Take a deep breath and repeat after me, the real estate market is not crashing.
There seem to be murmurs of fear, disquiet, and even panic around the fact that the market we saw in February is no longer the market we are seeing today. Here is what you need to know:
In February and March, the real estate market went nuts. In Airdrie, it was typical to see 10 or more offers on a detached home within two days of it hitting the market. Some homes were selling $80,000 or more over the list price with no conditions. Speculators from out of province were writing offers sight unseen, with no intention of even living in the home. The result of this was that the benchmark sale price rose nearly 22 per cent over last year's numbers in the first quarter of the year.
In the first three months of 2022, if you wanted to list your home, your Realtor®️ would have suggested a list price based on sale prices from the last three-to-six months. After March of this year, the strategy evolved to list homes closer to what comparable properties had sold for in the last 30 days or so (20 per cent higher on average). In plain English, the listing price of homes went up significantly in April.
When that happened, guess what? The number of multiple offers slowed. Some homes started to take longer to sell. People started to say the market was cooling, and panic started to ensue.
But does that really make sense? What do you think would happen if a home was listed 20 per cent lower than the comparables? We would see multiple offers. In fact, even at higher prices, we are still seeing them.
Is it as crazy as February? No. Is the market crashing? No.
But what about interest rates, you ask. Interest rates are rising. We know this and I think most of us understand that an interest rate of 1.5 per cent is not sustainable as an economic model. It's inevitable that rates need to rise again (even though no one likes it). A lot of people are worried about rates rising really quickly and ultimately being stretched too thin. This is a fair concern.
A few years back, the government decided to institute a policy that all high-ratio mortgage recipients had to qualify at the minimum Bank of Canada rate (it's currently at 5.25 per cent and it's subject to change every year). This policy is called a mortgage stress test and it means that a person's income needs to be high enough – and their existing debt low enough – to be able to pay down their mortgage at that higher rate.
Theoretically, it means that most people with high-ratio mortgages since 2018 have been vetted for a scenario such as the one people currently fear and thus, are somewhat insulated from rising rates.
The kind of growth we Albertans saw in 2022 does not compare to the craziness in Ontario and British Columbia. In Burlington, Ontario, I had a friend looking to purchase a bungalow. Many times she and her husband saw homes they loved sell for $400,000 over asking. The first home they wrote on, they offered over $200,000 above the asking price, and the seller declined. They eventually succeeded in securing their next home with an offer that was again $200,000 over the list price.
The scale is different here. We didn't experience that kind of insanity and it makes me believe that although our recent highs were not like other provinces, nor will our lows be.
Home prices in Airdrie are still extremely affordable in comparison to commuter cities in other provinces. We have access to great schools and pathways. We are also made up of strong and resilient people. We have diverse local businesses and a supportive community. To top it off, it's a short commute to Calgary.
If prices were to decline in Airdrie, people would flock here...and push the prices back up. It's affordable and beautiful. It's why we're attracting so many newcomers and it's why people stay.
Natalie Berthiaume is an Airdrie-based Realtor®️ with CIR Realty.