Anyone who doesn’t live under a rock is well aware of
the extreme “seller’s market” real estate has been experiencing for several
years—especially during the last year or so.
The Charlotte region is no exception.
The market in the Charlotte metro area has been characterized by low
inventory of homes for sale with a large number of buyers seeking those
homes. This dynamic has led to bidding
wars among buyers and closed sale prices well above listing prices. The situation has actually only escalated over
the last year. As
of May, 2022, the inventory of all homes available for sale, regardless of size
or price, in the Charlotte area has actually declined 12.2% from its already
low levels in 2021. This would not seem
to point toward a cooling of competition for available homes. But there are other factors that most experts
expect to cause an increase in inventory and a decline in the number of
interested buyers over the next six months to a year.
One
of the major differences between the housing market of 2021 and 2022 is the rapid
increase in mortgage interest rates—and the expectation that those rates will
continue to increase as the Federal Reserve attempts to check inflation over
the next twelve months or so. Few
experts expect a housing value crash in the coming 6-12 months. It is more likely there will be a correction
in the housing market, resulting in decreased home values of 10% or so. The reason for this is that increased
mortgage rates place homes out of reach for many homebuyers (see my blog
post for June 2022 for an exploration of this), and even if inventory of
available homes does not rise significantly over the next year, fewer buyers
actively seeking the homes that are available will put pressure on home
prices. Supply may not increase much,
but demand is likely to decrease.
The
continuing lack of inventory into the foreseeable future is what is likely to
save the market from an all-out crash. In
the Charlotte metro area over the last year, median closed home sale prices
actually increased a whopping 18.9%.
That momentum is likely to be carried forward for several months as mortgage
rates gradually rise. That is because
inventory is expected to remain low. But
sellers should not expect this to last long into 2023.
The
current market is still characterized by sellers requiring high due diligence
fees (non-refundable fees paid directly to the seller to compensate them for
taking their home off the market when it goes under contract) and “as is” sales
in which the seller does not make any repairs or concessions for property
condition. Those who had been reluctant
to sell because they would only have to find a replacement home might consider
the notion of renting for a year, watching the market cool, and buying a
replacement home at an anticipated reduced price, year-over-year.
In
the relatively short time this market is expected to persist, any home owner
considering a sale of their property might want to get their home on the market
sooner, rather than later. Things are
about to change. They won’t change in a
week or a month, but they will change. Potential
home sellers: you can’t say we didn’t warn you.
