Nanaimo's October Market Update
Year over year, September of 2023 saw a 55% increase in the number of transactions. Despite this surge in sales, the average home price decreased 3.4%. Typically, a decrease to the average home price will occur when the market slows down and there are fewer transactions meaning that we have less demand. This month we take an in-depth look at other factors that are affecting the Nanaimo housing market and there may be more to it than you think.
Mortgage rates have been a topic of discussion for some time now and has been one of the major factors that we hear people talking about as a reason for the decline in real estate. Higher mortgage rates have certainly attributed to a lower home price by affecting the amount of a mortgage that a potential Buyer is qualified for, however, looking at the bigger picture, we find that mortgage rates aren’t the main reason for the current price decline in the Nanaimo real estate market.
Looking at mortgage rates from September of 2022 to this year, there was a decline from an average rate of 6.14% to 5.59%. This is a significant drop in interest rates, but if we look at the cost of borrowing per month, assuming a 25-year mortgage, the theoretical difference in the cost of borrowing per $100,000 is $32.51. This means that on a million dollar mortgage, the annual savings is roughly $3,900. This means that homes are that much more affordable this year than last year, yet the average price still declined. This data shows that there is more to look at in the current real estate market to determine this change in value. With the Bank of Canada expected to hold interest rates it is likely to see further increases in demand.
The amount of inventory introduced to the Nanaimo real estate market in September 2023 was almost identical to that of September 2022. Without looking at inventory that was sitting on the market from previous months, this would suggest that the average price should be increasing. The difference from last year to this year is that we are coming from a period where there has been more inventory on the market.
Compared with periods throughout the last year where we had almost identical sales to inventory we should see prices increasing, but this inventory that hasn’t sold in previous months is adding to the amount of choices for Buyers and removing the scarcity from the market that was relied on so heavily for the past few years.
202 listings were introduced to the Nanaimo real estate market in September 2023, bringing the number of listings up to 372 – the highest since October of 2022. September of 2022 there were 428 active listings, and with 56 sales, this resulted in 7.6 months of inventory. September 2023 with 87 sales had a months of inventory of 4.3. While the months of inventory had decreased from the same period last year, it’s important to note that the months of inventory had rapidly decreased starting in March and continuing into the summer months and has started to climb back up and that because of the number of transactions increased this will have a bigger impact in decreasing the months of inventory.