Home affordability takes another dip in Raleigh – but buying demand remains strong, agents say

RALEIGH- The latest housing market data continues to show that for some potential buyers, the Triangle property market continues to feel out of reach as rising prices and rising mortgage interest rates reduce the affordability of homes.

First American Financial Corporation’s latest monthly report, Real House Price Index, shows that in April 2022, Raleigh’s housing market saw affordability drop to third among all metropolitan areas of similar size.

According to this index, affordability fell by 59.6% between April 2021 and April 2022.

Only Tampa, Fla. (59.6%) and Charlotte (62.5%) saw larger declines in housing affordability, according to the index.

“In April, affordability fell the most year-over-year in Charlotte, North Carolina, primarily due to the nearly 28% annual increase in nominal house price growth. strong investor activity and net migration to Charlotte have increased demand for homes relative to a limited supply of homes for sale,” said Mark Fleming, chief economist at First American, in a statement corresponding to the latest report.

Wake up among the least affordable home markets; Those earning an average salary can’t afford a median house

Least affordable neighborhood

The Wake County real estate market wraps up the least affordable quarter on record, according to a new report and data from ATTOM Data Solutions.

The dataset, which dates back to 2005, shows that for Wake County, homes have never been less affordable than they are now.

ATTOM data from Wake County found the median sale price during the second quarter of 2022 was $450,500 and the affordability index fell to 63, an all-time high of data.

In Mecklenburg County, affordability also fell, according to the ATTOM dataset, with the index falling to a record low of 59.

“Extraordinarily low levels of homes for sale combined with strong demand have driven home prices up over the past few years,” Rick Sharga, executive vice president of market intelligence at ATTOM, said in a statement. “But homes have remained relatively affordable due to historically low mortgage rates and rising wages.”

Affordability is declining in these markets, even though wages have increased year over year in these two counties, according to ATTOM data. In Wake County, wages rose 6.5% and in Mecklenburg County, wages rose 4.7%.

Nationally, household income rose 5%, Fleming noted in the statement on the national housing situation and the economy. “Consumer purchasing power has increased, but even strong year-over-year revenue growth has not been enough to offset the loss in affordability due to rising rates and rapidly rising prices. nominal prices.”

Consider: ATTOM’s dataset shows that while wages rose 6.5% in Wake County and 4.7% in Mecklenburg County year-over-year, the median price homes rose 22.2% over the same period in Wake County and 20.8% in Mecklenburg County, outpacing wage growth.

“With interest rates nearly doubling, homebuyers are facing monthly mortgage payments that are 40-50% higher than a year ago – payments that many would-be buyers simply cannot. not afford,” Sharga said.

Thinking of buying a house? Do it now as costs continue to soar, economist says

Relief for homebuyers?

Still, the market could change, said Dr. Michael Walden, economist and William Neal Reynolds Emeritus Professor Emeritus at North Carolina State University and regular contributor to WRAL TechWire.

Indeed, the Federal Reserve should continue to raise interest rates, Walden told WRAL TechWire this week.

“That means mortgages will become more expensive and the number of buyers will decrease,” Walden said. “As a result, house prices will experience smaller gains, and even losses if a recession is significant.

But Jim Allen, broker in charge of Triangle-based real estate company The Jim Allen Group, told WRAL TechWire that the increase in mortgage interest rates didn’t seem to have much effect on local real estate markets. , although the rise in rates had an impact on other markets.

“Nothing has changed,” Allen said in an interview with WRAL TechWire. “It’s still a very strong seller’s market and appreciation is at an all-time high.”

And the area continues to see demand for housing at a rate Allen said “we won’t catch up for years” due to the region’s economic growth, which is bringing or creating high-wage jobs to the Triangle. locally.

Adjustable mortgages are skyrocketing as a solution to soaring home prices and interest rates

Buyers could consider different financial products

If homebuyers find that rising mortgage rates on a 30-year fixed mortgage are now preemptively high, many financial institutions can provide a solution, Allen said.

That includes an adjustable-rate mortgage, Allen said, noting that he’s observed some lenders offering these types of loans with a starting mortgage interest rate in the 3-4% range.

Still, declining affordability is a concern for some homebuyers. A buyer who spoke with WRAL TechWire on condition of anonymity noted that while he still plans to find a home to buy, he is increasingly concerned that he won’t be able to purchase a home that includes all of the features he wants due to price increases and competition from other buyers.

“Until the housing supply is much higher, housing will remain strong regardless of interest rates,” said Linda Craft, lead broker and CEO of Linda Craft & Team, Realtors. “The future of our housing market remains strong. We always see several offers.

Prepare for a bidding war: Most Triangle home sales are the most expensive, some over $100,000

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