Where is Charlotte’s housing market headed? Realtors dish on rising rates, 1st-time buyers
Ashley Jamerson, a Realtor in Charlotte, saw the first signs of a shift for local homebuyers earlier this year.
It was a typically busy week in mid-April. Jamerson had five pre-approved clients ready to view about 20 properties that weekend. At the same time, a seller in Concord traveled out of town to leave their home open for showings, and Jamerson was scrambling to find a babysitter and get everything on the calendar.
Then, the average interest rate for a 30-year mortgage jumped up to 5%. The Concord property sat empty and, before the weekend arrived, all but one of Jamerson’s clients had backed away from their housing search.
“That was the first blow to buyers,” she said. Since then, rates have climbed another two percentage points and everything has changed for her clients, she added. “It just knocks them out (of the market).”
About a year and a half ago, Charlotte’s housing market reached a point of near-frenzy, as record-low interest rates made home loans affordable at every price point.
Real estate agents recall tales of buyers lining up at open houses, waiving inspections and putting down six-figure due diligence fees. Some offered tens of thousands over listing price just to nudge their way into a bidding war between dozens of others, one Realtor said.
Now, as interest rates rise and economic uncertainty lingers, agents told The Charlotte Observer that those days are well behind them. Higher mortgage rates have slowed sales, reined in a hectic market — and pushed many would-be buyers to the sidelines.
It particularly hurt those looking to buy their first home, Jamerson said, many of whom were on the cusp of affording their first property only to have their budgets “demolished” by the rising cost of loans.
“Gone are the days of appraisal and inspection waivers,” said Brittney Wall, owner of Dragonfly Homes at eXp Realty in Charlotte. “You can’t just stick a sign in the yard and get 20 offers the next day.”
A seller’s market in Charlotte
Wall likes to think of the housing market like a pendulum. About a year ago, it swung all the way to one side.
“It was fully a seller’s market,” she said. “They had the cream of the crop to pick from, as far as buyers.”
But as mortgage rates climbed — a trend that began in anticipation of Federal Reserve interest rate hikes early this year — the pool of interested buyers shrank, Wall and other agents explained. From January through October, the average cost of America’s most popular home loan more than doubled, rising from 3.22% to 6.94% by last month.
“It priced out a lot of would-be homebuyers, especially first-time homebuyers,” said Greg McBride, chief financial analyst at personal finance site Bankrate. “Even those who haven’t been priced out are more reluctant to take the plunge.”
On Oct. 27, the interest rate for a 30-year fixed-rate home loan rose to 7.1%, the highest it’s been in more than 20 years.
Home sales across the country are falling in response. In Charlotte, fervent demand died down as the higher cost of borrowing shrank buyers’ budgets and pushed many out of the market.
“All of a sudden, an approval for (a loan of) $350,000 is now only worth $290,000,” Jamerson explained. “And there’s nothing for $290,000.”
In early October, one of her clients closed on a home that had been on the market for 76 days. “That same house would have had a line out the door last summer,” she said.
Some buyers are “waiting in the wings,” Wall said, hoping for better interest rates or lower prices. In response, some sellers are waiting to list, helping create the slowdown.
“Buyers were starting to feel panicked,” she said of last year’s market. Now, “they’ve swung way in the other direction. Instead of being less panicked, they’re just not acting at all.”
Seasonal shift on home sales in Charlotte
Not everyone has been pushed out of the market as loan costs rise.
While many lower-budget buyers have backed away, Realtor Genevieve Williams said her clients are undeterred and much of the slowdown she’s seen is seasonal.
She works primarily with “move-up” buyers, many of whom already own a home and have plenty of savings. They’re moving forward despite higher costs, with plans to refinance when interest rates eventually fall.
“It’s not uncommon this time of year for the market to cool off a little bit,” Williams said.
Still, it’s far from the frenzy she experienced several months ago, which she described as “really defeating” for buyers. Clients would offer $150,000 dollars over asking price, waive inspections and appraisals, and still lose out on properties, she said.
“When you’re doing all of that and you still don’t win that offer, you don’t know what else to do,” she said. “That could not keep going on… I’m glad we pulled those reins back.”
‘A positive shock to the system’
Williams isn’t the only agent who views the recent slowdown as something of a welcome reprieve for her clients.
For those who can afford a more expensive loan, the current market offers more breathing room, said Marc Burns of Charlotte-based Brit & Bird Realty. “Those that can enter the market have a lot more opportunity. They don’t have to offer $30,000 over listing price just to get into a multiple bids situation,” he said.
Wall agreed. ““It shocked the system, but in a positive way,” she said of rising rates.
Burns noted that in Charlotte, home prices are still on the rise. From January 2021 through this September, the city’s median home price increased from $285,000 to $380,000, according to data from Canopy, Charlotte’s regional real estate association.
It’s also likely that mortgage rates will continue to increase as the Federal Reserve keeps hiking its benchmark rate. And a 2023 recession — which economists view as increasingly likely – could drag down the housing market nationwide and in Charlotte.
But don’t expect to see steep price drops in the city. The foundations of Charlotte’s market haven’t shifted, Williams said: there are still too few homes for too many people.
“I was in a meeting this morning with a client, and we’re talking about going in at $150,000 over asking price,” she said. “We’re just too far away from having the inventory that we actually need.”
This story was originally published November 10, 2022 at 6:00 AM with the headline "Where is Charlotte’s housing market headed? Realtors dish on rising rates, 1st-time buyers."
