Tuesday, May 5, 2009

Condo Flop

About a year ago 89 condos went on the market in the Texada development in North Nanaimo. As of today, only 25 have sold which means that 64 are still left on the market. In normal times all of them would be sold by now. Being stuck with all of these condos is a real burden for the developers. Since people are living in some of these condos, a strata is formed and they must pay 64 strata payments each month. They also must pay property taxes to the city. Let's assume that the average strata fee is $200 and property taxes are $125/month. That is $325x64 which is about $21000. Over a year period (being generous cause some have sold) that equates to $250000. If they are also borrowing money from the bank to finance the projects, they are taking a hit on that. Recently they reduced prices on all the condos by ~10% so we will see if sales start to pick up.

In April only 11 condos sold out of 188 on the market (It appears the Texada ones got delisted end of month so really there are about 250+). Clearly this is a bigtime crash.


Monday, April 6, 2009

Back to 2007 price levels?

With the recent article in the Nanaimo Daily News stating that we are only down 3% (of course we aren't), it was time to take a look at how far back price levels have fallen. Due to low levels of sales in some months, the average can very greatly from month to month. It just so happened that the YOY decline for March was only 3% due to statistical variance.

Here is a look at the average and median monthly prices since the beginning of 2007:

Average Median

J 309 296
F 306 302
M 329 324
A 325 308
M 346 327
J 333 326
J 352 333
A 346 335
S 360 345
O 367 360
N 364 365
D 377 365
J 360 357
F 371 358
M 343 335
A 373 356
M 363 350
J 372 362
J 364 343
A 373 365
S 354 343
O 373 350
N 379 372
D 365 338
J 348 334

F 326 310
M 334 320

Source: VIREB Statistics

From September 2007 to August 2008, the average was never below 360 and the median didnt go below 343, except for March 2008 were the numbers were 343/335 respectively. Using the YOY statistics, we get a decline of 3% for avg and 4.5% for median. This is due to the fact this month was a statistical irregularity, since it is way below all the other months around it. Averaging the average price of the first 3 months of 2008 and 2009, we get averages of 362 and 336, which signifies an average price drop of 7%. The average of the median prices for the first 3 months of 2008 and 2009 drops from 350 to 321, or a fall of 8%.

Prices were fairly stagnant in 2008 but in 2009 we are starting to see the prices reach lower levels. Sections in red indicate were current price levels have fallen back to. It is possible to say prices are back to 2 years ago pricing. If someone purchased 2 years ago, they likely would be in a break-even or losing position depending on realtor fees and equity gained. Since sales are continuing to be dismal and inventory is still ballooning, expect further price declines. How far back will prices fall?

Thursday, January 8, 2009

December Stats

Here is an article in Nanaimo Daily News about Nanaimo's real estate market toward the end of 2008.


Housing sales fell by almost 50% last month in Nanaimo, and real estate prices appear to be edging down as a result.
The Vancouver Island Real Estate Board's December sales figures show 43 units sold, compared to 83 in the same month for 2007.

The prices already are edging down due to slow sales. The List Price/Sale Price ratio for houses was 91% in December. This means that the average house sold for 9% off of the listed price (It may even have been listed for higher previously), meaning that a 400k listed house would have sold for 364k. Surely there are people out there who are smart enough to forward offers of 15% off list price.

Sales figures alone don't tell the whole picture. There were 512 active house listings and only 43 sold. This means only 1 out of 12 houses sold so any one house has about 8% chance of selling. Only 17 out of 341 Condo/Townhouse listings sold. That is about 1 out of 20 with a 5% chance of selling.

Realtors are watching Nanaimo's real estate inventory grow, and a resulting affect on selling prices.
"We're seeing prices change but likely that house that didn't sell for $600,000 last year was probably overpriced," said Nanaimo realtor Jim Stewart.
Buyers and sellers are witnessing market forces at work. As the number of homes for sale rises, it sways market conditions in favour of home buyers, pushing prices down.

The very few houses that are actually selling are selling at a discount. Many sellers still have too high of expectations and won't lower their asking prices or price below competition to get it sold. They are chasing the market down. If the current conditions continue, there will be massive supply come spring, forcing sellers to cut prices even more. How about a strategy of monthly price reductions instead of waiting 2 or 3 months?

Stats available here: http://www.relocationbc.com/stats/08Dec/NanaimoDec08Graphstats.pdf

Friday, December 19, 2008

Months of Inventory

Supply has shot up in recent months. In November this year, there was nearly four times the inventory of the previous November. There is a massive buildup of Condos/Townhouses as only 7 sold out of 422 this November compared to the previous year of 35 sales. Texada and Regency Vista and others are attracting few buyers since being listed in the spring/summer, and we have yet to see any huge price decreases. Perhaps the developers are waiting for the buyers to return. But will they return? Currently there is an economic downturn and people are finding it harder to get financing these days as well as being unable to put 0% down on a house.

Friday, December 12, 2008

Is it a good time to buy?

Well...here goes the first post of this blog. I came across an article in the Nanaimo Daily News about real estate at:

There are a few points I'd like to discuss:

With financial institutions lowering mortgage rates to levels not seen in decades, it may just be a perfect time to purchase residential and investment real estate.

Speaking in terms of your monthly payments, you are saving a lot of money over time if your interest rate is lower. On a 300k mortgage over 25 yrs, the savings are almost $200 a month for each % drop.

Don Fauchon, a mortgage broker with Invis in Nanaimo, said "it is an excellent time to invest in real estate here."
In November of this year, 50 homes were sold in Nanaimo compared to 104 during the same month last year.

When sales drop by that staggering amount, it affects a lot of people. Brokers rely on these transactions or they won't make any money. It is in the best interest of a mortgage broker to tell people it is a good time to buy. It probably always is a good time to buy for them since money and a job is on the line. Imagine clients sitting at their desk and the broker ever saying "Now is a bad time to buy, you better hold off on that".

But according to statistics from VIREB, more homes were sold in Nanaimo during November than any other VIREB reporting area.

Of course more houses will sell in Nanaimo each and every month! This is not a new trend by any means. Nanaimo has a lot of more people and inventory than any of the other areas. Perhaps this sentence was included to make Nanaimo look like it is more desirable than other areas.

Matthews said some homes in Victoria and Vancouver could drop in price by as much as 30% to 40% and homes would still be more expensive than equivalent homes in Nanaimo.

Nanaimo boomed just like those two cities did during the escalation of prices. Why would it not join them on the way down? This should read "and homes would still be more expensive than equivalent homes in Nanaimo at current prices." Take a look at what is happening in Kelowna, it is literally a meltdown.

Over at Realty Times, Rob Grey gives us an honest look at the big picture

On a day to day basis watching the market intently I have viewed downward price adjustments averaging over 8% since Spring '08. Buyers have a large inventory of homes from which to choose with sellers demonstrating much more movement on price both in the form of price adjustments and additional movement on price during negotiations. This latter statistic is based on the average selling price being 97% to 98% of the current list price - this stat was common during the 2003 to Spring 2008 markets; as of October '08 the selling price was 94% of list price.

Let's use his statistic of 8% downward price pressure until October. Let's say your home would have fetched 400k in the Spring. It should be worth about 370K these days for a loss of 30K. Take a look at property listed during the summer months that is still for sale, it will have dropped considerably and many homes still won't sell while there is a year's worth of inventory. And some people are still saying "it's the best time to buy". Let's have some discussion everyone!