Home News Thinking about buying a house? Do it now as costs keep soaring, economist says

Thinking about buying a house? Do it now as costs keep soaring, economist says

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RALEIGH – As inflation soars, so does the cost of housing, whether you buy or rent it. Some real estate analysts, including tech-enabled real estate company Zillow, anticipate continued price increases in the housing market. However, while some economists expect home prices to stabilize, others see the North Carolina real estate market continuing to experience rising prices.

“For those who are thinking of paying to buy a home, it’s better to be early,” said John Connaughton, economist at UNC-Charlotte. “I don’t think interest rates will fall any further. If anything, they will be even higher.”

“We saw a dramatic increase in North Carolina, especially in urban areas,” explained Connaughton, a professor of financial economics, in Thursday’s quarterly economic forecasts. “High-growth areas where people want to move from all over the country.”

And while home prices rose significantly in 2021 and 2022, whether rented or bought, Connaughton said, “I think it’s almost done.”

This is due to the recent increase in the cost of borrowing money to buy real estate. “This has a huge impact on solvency,” said Connaughton.

according to Freddie MacThe normal interest rate for a 30-year fixed mortgage is now 5.25%, down from 5.3% measured a week ago. However, it is still up 2.25 percentage points from a year ago, up from 3.76% in early March when some of the homes scheduled to be closed in April 2022 began contracting.

“Housing costs will still be high,” said Connaughton, even if home sales prices stabilize or fall.

This is because the higher the mortgage interest rate, the higher the monthly cost of the household.

Redfin: People migrating to North Carolina are spending more on housing

Rapidly increasing demand, continuous immigration

And while rising interest rates can discourage homebuyers from pursuing homebuying, rising interest rates can actually create a triangle home market due to concerns about affordability. Have sex More competitiveness..

Taylormer, Deputy Chief Economist at Redfin, told WRAL TechWire earlier this month. “That said, it can be difficult for locals in Raleigh to become homeowners in the short term.”

Housing and rental prices are determined by regional factors related to supply and demand, he said. Dr. Ann YorkInterview with WRAL TechWire, Professor of Economics and Program Director at Meredith College in Raleigh.

“The Raleigh region is impacted by a surge in demand that outweighs the rise in home supply, so we see these price increases that are great for homeowners but difficult for homebuyers,” York said. increase.

“Our people who already live here or move from cheap places to the Raleigh area are shocked by home and rental prices,” said York. “But when pulling in new business transfers from more affordable areas such as San Francisco and Los Angeles, the prices in our area, which are expensive to us, are relatively affordable to them.”

About one in ten people traveling to the area are moving from San Francisco, Ma said.And they may I want to spend more money More than the people who already live here, Ma said.

“Raleigh is a fast-growing region,” Ma said. “In Raleigh, rents are rising rapidly, as are home prices.”

Raleigh’s real estate market has risen in price over the last decade, ranking 16th in the nation.

Lower wages due to inflation

Ma said that migration to the area has not changed dramatically in terms of the total number of movers who chose to move to the area compared to pre-pandemic levels, but more. Regions where migration patterns may have changed as high-income jobs have been created.

“They are the winners and the people who are moving there with higher incomes,” Ma said. “At the same time, a group of these other people, perhaps a lessor household who has not experienced equity growth or the same income growth, but at the same time experiencing rising food and gas prices.”

“Inflation is eroding many of the potential wage increases, while the subway is experiencing more and more pain,” Ma said for these individuals and households.

These factors could contribute to the migration of people who already live in the area and are fortunate enough to be able to work in jobs and industries that make it possible to do so, John Duke University said. Professor Kinterno told WRAL TechWire.

“As housing costs rise, young professionals may try to live elsewhere, especially if remote work gives them access to a wider range of cities than before,” says Quinterno. “These dynamics also lead to mobility and impose a real burden on telecommuting and telecommuting workers.

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The lowest affordable price ever

“Affordability has been double-hit,” said Matt Fowler, executive director of the Triangle Multiple Listing Service (TMLS), a database of real estate transactions in the 16-county region. “Rising prices and rising interest rates are putting pressure on indices and buyers.”

“Currently 71, the index is the lowest ever,” Fowler said. “That is, the median income is 71% of the income required to qualify for a median house at a typical interest rate.”

In other words, the income of a typical household needs to increase by nearly 55% in order to buy a home at the median with a mortgage at a typical interest rate.

Zillow calculated A new lorry homeowner of a typical home at a typical mortgage rate will pay $ 798 more on a mortgage than it was a year ago.

Fowler told WRAL TechWire that the affordable price index for TMLS homes wasn’t below 100 until last spring. The index was 102 in May 2021, fell to 98 in June 2021 and July 2021, and returned to 100 in August 2021. But since then, the index has been below 100.

