The average home price in Nanaimo increased by roughly $65,000 month over month while the market also saw a decrease in the number of sales. Typically less sales will indicate a slower market with prices decreasing, not increasing.
Looking only at the average sale price in Nanaimo it could appear that the housing demand rapdily increased and the market is ready to take off again. Jumps in average price like this were all too common during the pandemic housing market boom. While the data points to this increase in average price not being the same as the pandemic market, the average single family home price in Nanaimo still increased 9% from October 2022. To determine why this increase in the average price isn’t comparable to the pandemic it’s important to look at the other data surrounding average price. The other factors that we look at in forecasting the Nanaimo real estate market include days on market, number of transactions, and the number of new listings introduced to the market.
On average, properties that sold in October stayed on the market for one week longer than September. With the average days on market increasing from 35 to 42 month over month the evidence shows that Buyers aren’t acting with the same urgency as recent years. As homes stay on the market longer there is less activity and showing requests and Sellers are having to decrease prices to reengage with the market. There are still properties on the market that are selling very quickly with the quickest property sale in Nanaimo during the month of October being 7 days and the longest being 168. This goes to say that not every property is taking longer to sell, but that the market as a whole is moving inventory slower. This is an important statistic to factor into market forecasting, but it still doesn’t explain the increase in the average sale price.
Arguably the most accurate statistic to forecast the market without factoring in other metrics is to monitor the number of transactions and new homes on the market. This data allows us to look at the market for any given period and be able to compare daily, weekly, monthly and annual data and determine whether the amount of inventory that we have is enough to feed the demand. With the right calculations, comparing the sales and inventory data will determine the months of inventory which can then be used to look at how much excess inventory we have, if any.
More inventory creates more choice for Buyers and in times of higher months of inventory the days on market typically stretches longer as Buyers are looking at more properties, booking second, and sometimes third showings, before being ready to write an offer.
The amount of inventory introduced to the market every month has stayed pretty consistent throughout the fall months. In October Nanaimo had 156 new single family home listings which is down 19% from a year ago. Along with this decrease the number of transactions decreased by roughly 7%. These decreases caused a spike in the months of inventory month over month. In September we have 4.4 months of inventory and October had 6.2. Again, this is an example of a time that we would typically see prices start to fall as we have more supply than demand. With the typical indicators pointing to a decrease in the real estate market and the average price still increasing, we need to evaluate every sale to see where this increase comes from.
Upon analyzing all of the transactions in the Nanaimo real estate market for the month of October, it becomes evident that the reason for the increase in average price is attributed to the current economic climate outside of the real estate market. What we are seeing is while the number of sales was down this shifted the market to a majority of homes being purchased at higher price points. Where the economic climate plays into this is that Buyers at the lower end of the market are being priced out by higher interest rates and are either stopping their search for a new home, or are waiting for more homes in the less than $700,000 range to come on the market. Buyers with a higher net worth and liquid assets aren’t getting squeezed as much by interest rates as they are typically coming into their purchase with higher down payments or equity from their previous home and this is resulting in the market changing from the majority of homes being sold in $800-900 to the $1-1.25 million price point.
With this shift in the market and less home being sold in the lower price points, an increase to the average price is to be expected and months like these are a great reminder that while the average price can be an important value to look at, it is not always the best indicator of where a market is heading.
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