For the past few years, the real estate market in Wilmington and surrounding areas has been hotter than the flickering heat lines that emerge from Interstate 40 on a scorching afternoon. But are we on the way to a colder real estate market?
The economic data analyzed by Lawrence Yun, Chief Economist and SVP of Research at the National Association of REALTORS®, certainly paints an interesting picture. Yun recently outlined his beliefs about the future during a virtual presentation at a breakfast/information session hosted by Cape Fear REALTORS® and the Cape Fear Home Builders Association.
The session was held at the Ballast Hotel in Wilmington and began with an analysis of recent housing market trends. Unsurprisingly given the anecdotal data I’ve received from my colleagues and clients, the median sale price in the Wilmington metro area increased 14% in 2021, to $325,000.
At 6.12 million units nationwide, existing home sales were at their highest level since 2006. This is partly due to the strength of the economic recovery, as Wilmington now has more jobs available than before the pandemic. Although recreation and hospitality still lag behind, Wilmington outperforms the state in labor force participation. Along with many other factors, this could explain why Wilmington was the second fastest growing metropolitan area in the state last year.
Of course, rising prices have a negative impact on affordability. Yun also pointed to a number of additional factors that he expects to calm the market going forward. Along with the war in Ukraine and rising interest rates, he believes the slowdown in government bond purchases, also known as quantitative easing, could be a headwind for the housing market this year. .
The war in Ukraine should exacerbate inflationary pressures and oil prices should continue to rise. This is particularly impactful for local REAL ESTATE AGENTS, as a large percentage of the job requirements involve driving. Along with supply chain issues, inflationary pressures will continue to drive up construction costs and could push construction timelines back another four to 10 weeks.
Although initial interest rate hikes may spur increased demand from homebuyers due to fear of missing out, Yun predicts that demand will eventually slow because buyers will be shut out of the market and / or will not be able to qualify for a mortgage. He expects the average rate on a 30-year fixed rate loan to reach 4.5% by the end of the year.
However, headwinds are not synonymous with sadness and misfortune. Yun wrote in a corollary article to his presentation that home sales would decline by a factor of two to four percent, as long as rates on a 30-year loan did not rise above four percent. It may be obvious, but a reduction of two to four percent is not very significant since the pace of sales has been extremely strong in recent years.
Another factor that indicates the continued strength of the housing market is the continued trend towards people working from home. Moreover, although many fear that this market will resemble the bubble of the late 2000s, Yun points out that now there is minimal subprime lending, no overbuilding or oversupply, and the constraints of Current inventories are the result of years of significant automaker underproduction.
For more housing market advice, visit CapeFear.REALTOR or call 910-762-7400.
Ea Ruth is the 2022 President of Cape Fear REALTORS®, an organization with nearly 3,500 members and the voice of real estate in the region. Cape Fear REALTORS®, through advocacy, education and community involvement, supports efforts to protect homeowners’ rights, promote housing availability and provide resources to ensure that every individual has the right to share the “American dream”. For more information on this topic and the association, please visit www.capefear.realtor or contact Cape Fear REALTORS® at 910-762-7400.