A look into the impacts of increasing interest rates on our local real estate market

You don’t have to pay much attention to know that mortgage rates have been on the rise for the last few months. Rates have increased exponentially since the early part of 2022 and it doesn’t appear that we’ve hit the ceiling just yet. As we monitor the interest rate increase, we must acknowledge that this will undoubtedly affect our local Real Estate Market here in Waxhaw and Charlotte. Below is a graph from the FRED Economic Data website showing historical interest rates for the last 10 years. 

As you can see interest rates have fluctuated dramatically over the last 10 years, but what is most notable is the peak of rate in 2019 and the subsequent slide thereafter. Most people attributed COVID-19 to the historically low interest rates, but the reality is we were already seeing a decline as of the end of 2018. COVID certainly impacted rates, but the decline was already in full swing. Below is another graph representing US housing prices in the last 10 years to compare to the mortgage rate graph above. 

As you can see in the graph above, housing prices across the US have increased dramatically, nearly doubling in the last 10 years. The takeaway from this graph is that over the last 8 years prior to COVID there wasn’t much correlation between interest rates and home prices. If we dissect the data considerably, we’ll find instant correlations, but over the long term we can see that home prices have been on the rise for quite some time. 

The looming question is how much will interest rates impact the local market inventory and prices? Unfortunately, the answer isn’t as simple as it will go down or up, it’s based on a larger amount of economic data and consumer confidence both in the Country and the product. As we combine the data, we can start to see that consumer confidence is decreasing now that home prices and interest rates have reached a level not seen for nearly 20 years. 

The reason for this is homebuyers have been the underdog for the last 2-3 years as the real estate market has been dominated by sellers. Home prices haven’t quite doubled in the last 2-3 years, but the increased mortgage rates and increasing home costs mean that a buyer is going to pay double today what their mortgage would have been just one year ago for the same home. It’s a staggering thought to realize how quickly the rising interest rates can change the affordability and desirability to own a home. 

Don’t forget that not only have the costs of owning a home increased, but so have the rental costs in our area. Rents in the Charlotte region have nearly doubled in the last few years and many are finding that renting is considerably less desirable than owning because of how much less you get for the money. For example, a 3-bedroom, 2 bathroom, 1200 sq ft apartment might be renting for $1,600 - $1,800/ month, but that same size detached home would cost around $1,500/month depending on down payment. It might not sound like much, but this equates to a savings of $1,200 - $3,600 per year, not to mention the equity gain from making your mortgage payments. 

It's my expectation that over the next 6 months we’ll begin to see some normalization to our market as the average days on market for a home will increase and home appreciation will decrease to a more stable 3-4% per year. Remember that we still have limited inventory and builders still can’t build homes fast enough, so we’ll continue to see growth, although it should be at a slower pace than these last few years. I always encourage those that are interested in learning more about the market and whether they should buy, sell, or invest to give me a call so we can discuss your best options. Every situation is different, and I’d love to help anyone that could use it or wants it. 

If you’re considering buying or a selling a home in the Waxhaw area and would like to learn more about the process, please don’t hesitate to call me at Briggs American Homes at (980) 250-2795. I would love to help you and your family with all of your real estate needs! 

Check out my latest client testimonial! “We are so fortunate to have worked with Matt Lawson! He has been an invaluable resource throughout the entire process of buying our home. Right from the start, we got a good feeling about him. He could relate to our needs and really helped us bring our options into focus, saving us valuable time and energy. He not only has years of experience as a realtor. He has worked as a home inspector, published numerous articles to help inform prospective buyers… I can’t say enough. We found the right realtor. And the right house!" L. Berger

Matt Lawson, MBA is the Owner and Broker in Charge of Briggs American Homes, a real estate team at Keller Williams Ballantyne area. Matt lives and operates his business right here in Waxhaw, NC and is passionate about all things Real Estate.