March 2023 Nanaimo Market Update
The average single family home price in Nanaimo held steady from January to February. February saw more buyers return to the market. While this resulted in a 30% increase in transactions compared to January, this is still a decrease of 40% from February of last year. The number of homes listed in February decreased by 9% month over month and 37% from February 2022.
In this month’s market stats update we will look at what these changes in supply and demand could mean for the Nanaimo real estate market as we head towards the spring market.
Historically in the Nanaimo real estate market, we experience an increase in new listings from January to February. In only 3 of the last 10 years have we seen a month over month decrease in inventory in February. On average over the last 10 years inventory has increased by 20% from January to February, compared to this year where there was a 7.75% decline in new listings. A contributing factor for this decrease in inventory is that sellers have been following the buyers market instead of leading the market. After home owners saw the demand for real estate during the pandemic there started to be an increase in inventory. When inventory started to get closer in line with the amount of buyers in the market, homes had become more unobtainable for buyers With the Bank of Canada expected to pause the rate hikes that have been on the rise since March of 2022 there is anticipation to see what announcement they make on March 8th.
As reports started to come out that interest rates were going to skyrocket buyers had two different trains of thought: They need to purchase a home on a fixed interest rate before rate increases affects their mortgage affordability so much that they can’t qualify for the type of home that they were dreaming of, or that they were going to put their home search on pause to wait and see where interest rates were going. The statistics for our real estate market would indicate that there was a good majority of buyers that decided to wait to see where interest rates were going to go and have a better understanding of what they were getting in to. In making this decision buyers were also looking at market forecasts which were anticipating a 20% decrease in the housing market. When we look at where the real estate market is at today, the Bank of Canada is expected to keep interest rates the same in their next announcement, and average home price is down over 20% from the pandemic peak. This creates a perfect storm of buyers who feel that home prices have come down enough that they are starting their search back up again, and that the pause in interest rates could signal less aggressive rate hikes in the future and that they are ready to start looking again. A 35% increase in the number of new listings from January to February is evidence that more buyers are getting ready to come back to the market. While this increase shows signs of more buyers than January, this February still had fewer transactions than every February in the past 10 years.
Supply + Demand
With fewer transactions than what is typical for this time of year, there is a likelihood that this gets made up with a busy spring real estate market. While there is room for more buyers to enter the market as evidenced by previous years transactions, the question that remains is would there be enough inventory for a sudden surge of buyers?
Where the market we may be headed toward is different from the pandemic is that global uncertainty isn’t as high as it was. When the pandemic hit you had sellers that were worried about listing their home thinking that the pandemic would disrupt potential buyer’s work, making it harder for buyers to be able to make purchases. This resulted in some sellers pausing their move. When this happened, we had a substantial decrease in the amount of new listings so that when more buyers starting looking for homes, there was very low supply and it was being purchases almost as quickly as it could be listed. Once sellers realized that the market was starting to take off there was a mix of sellers that felt they couldn’t list their home because of how competitive the market for purchasing a home became. They were worried that if they sold their home they were going to have a difficult time being able to find a home that they would want to live in and be able to win in a multiple offer situation while also not having flexibility on completion dates because they weren’t going to have a place to live when the sale of their home completed. This kept some sellers out of the market instead of giving inventory a boost to meet the demand.
This time around, we have inventory that has been on the market longer meaning that a surge of buyers would eat into the amount of inventory available, but shouldn’t completely deplete the inventory currently available. This will help to bridge the gap between buyers and sellers so that sellers have the opportunity to see a bump in transactions and get their home prepared to sell. Looking at the months of inventory that has been available for single family homes in Nanaimo there is a distinct period from June of 2020 to April of 2022 where the we had less than 2 months of inventory. This meant that the real estate market wasn’t able to handle an influx of new buyers because there was no inventory available to them. When new listings hit the market, there was a lineup of buyers waiting to be able to compete in multiple offers. The current months of inventory means that we have a few months of breathing room based on current market activity.
This is something that can change drastically month over month because it all depends on how many transactions happen compared to new listings. If there are 100 new listings and only 75 sales, there will be 25 listings to start the next month. If we have the exact same transactions and new listings the next month, then we will have 50 listings left over for the third month meaning that the months of inventory is going up and we have more supply than demand which can start to bring down the real estate prices by increasing competition as well as creating a broader range of listings for buyers to look at. Instead of the mentality that buyer have to take what they can get, they feel that they can take more time with their home search and look at a few different homes over a longer period of time and not feel the pressure of viewing a home and then going right to the table to sign an offer. There is a fine balance to ensuring that there is enough inventory on the market, but ensuring as a seller that you are listing at the right time based on the among of home comparable to yours to make sure that the marketing of your home can be effective as possible to maximize your home value.