Nanimo Real Estate Report June 2020.

Despite a rather slow start to what should have been a hot spring market, we are currently enjoying a busy rebound in the Nanaimo area, and indeed across most major markets nationwide.

I’ve been seeing multiple offers, and quick sales, occur on a fairly regular basis, especially under $650K.

The market “seems” to have decided to factor in our new Covid normal into the equation and is trying to move on. Prices have remained stable thus far, even managing to squeeze out a 3% year over year rise in May in Nanaimo, and throughout BC. (You’ll find more stats at the end of this email.)

Regardless of current activity there are black clouds out there. Indeed given the “noise” all around us, it can be tough for a potential seller, or buyer, to make sense of it all.

The reality is no one can predict where real estate will be in 12 months, even in normal times. However analysis of facts and trends as they emerge may allow us an educated glimpse of where things may be heading over the short term, and to a limited extent over the mid to longer term.

A number to watch.

In a buyer’s market, there are more homes for sale, or listings, than there are buyers actively looking to purchase. As a result, price increases slow or stall and, in extreme situations, can even decline.

Conversely, in a seller’s market where there are many more buyers than listings, prices for homes tend to rise faster than the long-term average inflation rate—the rate at which most homes appreciate, on average, over time.

Analyzing sales, or listings by themselves gives important micro and macro economic information. But on their own they don’t really tell us how hot or cold the market is. Instead, you need to compare the number of new listings hitting the market in contrast to the number of units sold, and to do that I use the Sales-to-New-Listings-Ratio (SNLR) – the ratio of sales in contrast to listings.

By using the SNLR, we can also get an idea of how quickly inventory is being replenished. The higher the ratio, the more pressure on prices to rise. The lower the ratio, the more pressure on prices to fall.

Generally, analysts say downward pressure on home prices occurs when the ratio dips below 12% for a sustained period, while home prices often experience upward pressure when it surpasses 20% over several months. Similarly the market is considered to be fairly balanced when the ratio is between 12% and 20%.

Here in Nanaimo our sales-to-active listings ratio in May was 18%, indicating a fairly balanced market.

In Vancouver in May their sales-to-active listings ratio was 15%. Also still in balanced territory.

I will be watching to see if the trend deviates in one direction or another over the next few months.

Get ready for a hot summer!

I think here in Nanaimo we will enjoy a hot and sunny “spring market” well into July and maybe into August and perhaps September.

In a typical year more than half of our buyers come from off the island — given that we live in what is arguably the best place to live and retire in Canada. (Call me biased lol.)

Mid island is one of the most unique housing markets in North America as we regularly experience an unusually large percentage of off island buyers who do not offset their purchases with sales in the same area.The result is perpetual scarcity in housing inventory. Take 2019 as an example when some 62% of mid island buyers did not live on the island.

Many of the retirees that come to our region every year are less affected by the economy as a whole. From my vantage point I am fielding an ever-increasing amount of domestic inquires from further afield.

As I have said before, this apparently never ending influx may serve to make our market more resilient moving forward than was the case in 2009. And may serve to further accelerate demand.

What it all means to Buyers and Sellers.

If I were contemplating selling in the next while, and was not buying again in the same area, I would seriously consider selling into the current wave of demand. However, if I were planning to sell and buy locally, I would time it for whenever it makes the most sense for my family rather than try to time the market. Timing matters far less when trading like for like.

Timeline is always an important consideration when purchasing. If I had decided to buy a home for my family that we intended to live in for many years and found one we liked at a decent price, I would move ahead on it now without hesitation as I have owned for many years and seen recessions come and go. It only really bites (or rewards) when you sell, so it will matter not if a recession had come and gone in the interim.

The same logic applies if I were looking for an investment property to hold over the long term. If the right property came along, and it had reasonable cash flow, and I could afford to keep it and rent it out, then I would pull the trigger now. Because values tend to rise over the long term.

A unique silver lining.

I think the summer months will continue to see “spring-market” activity levels for a while. Beyond that I feel confident in predicting that the market will do what it does, regardless of anyone’s prediction… and that it will likely defy most forecasts currently floating around.

Looking ahead the next big bump on the road may come in the fall when mortgage deferrals expire, as do most provincial, and federal supports.

I will be tracking the SNLR to try to determine where the market, and prices, may be heading in early fall — and of course I will share that ongoing analysis with you in my next market report in July.

Time will tell but it is possible that here in the mid island region, gray hair may turn out to be our silver lining. We shall see.

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