In January, the index fell to a record low of 92, but in February it fell to 88 and in March it fell to 82.

Triangle homes have never been more affordable

The person who owns the house is winning

Last year, the median of the entire triangle rose 25.8%. Latest market data From TMLS.

The median home sales price in April 2021 was $ 330,000, but last month the median price of all Triangle homes sold was $ 415,000, an increase of $ 85,000 over the year.

It was “unprecedented,” Fowler said. “It’s not just homes that sell. All homes in the area have been highly valued in just one year.”

Take Wake County.by Latest TMLS dataIn the county, the median home sales price from April 2021 to April 2022 increased by $ 100,000. The median home sales price in April 2021 was $ 385,000, but in April 2022 it rose to $ 485,000, an increase of 26%.

And in Durham County Growth was even greater, According to TMLS. The average home sales price in Durham County was $ 319,500 in April 2021, while the average home sales price for all homes in April 2022 was $ 426,000, an increase of $ 106,500 (33.1%).

Rising home prices put many homeowners in a strong position. Increasing their home equity.. In the Durham-Chapel Hill and Raleigh-Cary metropolitan statistical areas, which include seven counties, about 56% of homeowners who borrow money through mortgages have homes worth at least twice the remaining loan balance. I own it. Analysis of ATTOM Data Solutions found earlier this month.

“The winner is still the homeowner,” Fowler said. For many Americans, home ownership remains the path to family and household wealth, Fowler pointed out. “Ownership of real estate brings wealth and security to more Americans than any other investment,” he said.

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Tenants are under pressure

However, not everyone in the triangle is a homeowner. “The loser is still the lessor and the housing is not safe,” Fowler said.

In Raleigh, rents have risen by 20.9% in the last 12 months. Latest rent report From the apartment list. In Durham, rents have risen 18.3% in the last 12 months. Report find. To secure a rent for a one-bedroom apartment, Durham people can expect to pay $ 1,187 and Raleigh people can expect to pay $ 1,371.

On the other hand, for those looking for a two-bedroom apartment, the average price to rent a two-bedroom unit in Raleigh was $ 1,570 and in Durham $ 1,424.

And Zillow concludes that it is possible, Rent goes up Despite a national slowdown based on March 2022 data, the company still calculated a 16.6% increase in Durham’s annual rent, with an average observed rent of $ 1,612. Latest report.. In Raleigh, Zillow calculated a 17.7% increase in rent over the last 12 months, with an average rent observed of $ 1,706. Latest report..

According to the latest data available from the US Census Bureau, vacancy rates for the first quarter of this year were 5.8% nationwide. This is the second lowest quarterly vacancy rate since 1984 (the fourth quarter of 2021 was 5.6% vacancy rate).

And as new graduates begin to migrate to different metropolitan areas, the triangle can become an attractive destination. In a recent survey, both Durham and Raleigh are ranked in the top 20 cities in the United States as early career professionals. And that can put additional strain on the rental market. Zillow analysis OK.

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Do you have any relief?

It is widely believed that rising mortgage rates may adjust and stabilize home selling prices. The idea is that rising interest rates will push down demand. But there are also supply-side considerations, Dr. York said.

“As long as our prices are more affordable than in some other parts of the country, we still attract new residents and businesses,” York said. “The move looking for a place to live and work at a more affordable price will stop when our prices are the same as those in other high-priced areas.”

Zillow has calculated a median home price for real estate in the San Francisco region of $ 1,644,703, so the prices of potential homeowners in the region will almost certainly be high.

“If we can find a way to continually increase the supply of homes as demand grows, we hope the prices will not be that high,” said York. Still, North Carolina is projected to run out of 900,000 homes by 2030, Alexandra Forter Shirota, Managing Director of the North Carolina Budget and Tax Center, at the Virtual Fair Housing Community Conference in April. Stated.

“In reality, home prices in our state are rising much faster than income,” Shirota said. “The stagnation of wages makes it harder to buy a house,” Shirota said. “There are not enough homes to buy.”

Last month, Zillow weather The national growth rate of home prices by March 2023 was 14.3%, but the company updated its national forecast by April 2023 to 11.6%. Latest forecast.. Still, the triangle has outpaced the rate of increase in home prices nationwide since the start of the COVID-19 pandemic. And if demand continues, prices in the housing market may continue to rise, regardless of interest rates.

Policy changes at the state level may provide some form of support to those facing affordable pressure.

Governor of North Carolina Roy Cooper 2022-2023 budget plan “Affordable homes at the historic level, but some of the current needs remain unresolved.” Blog post Anna Patterson, a policy analyst at the North Carolina Housing Union, announced earlier this week.

Executives warn that North Carolina is facing a housing shortage of 900,000 homes by 2030

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