The truth in what the real estate market is doing is quite different than what the media headlines might lead some to think.
Two of those issues are interest rates and home prices. While interest rates are much higher than what we saw in the past several years, they are not actually high compared to the last 50 years. The 50 year historical average for a 30 year fixed interest rate is 7.81. We are still below that average rate. And the 30 year average, which removes the really high rates of the late 1970’s to early 1980’s is 5.97. So with current rates at 7.00-7.25%, we are in the middle of those historical averages.
The media likes to hype the escalation of home prices, and that created the misunderstanding that prices are significantly inflated. But that is not the case. In the second chart below, you can see the trend line based on the long-term trend of 4% annual appreciation in home prices nationally. Charlotte’s historical appreciation rate is also 4%. The trendline illustrates where home prices should be today, and that shows that current home prices are 7% higher than than the trend line. That would hardly be called significantly inflated.
The final issue is falling home sales in Charlotte. While it is true that the number of homes that sold in the last 12 months is down 30%, it is also true that the number of new homes that hit the market is down by that same amount. What that means is that the inventory of homes available to purchase has not materially changed and is still critically low. And it’s a proven fact that when the inventory is low, home prices are not going to fall. In the last 12 months, home prices have risen 2.3%. That is encouraging news, because that is much closer to Charlotte’s 4% annual appreciation rate. Higher interest rates are certainly a big factor in the drop in home sales and number of new listings. While it remains to be seen what will happen to prices in 2024 as current interest rates persist well into next year, most real estate economists believe that Charlotte will not see a decrease in prices.
As it relates to interest rates, we have educating our buyer clients about loans that allow them to buy down their interest rates as much as 3%. We have even been successful in getting sellers to pay the buydown fees. So if you, or someone you know wants to purchase a home but is hesitant to do so because of current rates, let’s discuss some of these loan options.
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