While the Charlotte real estate market remains strong due to the region’s growing economy and high quality of living, it isn’t isolated from either the national real estate market or overall economy. That’s especially true when it comes to mortgage rates, which are ultimately determined by the Federal Reserve. So it’s no surprise that in response to the Fed’s tweaking of interest rates, the real estate market has cooled somewhat.
This is not only an expected development, but a welcome one. Our previous posts have commented on the moderation of a lop-sided sellers’ market, as evidenced by the cooling down of the rate of price increases and fewer closed sales.
November’s results suggest this moderating trend will continue. As of November 30, 2018, the percentage of original price received nudged down from 96.5% from last year to 95.9%, a decrease of .6%. However, shrinking inventory remains a significant issue. The number of homes for sale slid by 7% from November, 2017 to 9,701 units. This leaves the number of months supply of homes for sale at only 2.4, a decrease of 7.7%. As we’ve seen in past reports, the lack of supply has propped up the price once again, as the median sales price has bumped up from $221,000 from last November to the current median price of $235,000.
As the Fed’s increase in the cost of borrowing filters down through the economy, we can expect additional signs of a cooling real estate market. However, the effect should be gradual, for a couple of important reasons. First, while Freddie Mac notes that the 30-year fixed rate of 4.94% is the highest in seven years, that’s still lower than the 5.97% we saw in 2008.
The other reason we expect rising interest rates to have only a moderating effect on home prices is the overall economy. With a national unemployment rate of 3.7%, demand for Charlotte homes can only continue to rise, which will exert upward pressure on real estate prices.