Every month, the Canopy Realtor Association reports on the market trends happening in the Charlotte Region. This month, the main story is inventory remaining at historically low levels. A balanced market between buyers and sellers is typically considered to be a 4-6 month supply of homes. In the entire Charlotte Region, we now sit at just a 1.5 month supply. This means that just 5,309 homes are listed for sale right now, down 27.3% from the 7,307 homes listed for sale last August. If we wanted that 4-6 month supply, we would need 14,000 to 21,000 homes listed for sale right now.
Not only are there fewer homes for sale, but listed homes are sitting on the market for longer before a sale. Last August, homes were going under contract in an average of 19 days. This August, homes are spending 29 days on the market before going under contract. This is a 52.6% increase year over year. This can be worrying for sellers who are anticipating a quick sale as it is less likely to happen. However, it can be great for buyers so they don’t have to rush into what is most likely the largest single investment they will make.
One of the causes for this slowdown is the rise in interest rates. This has caused many buyers to be priced out of the market. When interest rates were at 3%, a monthly mortgage payment for a $500,000 home would be $2,108 before taxes, fees, and escrow account funding. At 8% interest, that same monthly mortgage payment on the same $500,000 home would be $3,669 before taxes, fees, and escrow account funding. That is a difference of $1,561 per month. Over the life of the loan, the 3% interest home will pay $758,880 in mortgage payments. The 8% loan will pay $1,320,840 in mortgage payments. That’s a whopping $561,960 difference over the length of a 30-year mortgage.
Prices for these homes are still holding steady. The average list price for a home rose fractionally from $459,780 up to $474,987. This 3.3% rise has slowed dramatically from last August when we saw a 16.9% increase in home prices. This slowdown is good, but still not enough to offset the rise in interest rates. The rise in rates was enacted to slow inflation, and in this instance, it seems to have worked. We have yet to see a decrease year over year, but that may come in the next few months.
New listings (-12.3%), pending sales (9.2%), and closed sales (-14.8%) are all down year over year. This shows that this trend is here to stay for the foreseeable future. In addition, many sellers are reluctant to sell right now because they would then face the same market that buyers are facing with high prices and high mortgage rates. Staying in their home with a low interest rate loan can be preferable to dealing with the market at the moment. Due to this we are seeing a rise in home remodeling as it can be much cheaper in the long run even though it can be stressful in the short run.