The Federal Reserve has done it again. Interest rates have been raised, this time reaching a peak that we haven’t seen in over two decades. This historic increase is making waves across the nation, leaving many to wonder, how will this affect the housing market? In this blog post, we will delve into what these changes mean for real estate, with a specific focus on the housing landscape in Charlotte, North Carolina.

Charlotte North Carolina Housing Market Update:  

August 2023

1. The Federal Reserve And Mortgage Rates

2. Number of New Listings

3. Number of Pending sales

4. Number of Closed Homes

5. Average Sales Price

6. Market Overview 

7. What Does This Mean For Home Sellers

8. What Does This Mean For Home Buyers

1. The Federal Reserve & Mortgage Rates

In a significant move, the Federal Reserve has raised the Fed Fund rate to 5.5%. This is a notable shift, marking the highest level this key interest rate has reached since 2001.

Surging Mortgage Rates: Crossing the 7% Threshold 

Following the Federal Reserve’s decision, mortgage rates responded dramatically. In July, they surged past the 7% mark, a level that we haven’t seen in years. This sharp increase is a game-changer for many prospective homebuyers, as it significantly impacts what they can afford.

Higher mortgage rates invariably translate to higher monthly payments for borrowers. As a result, this rise in rates is further tightening the screws on buyers’ affordability. For many prospective homeowners, this might mean having to set their sights on smaller, more affordable properties, or considering different neighborhoods than they originally planned.

An Ongoing Inventory Crunch 

As if surging mortgage rates weren’t enough of a challenge, the housing market is still grappling with another critical issue: a lack of available homes for sale. This inventory crunch is a nationwide phenomenon, and it’s hitting us close to home here in Charlotte.

The numbers don’t lie. Current data clearly illustrates the severe inventory shortage in our backyard. With fewer homes available, buyers are often forced into bidding wars, pushing prices even higher in a market that is already challenging due to rising mortgage rates.

Looking Ahead in the Charlotte Housing Market 

As we navigate these unprecedented waters, it’s essential to stay informed and prepared. Whether you are a buyer feeling the pressure of these compounding factors or a seller questioning how this will affect your sale, the landscape of the Charlotte housing market is shifting and we are here to guide you through it. 

2. Number of New Listings

In July, the Charlotte housing market saw a total of 1,134 new listings hit the market . This figure marks a 17% decrease from the number of new listings that appeared in June, and it is notably down by 34% when compared to July of the previous year 2022.

Charlotte Housing Inventory: A Significant Dip!

The decrease in new listings compared to last year is a clear indicator of the ongoing inventory crisis. Homeowners are hesitant to list their properties due to the current market conditions, including high mortgage rates. This hesitancy is contributing to the shortage of homes on the market, creating a challenging environment for buyers.

So, why are so many homeowners refusing to make a move? A key factor appears to be the current state of mortgage rates. A substantial 80% of mortgage holders in the United States have locked in a 30 year fixed-rate mortgage of 5% or lower. Impressively, a quarter of these holders have secured a rate of 3% or less.

The Ripple Effect Of Low Mortgage Rates

These historically low mortgage rates are acting as a powerful incentive for homeowners to stay put. Selling and buying a new property often means taking on a new mortgage. For many, this could result in higher monthly payments, given that current rates for new mortgages are now higher than what many existing homeowners are locked into.

This reluctance to sell isn’t just about the numbers, it’s contributing to a palpable tension in the Charlotte housing market. With so few homeowners willing to list their properties, prospective buyers are left with fewer options, which can lead to competitive bidding wars and continually rising home prices.

3. Number of Pending Sales

In July, 1,083 homes in Charlotte accepted an offer. Interestingly, this marks a 1% decrease from June and an 8% drop compared to July of the previous year. At a glance, this might seem like a small shift, but in a bustling market, even slight changes can signal a broader trend.

These lower numbers in accepted offers aren’t occurring in a vacuum. They are directly tied to the number of homes available. With fewer homeowners listing their properties, it’s logical that there will be fewer pending sales. Simply put, fewer listings lead to fewer sales.

New Listings Outpacing Pending Sales

In July, the number of new listings added to the market outpaced the number of pending sales by approximately 5%. This suggests an unexpected dynamic, our inventory is actually growing.

This growing inventory is largely attributable to recent rate hikes. Even in a climate of historically low inventory levels, these rate increases appear to be making a tangible impact on the Charlotte market. What is the result? A steadily increasing number of listings available at any given time, a trend that has held strong throughout this year.

A Sellers Playground: But For How Long? 

Despite the uptick in available homes, make no mistake, Charlotte remains a heavily tilted seller’s market. Buyer affordability has been squeezed significantly due to rising interest rates, and the number of homes available, while growing, is still relatively low compared to demand. This combination continues to favor sellers, who often find themselves fielding multiple offers and enjoying favorable sale conditions.

For sellers, the current market dynamics present an opportune time to capitalize on high demand and potentially secure a premium price for their property. For buyers, the situation is more nuanced. While increased inventory offers more options and potentially less competition for each listing, reduced affordability due to higher mortgage rates presents a significant hurdle.

