Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets. This week, we take a look at the latest market data from the Triangle Multiple Listing Service—which, though preliminary for October 2022, shows a changing Triangle real estate market right now.
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RALEIGH – A new study of homebuyers conducted by the National Association of REALTORS (NAR) found that first-time homebuyers may continue to feel priced out of the market to buy their first home. But the housing market is changing, a housing economist with NAR told WRAL TechWire, with continued deceleration in home sale prices both nationally and in the Raleigh metropolitan area.
And in Wake County prices are falling.
“The median sales price of a parcel of Wake County real estate for October 2022 was $460,000, down $5000 from September’s 2022’s price of $465,000,” the Wake County Register of Deeds reported Thursday.
That new average also is $10,000 below the record of $470,000 set in June, the new report says.
Prices appreciated year-over-year in Raleigh, Durham, and in 98 of the 100 most populous metropolitan regions in the United States, a second NAR study found, with homes in the southern United States appreciating the most, on average.
The report contains what the NAR notes in the executive summary is “unique data which has emerged from a year of transition for the housing market.” The year of transition followed the summer of 2021, when there was “incredibly high demand for limited inventory” through the second quarter of 2022.
Median home price falls again in October as houses now selling for less than list price
In the Triangle real estate market
In the Triangle, that period of high demand far outpaced the supply of homes available for sale, called home inventory, leading to rapidly rising prices and year-over-year price appreciation upwards of 20% in the Triangle and in many of its submarkets throughout much of 2021 and the early part of 2022.
But during the first half of 2022, which was the second portion of the data analyzed by the NAR in the study, “the housing market started a contraction due to housing affordability,” it reads. “Housing affordability was a continual theme throughout the last year, first with the rise in home prices, and now the recent rise in mortgage interest rates which is a result of inflationary pressure.”
That led to the share of first-time buyers decreasing to the smallest market share on record, the NAR found, at just 26%. In the prior annual study, the share was 34%.
What’s happening
“Homeownership is the primary source of wealth,” said Nadia Evangelou, a senior economist and director of real estate research at the National Association of REALTORS, NAR. “First time homebuyers may want to buy a home, but right now, they may be priced out.”
That’s both because of home sale prices that remain higher than they were a year ago, but also because mortgage rates have increased.
And costs are rising faster than wages, said Evangelou. According to the National Association of REALTORS, the median household income needed to buy a typical home in the United States has risen to $88,300, which is nearly $40,000 more than it was in 2019, prior to the start of the pandemic in March 2020.
“That’s why we’re seeing buyers priced out,” said Evangelou.
However, in Raleigh, we’ve seen home sales fall in recent months, though at a slower pace than nationwide, along with a decrease in median home sale price that some North Carolina real estate agents based in the Triangle have said is a return to a seasonal, cyclical real estate market in the Triangle.
“We see the same trend, and we expected that,” said Evangelou. “When you compare to 2021, which was basically the best year for the housing market, we expected to see a drop in the housing market in 2022.”
Climbing mortgage rates scaring buyers; Triangle prices are falling
Affordability remains a concern
Still, even with dropping prices, affordability is still a concern for many buyers, in particular, first-time homebuyers.
In the Triangle, affordability plunged by more than 30% between September 2021 and September 2022, according to a recent Triangle Multiple Listing Service report obtained by WRAL TechWire.
“First-time buyers looking to purchase a typical home during the third quarter of 2022 continued to feel the impact of housing’s growing unaffordability,” the second NAR study found. “For a typical starter home valued at $338,700 with a 10% down payment loan, the monthly mortgage payment rose to $1,808 – nearly identical to the previous quarter ($1,807), but an increase of almost $600, or 49%, from one year ago ($1,210).”
And, according to the NAR, first-time homebuyers also spent more of their household income on their mortgage payments in the third quarter of 2022 than they did in the second quarter this year, rising from 36.8% to 37.8%. But the benchmark for housing affordability is when a mortgage payment, both principal and interest on the loan, is 25% or less of household income.
Still, in recent months, the scales may be tipping back toward buyers, and first-time homebuyers could actually be in a good position to buy a home, if they can afford one, compared to a year ago.
Raleigh real estate market tipping back toward buyers by fall 2023, analysis finds
What’s coming in Raleigh’s real estate market?
The recent deceleration of median home sale prices in Raleigh’s real estate market is normal and expected, said Evangelou.
And even further deceleration could be coming in the next 12-14 months, as well.
All considered, said Evangelou, there will be a “relatively flat” real estate market throughout 2023.
“About a 1% increase in the median home sale prices, on average, across the national market,” said Evangelou.
Still, Raleigh is expected to outperform the national averages, due to the region continuing to attract migration from other metropolitan regions of the country, with a steady net population gain.
Evangelou noted that for every 100 people that are moving in the Triangle, 54 of those are moving into the region while 46 are moving out of the region. That may not seem like a big difference, but it means that each year, about 20,000-25,000 more people are choosing to live in the Triangle.
“Raleigh is one of the areas among the top 25 metropolitan areas with the most population gains,” said Evangelou. “With more people coming to the area, we expect demand to remain relatively strong.”
Housing crash coming? Here’s where there is stability in the Triangle real estate market
What happens next
So that means that even with a deceleration in home sale prices, demand will remain high. Thus, said Evangelou, “higher mortgage rates will have a smaller impact on the local housing market.”
Mortgage rates rose above 7%, on average, this past week, according to the latest data from Freddie Mac, with the typical 30-year fixed-rate mortgage now at 7.08% as of Thursday.
But even with rising interest rates and ongoing inflation in the economy, the Triangle’s housing market may continue to outperform the nation, said Evangelou. “That’s because the area continues to be one of the most popular destinations for people to move there.”
Now might be best time to buy a house in Triangle – here’s why
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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.”
