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.

http://www.relocationbc.com/statistics-vanisland.asp

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

2007
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
2008
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
2009
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.

http://www.canada.com/nanaimodailynews/news/story.html?id=be718129-ebc3-4196-a732-bc7a88b6c399

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