A lot has happened in the Real Estate market in the past few months. Interest rates are on the rise, inventory is at an all time low, and the median home price is up almost $65,000 in just one year. Homes are selling quickly, in 20 days on average. They are selling for above list price in many cases with the average home selling for 101.8% of list price.
These numbers, as always, come from the Canopy Realtor Association from their Canopy Multiple Listing Service. The Charlotte region that they report on includes 12 counties in North Carolina and 4 counties in South Carolina.
The inventory shortage has been a struggle in almost all cities across the country. This trend has been in place for many years with fewer homes on the market each year. Most experts thought we would see some ease in the inventory woes with the typically robust spring season but we are not seeing relief yet. In fact, new listings were down 8.1% from this time last year. There is still time to see a robust spring season this year and we may see it with rising temperatures and spring flowers.
Prices have been on the rise for a while as well. The median price of a home in the Charlotte Region is now $369,236. Last March the median price of a home was $306,750. This rapid rise of prices can make the initial entry to the housing market too steep for many first time buyers. The additional carrying costs of owning a home go up with the price so many buyers just can’t afford to purchase a home right now. These additional carrying costs include property taxes, and homeowner’s insurance which are both figured using the price of a home.
With interest rates on the rise, buyers are getting squeezed from yet another direction. For example, if you have a $200,000 loan at 4% interest, you will pay $954.83 per month for principal and interest. If you have that same loan at 6% interest, you will pay $1,199.10. That is a difference of $244.27 per month or $2,931.24 each year. That can mean the difference between buying and renting for many people.
The current interest rates are expected to rise more over the course of the year as they are tied to a key indicator from the Federal Reserve. Analysts expect the Fed to raise this key indicator another 4 times over the year. That means that we probably will not see interest rates this low for a while. The current rates have risen to almost 7% right now with FHA and VA loans up to almost 6%.
With tight inventory and homes typically selling at or above list price, many recent buyers are feeling some buyers remorse. Paying more for a home can leave you with little discretionary income and can put you in a real bind if an emergency happens. If you end up with a major repair in the first year, it can really devastate a new buyer.
Once buyers are owners, they can also feel the pinch from taxes rising each year due to reappraisals. Taxes rising affects buyers and renters alike so renters are seeing a rise in rent prices so landlords can offset the rise in their carrying costs as well.
It could be a long while before we see any correction in the market and more buying power back in the hands of buyers. For now, sellers definitely have the upper hand, but as they sell and become buyers themselves, they are not immune to these issues either.
