The real estate market is experiencing odd times indeed. The market indicators are showing larger than normal changes and may be sending some conflicting messages. How are buyers and sellers supposed to make decisions right now? As of the close of September data, home sales are down almost 20% in Mecklenburg County, but prices are up 20%. Inventory has been problematic for several years but we are finally seeing an increase in what’s available. That means more selection for buyers, so that’s good right? And while prices do seem to be rising at unprecedented rates, the average time on market is rising and more home sellers are having to reduce their asking prices in order to attract a buyer.
This may all seem like a big ball of confusion, but we can help unravel the mess because when you look at how each indicator relates to the other, it actually makes some sense. First of all, inventory has been unhealthily low for a very long time which has caused prices to skyrocket as buyers had to compete with one another to “win” in multiple offer situations. Crowds follow crowds for fear of missing out, so even with rising prices and not much to choose from, there were plenty of sales. Additionally during the pandemic, the government injected a huge supply of money into the economy and much of that money was spent on housing which kept demand high.
Unfortunately, this rapid rise in home prices and the supply of money has played a significant role in contributing to inflation. In order to curb this inflation, the Federal Reserve has increased interest rates, several times this year alone and it is working. Interest rates have gone from 2.9% this time last year to the current rate of 6%. This doubling of interest rates over the past year, coupled with higher sales prices means a major shift in buying power, so buyers have to adjust their expectations around what they can afford. And when all of this happens in such a short period of time, buyers begin feeling confusion over whether to keep looking or to wait things out.
As of September, Charlotte is still experiencing a sellers market. However, if sales continue to slow due to the higher rates, eventually the inventory numbers will rise. When the market shifts back to a buyer’s market, the rise in prices will eventually slow. In the meantime, inflation at over 8% is devaluing our liquid funds and real estate is one of the only investments out there that is keeping up with (and beating) inflation.
Yes, the market is a bit confusing right now. Thankfully, our team has experience in all markets and are here to answer your questions and help you make smart decisions. Our primary concern for our clients right now is to help navigate decisions around inflation and how to beat it. Waiting out this market and/or choosing to rent instead of buy, is likely not the right answer for one’s investment portfolio. It will take time for inventory to get back to buyers market status and both rents and real estate values are likely to continue to rise until that happens. Waiting means even less buying power later.
This week we’ll publish our E-Newsletter and the market stats for Mecklenburg county for single family homes comparing September to the previous month and the previous year. Here’s a sneak peak of the summary data:
- Home sales are down 1% from last month and 19% from last year.
- Average sales price is even with last month, but up 22% from last year.
- Median sales price is down 1% from last month, but up 18% from last year.
- Average price per square foot is up 1% from last month and 18% from last year.
- Sale to List Price ratio has fallen to 99% from 100% last month and 102% last year.
- Average time on market is up 44% from last month and 92% from last year.
- Pending home sales are down 18% from last month and 34% from last year.
- Supply is up 9% from last month and 134% from last year.
- Mortgage rates at 6.11% are up from 5.22% last month and 2.9% last year.
- Average house payment is up 11% from last month and 77% from last year.