More than enough demand in Triangle housing market, even as mortgage rates rise again

RALEIGH – There are still more than enough buyers to keep the Triangle’s real estate market moving at record speed, a new monthly report from Zillow concludes.

That’s despite rising mortgage rates, bidding wars, high median home sale prices and a record low measure of housing affordability.

Zillow’s analysis found that in the Raleigh metropolitan statistical area, which includes Wake, Johnston and Franklin Counties, the typical home is now worth $433,065.

That’s up nearly 35% from last year. Nationally, the typical home is worth 20.6% more than it was one year ago, the Zillow analysis found.

Another indicator that has increased? Mortgage rates, which began the year averaging 3.11% for a 30-year fixed mortgage and as of this morning are 5.11%, according to the latest data from Freddie Mac.

“I’ve been in the mortgage industry for 29 years, and I’ve never seen something like this,” said Jon DeHart, a Durham-based branch manager at Movement Mortgage. “Mortgage rates tend to stabilize over time,” said DeHart, but since Jan. 31, they’ve basically only increased. The Freddie Mac data shows that, for the week ending on Jan. 27, the average rate for a 30-year fixed mortgage was 3.55%.

When taken together, Zillow found, rising home values and mortgage rates have increased the monthly payment on the typical U.S. home 38% higher than it would have been a year ago, assuming a 30-year fixed rate mortgage with a 20% down payment.

“Higher mortgage rates were anticipated this year, but the speed of their rise has been breathtaking,” said Jeff Tucker, Zillow senior economist, in a statement releasing the latest report. “Record low mortgage rates had been an affordability lifeline during the pandemic, keeping monthly payments in check even while prices climbed quickly.”

It’s more expensive than ever to buy a Triangle home, and interest rates are rising, too

Housing inventory

Home prices in the Triangle may continue to rise, despite increasing mortgage rates, even if nationally there begins to be a trend toward market equilibrium, based on Zillow’s analysis, which suggested that an increase in available housing inventory could signal the beginning of a more balanced market.

That’s because, while inventory rose 11.6% nationwide in March, there were far fewer homes coming on the market for sale in the Triangle region.

“In the housing market, we have an interesting intersection of high demand and low inventory,” said DeHart. “In the decade between 2010 and 2020, there were the fewest number of housing starts in the country since the 1930s.”

DeHart noted that, in the 1930s, there were 5.4 million housing starts. In the decade between 2000 and 2009, said DeHart, there were 27.1 million housing starts. But in the decade between 2010 and 2019, there were only 5.8 million housing starts.

Compared to last March, the latest data from Triangle Multiple Listing Service (TMLS) shows that inventory fell 29.3% in March 2022 across the entire region.

The decrease in available inventory is even more dramatic in Wake County, as the TMLS data shows a decrease of 38.3% in inventory in March 2022 compared to March 2021. In January 2022, inventory was 50% lower than in January 2021.

By the numbers, 1,255 homes came on the market in March 2021 in Wake County. In March 2022, just 774 homes came on the market.

Homes are also selling faster than a year ago. In Wake County, homes stayed on the market for an average of nine days in March 2022, down 30.8% from a year before, when homes stayed on the market for an average of 13 days.

But there is a silver lining in the data, as the Zillow analysis noted that there was an increase of 12.4% in inventory in March 2022 compared to February 2022.

“I think inventory will slowly increase,” said DeHart. “There is still a high demand, and it is still a great time to buy.”

But the market isn’t likely to normalize to a balanced market soon, DeHart said. “Until the inventory corrects, the demand is still going to be there.”

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Median home sale prices at record highs

That means median home sale prices may continue to increase in the region.

“March was the biggest test yet of whether enough buyers can meet the new asking prices to keep home values growing at a record pace, and the answer was ‘So far, yes,'” said Tucker. “There will be a point when the cost of buying a home deters enough buyers to bring price growth back down to Earth, but for now, there is plenty of fuel in the tank as home shopping season kicks into gear.”

According to the latest TMLS data, median home sale price across the entire 16-county Triangle region the group services was $394,950 in March 2022, up from $317,950 the year before. That’s a one-year difference of $77,000.

And in Wake County, the median sale price has increased by nearly $90,000 in one year’s time. Last March, the median home sale price in Wake County was $360,500. In March 2022, that had increased 24.8% to $450,000, an increase of $89,500.

While prices increased by 24.2% in the region between March 2021 and March 2022, affordability has decreased by 23.3%, according to TMLS data that tracks housing affordability. While this measure of affordability was 108 in March 2021, in March 2022, the index reached another all-time low of 82.

“I think that the Triangle’s housing market will only start to normalize when large institutional investors reduce their purchasing in the area,” said DeHart. “That’s my personal opinion.”