RALEIGH – As inflation soars, the cost of housing—whether buying or renting—is skyrocketing, too. Some real estate analysts including the technology-enabled real estate company Zillow are forecasting continued price appreciation in housing markets. But while one economist expects the price of homes to stabilize, others see North Carolina’s real estate markets continuing to experience price runups.
“For anyone who is out there thinking about getting out of a rental and buying a house, the sooner the better,” said UNC-Charlotte economist John Connaughton. “I don’t see interest rates getting any lower. If anything, they’ll continue to get higher.”
“We’ve seen dramatic increases in North Carolina, particularly in urban areas,” explained Connaughton, a professor of financial economics, in a quarterly economic forecast on Thursday. “Higher growth areas where people want to move to from around the country.”
And while the price of homes, whether to rent or to buy, has increased considerably in 2021 and 2022, Connaughton said, “I think that is pretty much done.”
That’s due to the recent increase in the cost of borrowing funds to purchase real estate. “This has a big impact on ability to pay,” Connaughton said.
According to Freddie Mac, the typical interest rate for a 30-year fixed mortgage loan is now 5.25%, which is a decrease from 5.3% measured a week ago. But that’s still up 2.25 percentage points from a year ago, and up from 3.76% at the beginning of March, when some of the homes that would close in April 2022 began to be placed under contract.
Even if home sale prices stabilize or even come down, said Connaughton, “the cost of housing will still be high.”
That’s because higher mortgage interest rates mean higher monthly costs to a household’s budget.
Redfin: People moving to NC are looking to spend more on housing
Surging demand, ongoing in-migration
And while rising interest rates may dissuade would-be homebuyers from pursuing a home purchase, due to concerns about affordability, the rate increases may actually make the Triangle’s housing market even more competitive.
“Rising rates swing people more in favor of moving to Raleigh, because it’s more affordable overall,” Taylor Marr, a deputy chief economist at Redfin, told WRAL TechWire earlier this month. “That said, it might make it so that locals who are in Raleigh, would (find it) harder to become homeowners in the short run.”
Housing and rental prices are determined by local factors pertaining to supply and demand, said Dr. Anne York, a professor of economics and program director at Meredith College in Raleigh, in an interview with WRAL TechWire.
“In the Raleigh area, we have been impacted by a surge in demand that is outstripping any increase in our supply of housing, so we are seeing these rising prices, which are great for home sellers but difficult for home buyers,” said York.
“Those of us who already live here or are moving to the Raleigh area from cheaper places are getting sticker shock with housing and rental prices,” said York. “But when we pull in new business relocations from areas of the country that are even less affordable, such as San Francisco or Los Angeles, the prices in our area that are expensive to us are relatively affordable to them.”
About one in 10 people moving to the region are moving from San Francisco, said Marr. And, they may be looking to spend more than those already living here, Marr noted.
“Raleigh is a fast-growing region,” said Marr. “Rents are rising rapidly in Raleigh, as are home prices.”
Raleigh’s real estate market 16th in nation for price gains in last decade
Inflation eroding wage gains
And while Marr noted that in-migration to the region hasn’t changed dramatically in terms of total number of movers choosing to relocate to the area compared to pre-pandemic levels, migratory patterns may have shifted as more high-income jobs are created in the region.
“Those are the winners, those who are relocating there with higher incomes,” said Marr. “At the same time, these other groups of people, maybe renter-households who are not experiencing a growth in equity or the same income growth, and at the same time they’re experiencing increases in food prices, gas prices.”
For these individuals and households, noted Marr, “inflation is eroding away a lot of their potential wage gains, at the same time the metro is experiencing the growing pains.”
These factors may also contribute to the out-migration of those who already live in the area and are lucky enough to work in a job or industry that would enable them to do so, John Quinterno, a professor at Duke University, told WRAL TechWire.
“As housing costs rise, younger people in professional roles may seek to live elsewhere, especially if remote work enables them to access a particularly broader set of cities than in the past,” said Quinterno. “These dynamics also lead to displacement and impose real burdens on workers in service or supporting jobs that pay less and can’t work remotely.”
Prepare for a bidding war: Most Triangle home sales top list price, some by $100K+
Affordability at another all-time low
“Affordability has been getting a double hit,” said Matt Fowler, the executive director of Triangle Multiple Listing Service, or TMLS, the listing database for real estate transactions for the 16-County region. “Prices are rising, and rates are rising, causing the index, and buyers, to be squeezed.”
“Currently at 71, the index is at an all-time low,” said Fowler. “That means that median income is 71% of that necessary to qualify for a median priced house at prevailing interest rates.”
Put another way: the income of a typical household would need to increase by nearly 55% in order to buy a home at the median price with a mortgage loan at the prevailing interest rate.
Zillow calculated that a new Raleigh homeowner of a typical home at a typical mortgage interest rate would now pay $798 more in housings costs than they would be a year ago.
Fowler told WRAL TechWire that the TMLS Housing Affordability Index had not dropped below 100 until last spring. The index was at 102 in May 2021, then dropped to 98 in June 2021 and July 2021, and returned to 100 in August 2021. But the index has been below 100 since.
In January, the index dropped to an all-time low of 92, only for the index to drop to 88 in February and 82 in March.