Navigating A More Patient Market

The classic law of supply versus demand is playing out vividly in Charlotte’s housing market. Inventory levels are indeed inching upward, offering a glimmer of hope for buyers seeking more options. However, this increase is far from the surge needed to genuinely alleviate our housing inventory shortage.

Throughout this year, one trend remains constant, the rise of average home sales prices. Despite the modest uptick in inventory, home prices are not taking a breather. They continue to appreciate, reflecting the sustained demand for properties in Charlotte’s vibrant market.

The average days on market this year has grown by approximately 29% compared to the same period last year. This suggests a subtle, yet potentially significant shift in market dynamics.

4. Number of Closed Homes

In July, the Charlotte housing market saw 975 homes successfully reach the closing table. This figure represents a sharp 24% drop compared to the number of homes closed in June. Even more notably, it marks a 25% decrease from the number of closings recorded in July of the previous year.

It’s important to note that closed data is, by nature, lagging data. It reflects deals that were likely initiated a month or two prior, making it a somewhat delayed indicator of market activity. Nevertheless, a pattern is emerging. Both month over month and year over year comparisons reveal a consistent downward trajectory in the number of closed homes.

Why is Charlotte experiencing this decline in closed transactions? The answer seems to lie largely in the supply side of the equation. Simply put, fewer homeowners are choosing to put their properties up for sale. This reluctance to list is constricting the supply of available homes, which in turn, is resulting in fewer closed deals.

5. Average Sales Price

In July, Charlotte’s housing market observed an interesting turn, the average sales price for a home in July was $534,500. This figure marks an 8% decline from June’s average sales price, but still reflects a solid 6% increase compared to July of the previous year. Notably, July was the first month this year that Charlotte witnessed a decrease in the average sales price.

Just like how we have seasons in the year, the housing market also goes through its own ups and downs. During the later part of summer, house prices usually stop rising so quickly or might even drop a little.

This isn’t something to worry about, it’s just how the market works. As we move further into the year, it will be interesting to see how Charlotte’s housing market changes, especially when compared to the bigger picture of what’s happening everywhere else.

6. Market Overview:

Imagine the housing market as a boat on the ocean. Lately, rising interest rates are like strong winds, pushing and challenging the boat’s direction. If these winds (or rates) keep getting stronger, they might make it tougher for our boat to sail smoothly.

When we step back and look at the past year in Charlotte, things have been going pretty well. The key question now is, how will these increasing rates shape the housing market’s journey in the upcoming months?

The Moves by the Federal Reserve:

Keep a close eye on Jerome Powell and the team there. The decisions they make can stir the waters even more. In their July meeting, Powell hinted at the possibility of interest rates increasing again. He left the door open to further rate hikes when they reconvene in September.

Now, even with the looming prospect of higher rates, Charlotte’s housing market remains robust. Why? We’re seeing a shortage of houses on sale. Think of it like everyone rushing to grab the last few popular toys on the shelf!

However, there’s a catch. If the Federal Reserve does decide to crank up these rates, we might find fewer homeowners wanting to sell their property. After all, why jump ship when it might mean dealing with a pricier loan on the next house? The next few months promise to be a revealing period for Charlotte’s housing market, as it reacts to these broader financial currents.

7. What Does This Mean For Home Sellers

Considering a move? Here’s what you need to know:

• If you decide to sell now, chances are good you’ll get a competitive price for your property. The current inventory in Charlotte is low, and many homes have recently sold above their asking price due to multiple offers.
• On the flip side, if you’re also planning to buy another home, anticipate potentially higher monthly mortgage payments due to rising rates.

If you are considering selling your home, make sure you choose the best Realtor. Watch this video to make sure you are asking your potential realtor the RIGHT questions:  10 Questions You Must Ask Your Realtor Before Hiring Them. 

8. What Does This Mean For Home Buyers

Is now a good time to purchase a home? Here are some insights:

• Not every prospective buyer should jump into the market at this moment. Housing options are limited due to low inventory. Moreover, the homes that are available face high demand, which might stretch your budget.
• If you’re feeling uneasy about high monthly mortgage payments, it might be worth waiting. Some suggest buying now and refinancing later if interest rates drop. However, it’s unpredictable when or if that will happen. Base your decision on current conditions, not potential future scenarios.
• While some industry watchers think rates might lower slightly by the latter half of 2024, there’s no guarantee they’ll drop below 5% anytime soon. If they do decrease, expect a surge in buyer demand due to the many who have been waiting on the sidelines. This could potentially drive prices up further.
• Despite the challenges, if buying aligns with your personal and financial situation, then it’s a move worth considering. Always prioritize what’s best for you and your family, without banking on uncertain future rate changes.
• Given the resilience of our current housing market, a massive drop in home prices isn’t likely. Instead, we might see a steady growth in home values over the next few years.

In a nutshell, Charlotte’s housing scene is vibrant and ever-changing. While broader market trends provide guidance, the best choices always align with individual needs and circumstances.

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Charlotte NC 28277