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Cornelius News

It’s still a seller’s market, only less so

Real Estate 2024 By Erica Batten

Jan. 19. The local residential real estate market may have seemed stacked against buyers, particularly new ones, but there is cause for optimism going into 2024.

With home prices and interest rates rising precipitously since 2020, the overall market still favors sellers.

But not as intensely as it has in recent years.

“It will continue to be a seller’s market because of low inventory,” said Gary Scott, president of Allen Tate Co. “We anticipate that the month’s supply of inventory will increase, although not to the level that would make it a buyer’s market.”

Gary Scott

A buyer’s market, Scott said, is one with more than six months’ supply of inventory. While the supply dipped as low as 0.7 months in December 2021, it is now at three months nationwide.

Locally, the outlook is a bit different. Inventory is at 1.8 months, the same as this time last year. However, the 12-month average of new listings has risen 8.7 percent year-over-year.

Also unique to the local market are high-value homes. New listings for homes topping $1 million are up 5 percent over 2022, and the inventory reflects a six-month supply.

“We’re seeing a much more balanced market for this segment,” Scott said.

Interest rates have played a part in the inventory picture. As mortgage rates have risen since the pandemic, homeowners with historically low rates—some below 3 percent—have been reluctant to sell, particularly since the concurrent rise in prices wouldn’t allow for an upgrade.

On the buyer side of the equation, home prices relative to income reached historic highs in October, demanding buyers expend an average of 40 percent of their earnings on a mortgage payment.

Young potential buyers—those between the ages of 20 and 35—number 72.9 million nationwide. As of July, the effective rent rate was $1,675, compared to the average monthly mortgage payment of $2,051. Many of this cohort are choosing to rent, and a boom in multifamily construction reflects this choice.

Bright spots

This may seem like a gloomy forecast for potential buyers in 2024, but there are some bright spots. According to Zillow, home values won’t be falling anytime soon, but they aren’t projected to rise, either. Thus, wages and savings may be able to make gains that weren’t possible for the past two years. Buyers won’t have to spend as large a percentage of their income on housing.

They will also have more confidence in their buying power as the labor market continues to favor workers. The last several part of 2023 showed several consecutive weeks with increasing mortgage applications.

Interest rates will help relieve some of the pressure on buyers as well. Scott expects 2024 interest rates to dip back into the 6 percent range.

Keller Williams agent Bob Warchol said that even if rates hold steady, buyers are beginning to accept a new normal at or above 6 percent.

“I’m not getting a lot of kickback from the buyers on the rates,” Warchol said. “It’s just a matter of the time being right.”

Warchol also said the decision to buy has a lot to do with consumer education. Many first-time buyers don’t realize that with VA or FHA loans, their total initial outlay, including closing costs, could be well under $10,000.

Young buyers who weren’t in the market for housing as little as two years ago might not be aware of how much the market has changed since then.

“Two years ago, we were selling houses with multiple offers over the weekend, and people were overbidding the property by $25,000 to $50,000,” Warchol said.

The trend peaked in May 2022, when 59 percent of homes sold above the listing price. In 2023, the number was slashed by more than half.

Wait, or not?

So while affordability may not have eased until now, buyers at least have more flexibility to shop around. Sellers are also granting concessions in more than 40 percent of transactions, a near-record high, according to Redfin.

“It’s actually not a bad market,” Warchol said. You just have to have the right perspective.

He recalls an industry publication from his early real estate career. A cartoon featured an elderly couple with the caption “Buyers waiting for the prices to go down.”

The takeaway: If buyers wait for a buyer’s market, they’ll never get it.

Growth market

Thirty years ago, Warchol began his career in an area of New Jersey just 45 minutes outside of Manhattan. Surprisingly, he said, the relocation segment of his industry is much larger here. People move to the Charlotte area for the racing and banking industries, to follow children and grandchildren who have relocated here, and to enjoy the proximity to the region’s natural amenities: the lake, the mountains, even the beaches.

The South overall is leading the nation in growth. Wells Fargo reports that between 2022 and 2023, the region added 1.2 million new households, a rate outstripping all other regions in the U.S.

“Our area is well-suited for pretty much anybody,” Warchol said.

Scott echoes this optimism. “The outlook for both the Charlotte region and the Carolinas is more favorable than anywhere in the country,” he said. “We are confident that the Carolinas will continue to outperform the country’s overall real estate market.”