The real estate market in Nanaimo is heating up beyond expectations as we move into late January. We are seeing a LOT of bidding wars again, more so than at any point in 2020, I believe. I’ll quantify that a bit below.
First, let’s quickly summarize the 2020 statistics for single-family detached homes in Nanaimo:
- 12.88% more homes sold in 2020 vs. 2019 (1306 vs. 1157)
- The average sale price increased 8.82% - from $562,175 in 2019, to $616,588 in 2020
When the pandemic was declared in March 2020, there was speculation of a general market crash and many people thought that home prices would fall. Activity slowed through April, but then it all picked up and it barely slowed down since, even through the Christmas season. Most agree that the market’s buoyancy is the result of many things including the following:
- Real estate being seen as a “safe investment” even when other markets show volatility
- Federal stimulus payments keeping confidence high
- Vaccine rollout keeping confidence high
- People reconsidering their priorities, leaving the bigger cities and wanting more space for gardening and survival bunkers(!)
Indeed, 12 out of 21 of my sales in 2020 involved buyers from somewhere OFF of the island. Three of my sales involved Canadian citizens moving back from the United States.
Bidding Wars on the Rise
Agents are reporting a rise in the number of bidding wars and I can corroborate that fact in my own practice. When my buyers ask me about a property that’s been listed more than 3 days, chances are about 50% that it’s already under offer!
This is creating a lot of tension. Yesterday my buyer client asked to view a home that was just listed and which hadn’t been viewed yet. As of this morning, the seller had already accepted a bully offer*, sight unseen, at $60,000 over asking price, without any conditions. My buyer was furious because we were told that offers wouldn’t be reviewed for several days. However, there is no rule which says a seller can’t accept a bully offer. Agents and their buyers are scrambling to see properties as quickly as possible.
*When a seller announces they will review all offers on a certain date, and then a buyer submits an offer before that date, it is referred to as a “bully offer”. Bully offers are usually very competitive, or else they would be ignored while the seller tests their property on the open market.
How BIG are these Bidding Wars?
Clients often ask me how high the bidding wars will go. It’s a question I’m reluctant to answer because I don’t want to scare my buyer into bidding unnecessarily high; and yet I also don’t want them to miss out. A lot of the buyers creating demand in January are the buyers who lost every bidding war they entered since summer of 2020.
So I pulled a few stats. I queried the MLS for all properties matching these criteria:
- Nanaimo only
- Single-family detached homes (stratas are very relevant here but I didn’t want a huge data set)
- List price up to $900k
- Sold in the last 60 days, and/or currently pending sale (this means I included a lot of properties which "sold" before 60 days ago, but which are still pending, i.e., still waiting to complete)
There were 172 results, and I counted 66 that sold over the asking price by at least $2,000. (I was careful to omit the new construction sales where GST was rolled into the price, giving the impression of selling over asking.)
But HOW MUCH over asking price did they sell? Here’s a graph which shows that bidding wars are pushing prices well above asking, with many buyers offering more than $50,000 above list price! [Feb02 update: Yesterday a home listed for $599k sold for $755k.]
Clearly there are some high rollers inflating our property values – it begs the question: Is there a correction in the near future? I wish I had a crystal ball. All I can say is that buyers should be careful not to over-extend themselves.