Fed Rate Increases Cool Down the Housing Market
Rising prices and shrinking inventory have mauled the real estate market like a whipsaw for several years. Finally spurred to action by rising inflation, the Federal Reserve took decisive action in June, raising interest rates by three-quarters of a percentage point, the highest escalation in almost thirty years.
It didn’t take long for the effects to be felt. Home sales and new mortgage applications have plunged. The higher cost for loans, coupled with already high home prices, have cooled an overheated market. As consumer demand drops, inventory has increased – although not by enough to restore inventory to normal levels.
The Charlotte real estate market has already experienced a sudden boost in the number of homes available for sale. And we’re not alone. Even the hottest housing markets in the country, including San Francisco, Seattle, and San Jose, are seeing modest increases in home availability, as well as a cooling down in the growth of home prices. That’s good news for buyers. Home sellers, who have long taken for granted offers exceeding asking price, are getting the message, and are making more concessions as the market tightens.
As of June 30, the number of days on the market until sale is the same as a year ago – 14 days. That shows it’s still a hot market, though cooler than the last couple of years. Even more welcome is the rise in inventory. After years of decreasing numbers of homes for sale, we have finally reached a point where the number of homes for sale actually increased in the greater Charlotte region by 12.7%. That means 602 additional homes are on the market compared to last June, a new total of 5,334 units. The median sales price rose by 19.4% to $400,000, an increase of $65,000 from last year.
So, for the time being, home prices will continue to increase, but in smaller increments. Like a gigantic oil tanker at sea, the housing market has too much momentum to turn around quickly, but these first signs are definitely encouraging.