What the Fed rate hike could mean for the hot Charlotte housing market
Charlotte’s hot real estate market is about to collide with the Fed’s attempt to cool down inflation.
The country’s central bank lifted interest rates by 0.75 percentage points on Wednesday, the highest such increase since 1994. It’s the latest in a series of rate hikes this year as the Fed attempts to get a grip on inflation.
Mortgage rates also shot up this week, reaching their highest levels in over a decade, and now stand at 5.78% for a 30-year fixed rate.
That could work to slow down the local housing market, although real estate agents told The Charlotte Observer this week it won’t necessarily be much easier to buy a home in the area. Here’s what they said about the recent hike.
‘A welcome change’
Brittney Wall, who owns Dragonfly Homes at Keller Williams, said she saw signs of the market starting to slow beginning late last year, right around when mortgage rates began to rise.
She said that houses are staying on the market just a little longer these days, and the number of bidders on a home has dropped from the 20 or more competing offers she often saw during the market’s hottest months last year.
One recently listed property had about a quarter of the walkthroughs and interest Wall had anticipated.
And now, she said, “buyers have a wariness about them.” She thinks the rising rates may soon lead some of them to give up their search, possibly in fear of an impending market crash — concerns Wall said are unwarranted.
“There is a stability to this market,” she said. “Owning is still better than renting.”
Still, it’s getting pricier to buy a home. The average U.S. interest rate for a 30-year fixed rate mortgage reached 5.78% on June 16, according to Freddie Mac. That number was just 2.93% this time last year.
Wall pointed out that historically, that’s still a relatively low rate.
“Our grandparents were paying 10, 12%,” she said. “I think we were a little spoiled with a 2 or 2.25% interest rate (for so long).”
Still, a higher interest rate means a more expensive mortgage – and that’s eaten into homebuyers’ budgets, Wall said, already stretched thin in Charlotte by inflation.
But Wall said the rising rates and subsequent slowdown has almost been a relief.
It’s thrown “a little cold water” on a hot market, she said. “It’s been a welcome change.”
Price growth slowing slightly
The people impacted most by the rate hike are first-time buyers, Charlotte Realtor Genevieve Williams said.
Without money rolling over from the sale of a previous property, first-time buyers often don’t have the same resources to pay a higher interest rate.
But overall, she expects the recent interest rate hike to have a limited impact on the city’s housing market. If interest rates continue to rise, Williams said, “price growth could slow a little bit and somewhat stabilize.”
The market is unlikely to slow down, she said. “Charlotte is growing too fast and there are too many people moving here,” Williams said. “The inventory is just lacking enough that we’ve yet to see interest rate hikes really affect our market.”
There’s always someone willing to pay more, she said.
In some cases buyers might be motivated by a rate hike to close a deal quickly and avoid further interest rate increases, according to Williams.
But the Charlotte housing market moved so fast even before rate increases, she said, that it would be hard to speed up the process any more.
“Buyers are already stretching their budget for their house, stretching the down payment,” Williams said. “People are trying to make a really competitive and strong offer to beat out other buyers when the house has only been on the market for a few hours.”
Still ‘brutal’ for buyers
Lou Redbord, Coldwell Banker Real Estate’s vice president for the Carolinas, agreed that people with limited financial resources were likely to feel the rate hike most.
“Those that are just barely making a down payment, those that really were relying on lower interest rates, may be priced out of the market temporarily,” Redbord said.
That could push out would-be buyers who might have been able to consider getting buying a home a year or two ago, Wall said.
If you’re looking to buy a home, Redbord said now is still a good time because things won’t get cheaper anytime soon. And even if you start out with a relatively high interest rate, rates will eventually come down again and you’ll be able to refinance.
Williams said the most important thing if you do enter the housing market is to follow your real estate agent’s guidance, and be ready to act fast.
“It’s brutal out there for buyers,” Williams said. “If you’re not prepared, then you’re just not even really going to have a chance.”
This story was originally published June 17, 2022 at 5:30 AM.
