December 2023 Real Estate Update
It’s looking as though we’ll have a white Christmas after all! With colder weather arriving in December, there has been a slowdown in the real estate market. In June, a home would be sold in a weekend. Now, it can take a month (and sometimes even longer) for a home to sell. There are a variety of reasons why this is the case.
The Slower Season in Upon Us
The most obvious reason for a slowdown is the season. December and January are historically quiet months. Generally, people don’t like to move in the winter; snowbirds are out of town enjoying a warmer climate and many people don’t like upheaval during the holidays.
Possibly Decrease in Mortgage Interest Rates
A secondary reason for a slower market is the current interest rates. With talk of interest rates coming down, a lot of people are opting to wait until the spring to see if they will be able to secure a better rate.
Another Interesting Factor
A third factor, in my opinion, is the most interesting. This is the fact that many homes that have sold recently, have had one previous offer on the property that has fallen through. Let me explain this. When a home goes on the market, it shows as available on Realtor.ca. When an offer is accepted on the property and it goes pending, Realtors will be able to see the status change on their internal database, but the status will not change on Realtor.ca. If the deal falls apart, the property status is changed back to Active. By the time a second offer comes in and again goes through the condition period before selling, quite easily a month may have passed.
The public’s perception of a property that has been sitting on the market, may be that it is overpriced. They may also believe that the market is slowing down. Interestingly, we can now see that these two assumptions may be incorrect. Out of curiosity, I ran the numbers. In the last 30 days, 70 detached homes sold under $700,000 in Airdrie. Of those properties, 23% of them had an offer that collapsed before successfully selling. With a percentage this high, there is no doubt that it is affecting people’s perception that the market is cooling.
So why are offers collapsing during the condition period? Many of them are due to buyers not obtaining mortgage financing, although a failed home inspection can also be a reason. For this reason, many listing agents are now asking for proof of a pre-approval with a written letter from a respected lender. This aim is to ensure only qualified buyers are tying up properties rather than speculators.
As we enter 2024, I think we will see the prime rate start to come down, which will ease the strain on people with variable-rate mortgages. With warmer weather and stricter requirements from Realtors to see pre-approval letters, I expect we will see a very robust spring!