Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets.  This week: is the housing market about to crash based on the latest data? 

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RALEIGH – Homebuyers may be feeling spooked, as purchasing power has plummeted since January 2021, a new report says.  And fears that a housing market crash is coming continue to affect the behavior of buyers and sellers in the Triangle’s housing market.

According to an analysis of real estate market data from national brokerage firm Redfin, homebuyers have lost 29% of their purchasing power, on average, since January 2021.  That’s as home prices rose for much of 2021 and 2022, and as mortgage rates have increased dramatically in 2022, climbing to a typical rate for a 30-year fixed mortgage set at 6.66% as of the latest data from Freddie Mac.

Housing market about to crash as rates rise

Freddie Mac data, chart

Why some are screaming housing market about to crash

“Mortgage rates well over 6% are spooking homebuyers,” said Redfin Deputy Chief Economist Taylor Marr. “Sellers are pulling back in this market, but buyers are pulling back even more.”

Buyers are initiating far fewer searches for “homes for sale,” for one, with North Carolina searches for the term “homes for sale” falling nearly 17% year-over-year according to Google Trends data.  And, a report from the Mortgage Bankers Association found that mortgage loan application volume dropped 14.2% last week compared to the prior week, on a seasonally-adjusted basis.

“Mortgage rates continued to climb last week, causing another pullback in overall application activity, which dropped to its slowest pace since 1997,” said Joel Kan, the associate vice president of economic and industry forecasting at the association.

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

A changing Triangle real estate market

And a buyer pullback may be changing the Triangle’s real estate market.

Preliminary data from Triangle Multiple Listing Service, shown below, indicates that the median sale price of homes in the region have fallen from highs observed earlier this year.

Across the entire Triangle Multiple Listing Service (TMLS) 16-county region, the preliminary data shows that in September 2022, the median sale price was $401,095.  That’s down from a prior high of $421,757 in June 2022, and a drop from August 2022, when the median home sale price was $405,000.

In Wake County, where the median sale price of a home was $492,490 in June, the preliminary data shows that in September, the median sale price was $468,000.

Still, year-over-year price appreciation between September 2021 and September 2022 remained in the double-digits, with Wake County increasing by 14.1% and the entire region increasing by 13.6% between September 2021 and September 2022.

When the Federal Reserve moved to raise interest rates, the mortgage markets responded as well, and mortgage rates increased quickly multiple times this year.  That’s changed affordability for homebuyers, said Dr. Gerald Cohen, the chief economist at the Kenan Institute.

“Housing affordability,” said Cohen, “is becoming increasingly [a] challenge by higher prices [and] rents and then becomes even more so with higher mortgage rates.”

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

Is the Triangle housing market about to crash?

Some real estate agents have told WRAL TechWire that what we’re seeing is not a housing market about to crash but rather a return to the seasonality typically observed in the Triangle.

And new data from ATTOM Data Solutions shows that, in North Carolina, the best time to buy a home may be during the fall and winter months.

While nationwide, buyers receive the best price premium when they close on a purchase in October, homebuyers in North Carolina fare best when they close in January, the ATTOM data show.

But not necessarily in the Triangle.

“It’s still a hot market, with low inventory, and lots of people moving here,” Seth Gold, a REALTOR licensed real estate agent and broker with Bold Real Estate and Governors Club Realty told WRAL TechWire earlier this year.

Best time to buy

In the Durham-Chapel Hill metropolitan statistical area, the best time to buy a home at value is in September, ATTOM data show.

The ATTOM analysis studied nine years of sales data, through 2021, and measured the sale price of homes against an automated valuation model’s valuation at the time of sale, looking for the days and months where homes were bought for the best value and at the highest premiums.

In the Durham-Chapel Hill MSA, September saw a price premium of 0.2% historically, compared to the average price premium of 3% across the entire year.  But the data shows that during the other fall and winter months, homebuyers may find good value, as well, as October, November, December, January, and February all fall below the average across the year.

The same was observed in the Raleigh metropolitan statistical area, which includes Wake, Johnston, and Franklin Counties⁠—unless you’re buying a home in November.  In Raleigh, the best time to buy a home is in February, based on the ATTOM data, with a premium of 3.1% compared to a 4.5% premium on average across the year.  But in October, the premium is 3.2%, the data found, and in November, it is 4.6%.

Still, the best time to buy a home is when you’re ready, willing, and able to purchase that home, Gold noted.  When you are ready, no matter the market, buyers must be prepared to strike, he said.

Triangle real estate market is slowing but agents warn it may just be seasonal

Inventory climbing – but contracts to buy falling

One reason that home sale prices may be falling is that homebuyers are facing affordability challenges.  And even though available inventory is growing, according to the preliminary data from Triangle Multiple Listing Service, the number of homes under contract and the number of closed sales both fell in September compared to a year ago.

“It will take a few months before the prices of closed sales start to reflect this shock to the market,” said Marr.

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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.”