How will the latest interest rate increase affect the Triangle housing market?
Interest rates continue to surge, intensifying pressure on the housing market. But don’t expect house prices in the Triangle to come crashing down anytime soon, say experts.
The Federal Reserve yet again pumped up its benchmark rate by .75 points to try to tame inflation on Wednesday — its sixth consecutive hike this year. That’s pushed the average U.S. 30-year mortgage rate to soar past 7% for the first time in two decades.
But while Wake County home prices are cooling — prices peaked in June at more than $493,000 — it doesn’t necessarily indicate a housing market crash is around the corner.
“We still have an under-supply of housing,” said Stacey Anfindsen, an Apex appraiser who analyzes Triangle Multiple Listing Service (MLS) data.
“Yes, increasing mortgage rates have impacted price metrics, and the number of listings with price drops. But when you have an under-supply, it’s really tough for prices to go down.”
Inventory measures how long the existing housing supply would last if no homes went on the market. The Triangle’s housing inventory ticked up to nearly a two-month supply in September, a 100% jump compared to the same time last year, according to the Triangle MLS September market snapshot. But it remains low both historically and compared to the supply of other booming cities like Phoenix and Las Vegas, each having more than three months of available housing stock, which is considered “healthy” to most real estate agents.
Anfindsen said he doesn’t see that changing anytime soon considering the Triangle’s strong job market and continued inbound migration, attracting white-collar workers and companies from markets like New York and Chicago.
“There’s no gray area about this. [The Fed] is going to keep interest rates going up until inflation gets hammered,” he said. “But until we get to an oversupplied market, which I don’t I don’t see happening this year, I’m not going to be crying that the sky is falling.”
The market is taking a hit, though. Since June, sale prices of Raleigh homes have fallen 9% while they’ve dipped 4% in the combined Fuquay-Varina and Holly Springs market, the report noted.
“How far house prices will fall? I don’t know,” said John Wood, owner of Re/Max United in Cary, who has been an agent in the Triangle since 1988.
But he cautioned against inflating the drop and said it has to be seen in context of last year’s “unprecedented” spike in house prices. “There were some of our submarkets with 30% or higher annual appreciation, and that’s crazy,” he said. “We still have year-over-year positive appreciation. Most homeowners should be happy long term.”
Meanwhile, house prices usually slump around this time of year anyways, he said. “They’re lowest in December and January. That’s the natural cycle. If we can get back to where the [rate] fluctuations are not so dramatic, we’ll get buyers back out there.”
Would-be buyers shouldn’t sit on the sidelines forever, he added. “If they’re renting, they’re paying 100% interest, right? They get no value out of that.”
Other options like getting an adjustable-rate mortgage instead of a fixed rate are also ways to save money, he said.
“That’s not something we want to push, but it’s something to remind people. If rates do go back into the 5%, you could refinance, and therefore you’re in a home where you want to be.”
This story was originally published November 3, 2022 at 1:55 PM with the headline "How will the latest interest rate increase affect the Triangle housing market?."
