Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets, including tracking mortgage rates as of today and an increasing rate of foreclosures, topics of this week’s reports.  WRAL TechWire reporter Jason Parker, the author of the report and a licensed real estate agent in North Carolina, works with journalists from WRAL.com to track and present market data and report on how people are experiencing the region’s changing real estate markets.  These special reports will use the category tag “Triangle Real Estate” or “Triangle Real Estate Market.” 

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RALEIGH – Mortgage rates as of today are at the highest levels since 2008, according to the latest data from Freddie Mac.  But for Triangle homebuyers, just because mortgage rates are high doesn’t necessarily mean that the Triangle real estate market will see price depreciation, a mortgage professional told WRAL TechWire on Thursday.

Average mortgage interest rates for a 30-year fixed rate mortgage rose to 5.89% in the prior week, according to a weekly survey of the primary mortgage market conducted by Freddie Mac.

Mortgage rates as of today at highs not seen since 2008

One-year of data on mortgage interest rates. (Data: Freddie Mac. Image: Freddie Mac.)

That’s more than three percentage points higher than the average mortgage rates a year ago, and nearly a percentage point higher than a month ago, according to the data.

The last time that mortgage rates for a 30-year fixed rate mortgage were this high was in November 2008, when rates were 6.04% on average.

Here’s what’s happening.

Triangle homebuyers face uphill climb made tougher by rising prices, mortgage rates, low supply

Why do mortgage interest rates increase?

Simply put, when there is uncertainty about the macroeconomic climate and its future, mortgage interest rates tend to increase, said Jon DeHart, a mortgage loan officer with Movement Mortgage in Durham.

And, last Friday, ahead of the Labor Day holiday, the latest data on the employment situation in the U.S. economy from the Bureau of Labor Statistics was not what many economists or analysts expected, showing a changing labor market and shifting economy that could move the Federal Reserve to again raise interest rates at its next meeting later this month.

“The bond market had a bad day on Tuesday,” said DeHart.  “Plus, there is still indications that there is about an 80% chance that the Federal Reserve will again raise interest rates by 75 basis points.”

A 75-basis point increase in the prime rate equates to an increase of 0.75%.  When the Federal Reserve raises interest rates, mortgage rates may increase as well, though lenders may also raise rates in advance of an official determination by the Federal Reserve in expectation that rate would rise.

Analyst: Rising mortgage rates ‘shut off’ refinancing but don’t mean a real estate market crash

Impact on Triangle homebuyers

The available data, including preliminary information from the Triangle Multiple Listing Service, shows that there’s been a bit of a slowdown in current purchase rates as well as in the median sale price of homes in Wake County and in the Triangle. The number of homes for sale is increasing but the two factors don’t yet mean that homebuyers are in a strong negotiating position for all homes on the market.

“Technically, we’re still in a seller’s market, as we have less than three months of inventory,” said DeHart.  “But the pressure isn’t as great to make an offer immediately.”

And while the Triangle housing boom may be over, there is not a housing market crash expected.  Rather than rapid, double-digit home price appreciation in the Triangle real estate market, DeHart expects to see the region return to price appreciation consistent with historical data, somewhere between 1% to 3%.

“We’re still seeing strong demand for housing,” said DeHart.  “It seems that the average buyer is becoming more accustomed to a mortgage interest rate that starts with a 5 than with a 3,” he said.

These four factors are changing the real estate market in the Triangle

Affordability concerns persist

Despite ongoing affordability concerns for homebuyers, particularly first-time homebuyers, who faced a real estate market this spring where it was virtually impossible to compete for available homes, there could be opportunity this fall.

That’s because sellers are no longer demanding high due diligence fees due to current market conditions, said DeHart.

Still, the latest available data on housing affordability from Triangle Multiple Listing Service, as tracked in the housing affordability index, shows that housing affordability hit another all-time low in July 2022 with an index score of 65.  The prior year, the index was 98, a drop of 34% year-over-year in affordability.

In August 2021, the median home sale price in the Triangle, according to TMLS data, was $351,000, and typical mortgage rates for a 30-year mortgage were 2.87% at the end of August 2021, according to the Freddie Mac data set.

At the median price of $351,000, with a 20% down payment, and an average mortgage interest rate of 2.87%, homebuyers would expect to pay $1,164 monthly toward the mortgage principal and to pay the mortgage interest.

But at the median price of $405,000, as measured by the preliminary data from TMLS in August 2022, with a mortgage interest rate of 5.89%, where rates moved to recently, with a 20% down payment, borrowers would expect to pay $1,920 per month.

That’s an increase of $756 monthly, or an increase of nearly 65% year-over-year.

Realtors say it’s nearly impossible for first-time buyers to find a home across central NC

Why first-time homebuyers may return to the market

But now, said DeHart, even though mortgage rates as of today may be higher, demands for sellers for high due diligence payments or high down payments from buyers have alleviated.

“That allows first-time homebuyers to participate in the Triangle’s real estate markets without huge down payments or high due diligence fees,” said DeHart.  And homebuyers don’t necessarily need to gather 20% of the purchase price for a down payment, either, as there are loan products available for qualified homebuyers that allow down payments as low as 3.5%.  And there are also down payment assistance programs available in the Triangle, as well.

Triangle housing boom is over as price appreciation slows, days to sell increase