CHARLOTTE – As sales of high-priced luxury homes dropped in the fourth quarter of 2021, the market for the most affordable residences increased nationwide, a new analysis of market data from Redfin found.
And in Charlotte, sales of the most affordable homes increased by 67.5% in the fourth quarter of 2021 compared to the fourth quarter of 2020. Meanwhile, the sales of luxury homes in Charlotte decreased by 21.4%, according to Redfin’s data.
That’s the second highest increase in the nation in the “most affordable” segment of the market, Redfin found, among the top 50 most populous regions in the country.
The most affordable homes are considered those in the bottom 5% of homes based on sale price within each market analyzed, while luxury homes are those sold within the top 5% of the market based on sale price, according to the study’s methodology.
In Wake County, 25% of residents struggle to find and secure a residence that would be considered affordable, according to a statement from the Wake County Board of Commissioners released in December 2021.
Booming market
“The market for homes at lower price points is booming for a few reasons,” said Redfin Chief Economist Daryl Fairweather. “Not only is there demand from workers who are now earning higher wages, but investors, who have an appetite for lower-priced homes, are buying up properties at record rates.”
That’s especially true in the Triangle, an ATTOM Data Solutions report found in 2021, as the sale of properties to institutional investors during the second quarter of 2021 were up by 234%.
Nationally, sales of the most affordable homes increased 11.3% year-over-year, while the sales of luxury homes dropped by 16.3%.
Yet, across all affordability tiers nationwide, home sale prices are up by double-digits. The sale price of luxury homes has increased 17.3% while the sale price of the most affordable homes in the market are up 10.9% compared to a year ago, the analysis found. Of each of the tiers, the middle 30% of the market, which Redfin analysts described as “mid-priced,” sale prices increased 18.8%.
And there are no signs of a slowdown now that a new quarter and a new year has begun.
A second Redfin report released this week describes January 2022 as “the hottest January on record” and found that 45% of all homes that come on the market become placed under contract within two weeks. That’s due to the continued low-inventory environment, with the supply of homes for sale remaining at or near all-time lows, the report found, including compared to January 2021.
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Outpacing national markets
Even as markets nationwide have seen increasing home sale prices and low inventory, markets across North Carolina are outpacing the national averages.
That includes real estate markets like Charlotte and Raleigh, which are expected to continue to outperform the national averages when it comes to the rate of increasing home prices, said Nadia Evangelou, a senior economist for the National Association of REALTORS, in an interview with WRAL TechWire earlier this month.
Take Raleigh, for example, said Evangelou. “I expect housing to outperform in Raleigh in 2022 compared to nationwide.”
That’s because there’s “strong job growth,” noted Evangelou, with more jobs in the region, and more job openings, compared to early 2020. Evangelou said that there are about 2% more jobs in the Raleigh market than there were in March 2020.
“There are great opportunities for homebuilders to increase supply even further and more people to buy homes as this area experienced net migration gains during the pandemic,” added Evangelou.
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Impact of potential interest rate increase
Despite soaring home valuations and a forecast from Zillow that expects the Raleigh market to be the third-hottest market of 2022, some economists remain concerned about the impact of interest rate increases on housing markets.
“As rates will rise even further in the following months, we expect housing market to settle down in 2022,” said Evangelou. “More buyers will be priced out.”
The typical mortgage rate on a 30-year-fixed mortgage was 3.55% for the week ending on January 27, the highest level since March 2020, though flat compared to week-over-week measures.
Yet mortgage purchase applications actually decreased 2% week over week the prior week, ending January 21.
But there hasn’t yet been an observable, “significant impact on homebuying,” said Evangelou. “On the contrary, although mortgage rates rose 45 basis points in less than a month, purchase applications increased as many buyers rush to buy before mortgage rates rise even further.”
That means that, for the foreseeable future, the real estate market will still benefit sellers, said Evangelou.
