / Qualicum
Last month, according to VIREB. 385 single-family homes sold on the MLS® compared to 347 in September and 458 one year ago while the number of apartments and townhouses changing hands last month dropped by 8 and 21 per cent, respectively.
This year’s housing market is behaving as expected, moderating after the record-setting pace set in 2016 and 2017. Government policy-side measures introduced to cool the market, such as the mortgage stress test (Guideline B-20) and higher interest rates, are taking their toll on housing sales throughout the country.
On the positive side, the provincial economy is still doing well, and the British Columbia Real Estate Association expects housing sales to make a modest recovery during the next couple of quarters. Further, Vancouver Island has so far been somewhat immune to the effects of Guideline B-20 because the broad demographic trend in our area includes baby boomers and retirees who do not typically need mortgages.
12 Month Trailing Average – Single Family and Condos:
Nanaimo: The 12 month trending average selling price of a single family home in Nanaimo keeps rising as it hit $552,916 up from $548,786 in September, $543,977 in August, and $510,556 a year ago. Up 8%. The average for Condos in Nanaimo in October was $302,493, up from $297,798 in September, and $298,649 in August. It was $260,408 a year ago. A rise of 18%.
Parksville/Qualicum: The 12 month trending average selling price of a single family home in Parksville/Qualicum hit $615,929 in October, up from $610,093 in September, $611,105 in August and up from $538,998 a year ago. A 14% rise. The average for Condos was $278,582, up slightly from $277,864 in August and up 7% from $260,360 a year ago.
12 Month Trailing Median – Single Family and Condos
Nanaimo: The 12 month trending Median Selling Price of a single family home sold in October was $529,800, up a tad from $525,000 in September and $520,000 in August. The 12 month trailing Median for Condos was $280,380, up a notch from $279,900 in September, and $280,000 in August.
Parksville/Qualicum: The 12 month trending Median Selling Price of a single family home sold in October$575,000, up from $569,900 in September and $570,000 in August. The 12 month trailing Median for Condos was $277,000, unchanged from September, and down solidly from $288,000 in August.
Nanaimo: A far better indicator than average price, the benchmark price of a single family home sold in October was $548,000, down slightly from $554,000 in September, and flat lined with $546,200 in August. year ago it was $504,700. Similarly the Benchmark price of a Condo in Nanaimo in October was $317,300, and was $323,000 in September, and $320,500 in August. A year ago it was $284,100.
Parksville/Qualicum: The Benchmark Price of a single family home sold in Parksville / Qualicum in October was $570,200, and in September it was $575,100, a tad up from $574,200 in August. A year ago it was $524,300. The Benchmark price of a Condo in October was $338,500, markedly down from $357,500 in September, and $352,800. A year ago it was $312,800.
House Price Index or HPI*:
Nanaimo: The Nanaimo HPI™ (Housing Price Index), probably the best value indicator of all, was 244.1 in October and 246.8 in September, up from 243.3 in August. A year ago it was 224.8.
Parksville/Qualicum: The HPI in Parksville/Qualicum was 232.1 in October and 234.1 in September, up from 233.7 in August. A year ago it was 213.4.
* Methodologies commonly used to calculate HPI are the hedonic regression (HR), simple moving average (SMA) and repeat-sales regression (RSR).
Absorption Rate: In a balanced market it takes 5-7 months to sell everything listed.
Nanaimo: At the current rate of sales, (absorption rate), it would take about 3 months to sell all single family homes actively listed for sale in Nanaimo overall. That’s up from last month as it is trending towards balanced market territory (5 months). But that is misleading. For example, between $700,000 and $800,000 it would take more like 5 months to sell through October inventory.
Parksville/Qualicum: At the current rate of sales, (absorption rate), it would take about 2.11 months to sell all single family homes listed for sale in Parksville/Qualicum overall.
Nanaimo: There were 72 price reductions in October, 62 in September and only 15 price reductions in August and 12 in July. There have been 75 reductions so far this month, (November 20).
Parksville/Qualicum: There were 53 price reductions in October, 43 in September and 19 price reductions in August, and 14 reductions in July. There have been 41 reductions so far this month, (November 20).
** Price reductions do not necessarily mean the market is going down. Sellers are last to figure out the market has changed, often reducing their asking price after sitting on the market for a while. Buyers figure it out much faster.
Inventory – Active Listings, Single Family Detached:
Nanaimo: There were 335 active single family listings in Nanaimo in October vs. 301 a year ago.
Parksville/Qualicum: There were 181 active single family listings in Parksville/Qualicum in October vs. 130 a year ago.
Inventory – Units Sold, Single Family Detached:
Nanaimo: There were 335 active listings in total with 201 listed in October vs 171 listed in September and with 121 sold in October vs. 98 homes sold in September in Nanaimo with a Sell/List Ratio of 60%, a tad up from 57% in September and a Sell Price/List Price ratio of 97% in October, unchanged from September. That means in aggregate, Sellers received 97% of their ask price in September and took 31 days to sell. Not bad.
Parksville/Qualicum: There were 181 active listings in total with 78 listed in October vs 54 sold (there were 42 sold in September) with a Sell/List Ratio of 69% . That means in aggregate, Sellers received 98% of their ask price in October and took 31 days to sell. Not bad.
What It All Means
My gut read is that although Nanaimo area prices will stay relatively stable through 2019, they will slowly trend to the downside in the higher price ranges while Sellers catch up to the new reality and Buyers realize they have the upper hand. In other words, I think we are seeing sellers and reality converge in real time as buyers take their time and cherry pick.
If a home is well presented and priced properly, it will sell. Perhaps for less than the seller had fantasized getting, but rather at the price the market will bare, today.
Looking forward I continue to feel that the Nanaimo area market will hold it’s own due to its unique proximity to the Lower Mainland and the fact that this area is arguably one of the best and most popular retirement targets country wide (over 50% of buyers come from off-island). Land here is still very reasonable and Boomers from major Canadian markets can still buy their dream home here for way less than what they can sell their current home for in say Toronto or Vancouver. Baby Boomers will continue to want to move here, even if they are not getting quite the lofty proceeds on their big city homes that they anticipated.
The fear of rising interest rates will push up demand in the short term while people buy sooner to save money. Prices in the higher ranges will continue to soften creating some great opportunities. fro Buyers flush with cash or credit.
If you’re shopping above $700K, make slightly more aggressive offers. Between $500-$700K, location and price are key, under $500K it’s is tougher for Buyers and they should be ready to pounce. Get solidly pre-approved to lock in your interest rate. Don’t try to time the market, you can’t. The market may go up, or down in the short run. Buy what you like and can afford, now. You’ll make money in the long run no matter what happens in the short run. And be weary of staging.
Don’t be greedy. Stay ahead of the market or you could land up selling for less in the long run than if you price sharply now. Don’t try to time the market, you can’t. If you actually want to sell now, price it to sell now. And price it sharply. If you’re in the market already and think you should drop your price, do it now. If you hold out for that elusive higher price for too long you risk selling for even less if the market should continue to soften. And be sure to “stage” your house to maximize on every showing.