Those who own homes are winning
In the last year, the median price across the Triangle increased by 25.8%, according to the latest market data from TMLS.
While the median home sale price in April 2021 was $330,000, last month, the median price of all Triangle homes sold was $415,000, an increase of $85,000 in one year.
That’s “unprecedented,” said Fowler. “Not just the houses that sold. All homes in the area appreciated by a large amount in just one year.”
Take Wake County. According to the latest TMLS data, the county saw a median home sale price increase of $100,000 between April 2021 and April 2022. While the median home sale price was $385,000 in April 2021, it grew to $485,000 in April 2022, an increase of 26%.
And in Durham County, the growth was even greater, according to TMLS. While the median sale price of a home in Durham County was $319,500 in April 2021, the median sale price among all home sales in April 2022 was $426,000, an increase of $106,500 or 33.1%.
The run up in home values has left many homeowners in a strong position, due to the increase in their home equity. In the Durham-Chapel Hill and Raleigh-Cary metropolitan statistical areas, which include seven counties, some 56% of homeowners who have borrowed money through a mortgage loan now own homes that are worth at least twice as much as the remaining loan balance, an analysis from ATTOM Data Solutions found earlier this month.
“Winners continue to be homeowners,” said Fowler. For many Americans, homeownership is still the pathway to family or household wealth, Fowler noted. “Owning real estate delivers wealth and security to more Americans than any other investment,” he said.
Many Triangle homeowners are now ‘equity rich;’ here’s how to cash in
Renters are being squeezed
But not everyone who lives in the Triangle is a homeowner. “Losers continue to be renters and those without housing security,” said Fowler.
In Raleigh, rents have increased by 20.9% in the past 12 months, according to the latest rent report from Apartment List. In Durham, rents have increased by 18.3% in the past 12 months, the report finds. To secure a lease on a one-bedroom apartment, those in Durham can expect to pay $1,187 and those in Raleigh can expect to pay $1,371.
Meanwhile, for those seeking a two-bedroom apartment, the median price of renting a two-bedroom unit in Raleigh was $1,570 and in Durham was $1,424.
And while Zillow concluded that it’s possible that rental increases have slowed nationally based on March 2022 data, the firm still calculated a 16.6% annual increase in rent in Durham, with an observed rental average of $1,612 in the most recent report. In Raleigh, Zillow calculated an 17.7% increase in rental rates in the prior 12 months and an observed rental average of $1,706 in the latest report.
Rental vacancy rates were 5.8% nationally during the first quarter of the year, according to the latest available data from the U.S. Census Bureau. That’s the second lowest quarterly vacancy rate observed since 1984 (the fourth quarter of 2021 was a vacancy rate of 5.6%).
And, as new college graduates begin to migrate to different metropolitan regions, the Triangle may be an appealing destination. A recent study ranked both Durham and Raleigh in the top 20 cities in the United States for early career professionals. And that could put additional strain on rental markets, the Zillow analysis noted.
Wake among least affordable home markets; Those making average wage can’t afford median home
Will there be any relief?
It’s largely believed that increasing mortgage interest rates could modulate and stabilize home sale prices. The thinking is that rising interest rates tamp down demand. But there are supply side considerations, as well, said Dr. York.
“As long as our prices are more affordable than some other areas of the country, we will still pull in new residents and businesses,” said York. “The relocations that are searching for a more affordable place to live and work will stop once our prices become the same as prices in other high priced areas.”
That would almost certainly price out many would-be homeowners in the region, as Zillow calculates the median home value for a property in the San Francisco region to be $1,644,703.
“Hopefully our prices will not get that high if we can find ways to continually increase our supply of housing that matches our increases in demand,” said York. Yet, there’s a projected shortage of 900,000 housing units in North Carolina through 2030, Alexandra Forter Sirota, the executive director of the North Carolina Budget & Tax Center, said during a virtual Fair Housing Community Conference in April.
“The reality is that housing prices in our state are growing far faster than income,” said Sirota. “Stagnant wages are making it harder to buy a home,” said Sirota. “There’s a shortage of homes to buy.”
Last month, Zillow forecast a national growth rate of 14.3% in home values through March 2023, however, the company has updated its forecast with a prediction of 11.6% nationally through April 2023 in the latest forecast. Still, the Triangle has outpaced the national home price increase rate since the onset of the COVID-19 pandemic. And if demand continues, the price appreciation in the housing markets may continue, as well, no matter what interest rates do.
There could be policy changes at the state level that could provide some form of assistance for those facing affordability pressures, too.
North Carolina Governor Roy Cooper’s proposed FY 2022-2023 budget includes “affordable housing at historic levels but leaves some current needs unaddressed,” a blog post published earlier this week by Anna Patterson, a policy analyst at the North Carolina Housing Coalition reads.
North Carolina faces shortage of 900,000 housing units by 2030, exec warns
"do it" - Google News
May 20, 2022 at 01:17AM
https://ift.tt/f1usGcJ
Thinking about buying a house? Do it now as costs keep soaring, economist says - WRAL TechWire
"do it" - Google News
https://ift.tt/sbcTOMk
https://ift.tt/gMAqmHx
Bagikan Berita Ini
0 Response to "Thinking about buying a house? Do it now as costs keep soaring, economist says - WRAL TechWire"
Post a Comment