Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets. This week: The latest data on rents may show price of rents in Raleigh are stabilizing and why right now might be the best time to buy a house in the Triangle, especially for first-time homebuyers.
RALEIGH – First-time homebuyers discouraged by rising prices and intense competition are returning to the housing market, and now might be a good time to buy a house in the Triangle even with mortgage interest rates hovering near 7%. The market has changed. Here’s an example:
“Even though interest rates were higher, prices overall were falling more in our price range,” says Savannah Hopps of Durham. “We made an offer – under asking, unheard of earlier this year – and were under contract the next day before noon.”
Adds Courtney Brown, a licensed real estate agent with Hunter Rowe: “It’s not the market that it was, at all. Sellers are having to do more work now.”
Plus there are “buy-down” options from lenders to help lower costs.
It’s also a good time to check for incentives being offered by builders.
- REAL ESTATE RUSH podcast: Check out the latest episode.
This housing market may be good for first-time buyers
The latest data on homeownership from national real estate brokerage Zillow found that the share of buyers who are purchasing their first home has rebounded in 2022, following a drop in 2021.
“First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put,” says Manny Garcia, a population scientist at Zillow. “The flow of homes into the market is slowing, suggesting homeowners are likely comparing their current low mortgage rate to today’s rates and deciding not to move.”
Many Triangle homeowners who bought or refinanced in the last decade have locked in interest rates below 4%, with some owners with rates as low as 2.75% or even lower. Now, though, an average interest rate for a 30-year fixed rate mortgage is 6.94%, according to the latest data from Freddie Mac.
That’s why some current owners may be feeling spooked, and have decided not to make a move, right now, Garcia noted.
Rents still rising, but home price appreciation is slowing
In fact, the latest data shows that the price of rents rose twice as fast in Raleigh than they did nationwide between September 2021 and September 2022, and grew faster than home prices increased in that time period as well.
The Triangle’s real estate market has softened, a bit, following a scorching spring and summer market, though some agents have told WRAL TechWire that this is more of a return to seasonal trends than a housing slowdown or housing crash.
Instead, the latest data from the Triangle Multiple Listing Service, TMLS, shows that home prices in the Triangle rose 13.9% between September 2021 and September 2022. That’s far less than the 25.8% price appreciation between April 2021 and April 2022 in the region.
Good news for first-time homebuyers
This could mean good news for first-time homebuyers in the Triangle.
Whereas homes were selling in a matter of days earlier this year, no matter their condition, real estate agent Brown said that sellers shouldn’t expect that in today’s real estate market.
Instead of facing bidding wars, buyers may now have more time to survey the market, write an offer that best suits their needs, and win a contract, all at the asking price of the home, said Brown.
“If you come in with a good offer, you can probably get the house at its list price right now,” said Brown. “It could actually be a good time to buy a home, because there are more options right now.”
But earlier this year, it was nearly impossible for first-time homebuyers to find a home that would meet their needs, at a price they could afford, facing competition from other buyers and from investors who were buying up homes in the Triangle.
A success story: The best time to buy a home is now
Earlier this year, Savannah and Austin Hopps leased a 780-square foot apartment. But with two dogs and a desire to be closer to the business they’d launched in South Durham, they were ready to buy their first home in the Triangle.
“We knew the rent would likely go up, and we were already paying more than $2,000,” said Hopps, the owner of NEIGHBORHOOD barre, which is located in South Durham. “We knew we wanted to buy before our lease ended, and I wanted to be closer to my business.”
Despite seeing higher interest rates in August and September than when they’d first looked for housing in the area, they found that the market was far less competitive than it had been the prior year and in the spring and summer of this year.
“Even though interest rates were higher, prices overall were falling more in our price range,” said Hopps. “We made an offer – under asking, unheard of earlier this year – and were under contract the next day before noon.”
Hopps didn’t tell WRAL TechWire the terms of the mortgage. But she did note that even once their offer had been accepted, and they’d locked in their mortgage interest rate, rates increased again.
“We definitely leaned on the phrase ‘date the rate, marry the house,’ because we knew that South Durham was where we wanted to be and that a refinance will be an option later on,” said Hopps. “Now, our mortgage is the same as our rent, but we live in a home we own, bigger than our apartment, with a huge yard for the dogs, and is close to where we work.”
More lending options, too
And while mortgage rates above 7% may scare some buyers away from considering homeownership, many lenders and many homebuilders are offering programs or incentives that may make it easier for buyers to purchase a home.
“We’re expecting rates to stay in the current position, stay where they are, or maybe go a little bit higher than where they are during the rest of the year,” said Jon DeHart, branch leader at Movement Mortgage in Durham.
But even with mortgage interest rates near 7%, there are still options for homebuyers, said DeHart.
“One of the most popular marketing items right now is called a 2-1 buydown,” he said. “This gives buyers a chance to ease into the mortgage payment.”
Here’s how it works: During the first year following the purchase of the home, the mortgage interest rate is structured to be 2% lower than the market rate for which the buyer qualified. In the second year, the rate would be 1% lower than the market rate, and starting in the third year, the loan would transition to the market rate made at the time the mortgage was signed.
That could make a real impact for buyers, too.
For instance, a $300,000 loan with a mortgage interest rate of 7% would normally mean that the borrower would pay a monthly amount of about $2,000. But a rate of 5% would mean a monthly payment of about $1,600, a savings of about $400 per month for the first year of owning the home.
“A 7% interest payment is better than a 100% rental payment when it comes to building wealth,” said DeHart. “Because you’re still going to be, every month, making a small payment toward principal, with the home appreciating over time.”
Builders want you to buy, also
“Every builder right now has a pretty good online presence, and most builders are changing pricing,” said Bill Smith, the president of the Johnston County Building Industry Association and a licensed real estate agent with the Jim Allen Group.
“They’re also changing incentives, consistently,” said Smith. “Sometimes, twice a month, especially at the end of the month.”
In addition to providing closing costs, sometimes in return for working with a preferred lender or preferred closing attorney, builders may also be offering design package upgrades or to pay closing costs to help a buyer buy down the mortgage interest rate, Smith noted.
Builders want homebuyers to have a great experience buying, and owning, their homes, and that’s why many builders are looking to make deals with homebuyers right now.
“Builders are being much more accommodating on selling their houses,” said DeHart, adding that some builders are also marketing the 2-1 buydown in listing their homes for sale.
And, nationwide, the best time to buy a home may be in October, a recent analysis from ATTOM Data Solutions found. In the Triangle, historically, the best months to buy have been in the fall or in the winter, according to the ATTOM data set, which was shared with WRAL TechWire upon request.
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.”