RALEIGH – Some would-be homebuyers now think if they just wait a little bit longer, home prices will fall and the real estate markets across the Triangle will crash like it did in 2008. Then, they’ll be able to buy a home when prices have dropped.
But local real estate agents and real estate economists don’t see it playing out that way, expecting the more likely scenario to be one of temporary flattening or softening of the market but long-term price gains as the region adds high-paying jobs.
And even if home sale prices across the region stabilize or fall in the coming months, housing costs for new homeowners may still end up higher than they otherwise might have been due to rising mortgage interest rates. That’s why if you’re thinking of buying a home, now is the right time, especially if you were able to lock in an interest rate earlier this year that positions you to buy soon.
That’s according to John Connaughton, an economist and professor of financial economics at the University of North Carolina at Charlotte, who predicted that housing costs will continue to rise at a virtual economic forecast last month.
Still, the latest data from Triangle Multiple Listing Service, TMLS, the database of real estate transactions across the region, shows that in Wake County, the median home sale price did not increase in May 2022 compared to the prior month.
The median sale price in Wake County during May 2022 was $485,000—the same median sale price observed in the market during April 2022.
Still, homes averaged just four days on the market in May 2022, compared to six days on market in May 2021, when the median sale price in Wake County was $389,900.
And in Durham County, the median sale price in May 2022 was $424,250, according to the TMLS report. That’s down from the median sale price of $426,000 across all transactions in the county that closed during April 2022.
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So is a market crash coming?
Local real estate agents say that’s likely not going to happen, and definitely not going to happen in the Raleigh-Durham area.
“We’re still seeing multiple offers on a good number of properties, and the real dilemma that we’re in is we don’t have enough supply,” said Jason Kogok, co-owner of Coldwell Banker HPW/Luxury Movers Real Estate, told WRAL News this week.
Kogok has been working in the Triangle real estate market since 2002.
“We were running at 1,000 degrees for quite some time, and now I think we’re running at 800 degrees, so we’re still super on fire,” he said.
Experts say in comparison to how the market has been growing in the past couple years, the Triangle’s real estate market is still fairly healthy and only shows signs of improving.
The chief economist at national real estate brokerage Redfin, Daryl Fairweather likened the real estate market to a change of speed on a highway in a report issued earlier this month that sought to explain why some local markets might see a softening of sales or a dip in median or average home sale prices.
“The housing market was going 100 miles per hour and now it’s down to 80,” said Fairweather in the report. “This is not the bursting of a bubble.”
Here in the Triangle, we’ve become accustomed to soaring home prices and soaring home values, said Kogok.
“We’re so used to comparing it to the last 18 or 24 months that we’ve lost some perception in really what a healthy market is,” he said.
While local real estate agents are seeing fewer requests for showings, signaling fewer potential buyers competing to win a contract to purchase property, they are still seeing plenty of offers and offers over asking prices, according to local agent Jason Dalton, who’s been working in the Raleigh-Durham area for the past 19 years.
“If you could fast forward to see it in 20 years, you’re going to be really glad you jumped on it in 2022,” Dalton said.
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Could hiking interest rates make homes more affordable?
The U.S. Federal Reserve announced Wednesday that it would be hiking interest rates by three-quarters of a percentage point, the highest single increase since 1994.
That, on top of a 12-month inflation rate not experienced in 40 years, has a complex effect on local housing markets.
“Houses are trending toward the higher pay brackets,” said Thomas Babb, the director of communications at TMLS. “You’re going to see a lot less homes in the $200,000 range. That’s partially due to inflation.”
Still, the interest rate hike from the Federal Reserve is likely going to help the market “cool off” a bit, Babb predicts. Though mortgage interest rates aren’t set by the Federal Reserve, the Fed’s interest rates do impact the primary mortgage markets as lenders adjust to prevailing economic conditions.
“That has a correlation with the median sales price. It’s up from a year ago but down from last month,” he said.
“As homes kind of level out on the price point and come down a little bit, you’re going to see the affordability index hopefully start to rise again,” Babb added.
TMLS publishes monthly an index that tracks housing affordability, based on median home sale price, household income, and prevailing mortgage rates. For May 2022, the index measured a 72. A year ago, in May 2021, the index measured a 111.
That’s a 35.4% decrease in housing affordability year-over-year. And Wake County is now among the least affordable markets in the country, according to a recent analysis of real estate market data and wage data conducted by ATTOM Data Solutions.
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According to Mortgage News Daily, the average interest rate for a 30-year fixed mortgage loan is now hovering above 6% as of 4 p.m. on June 15. For comparison, the average mortgage rate for a 30-year fixed loan was 2.93% for the week ending June 17, 2021, and 3.13% for the week ending June 18, 2020, according to the Primary Mortgage Market Survey from Freddie Mac.
