On Sunday, March 15, 2020, the federal government cut the federal interest rates down to zero percent. This is the second federal rate cut in response to the Coronavirus crisis. Mortgage rates are not directly tied to the federal interest rates. However, the mortgage interest rates will be affected by moves that investors make and other factors.
Federal Rates Cuts and Other Economic Stimulation Activity
The government is fearful that the economy will fall into a deep recession if they don’t make moves to stimulate it. That’s why they lowered the federal interest rates to zero. There is more economic stimulation legislation that should help during this COVID-19 crisis, as well.
Bonds and Other Safe Assets
Many investors have been buying bonds and other safe assets as a result of the federal interest rates cut. The 10-year Treasury note has been pushed to new lows.
Quantitative Easing Program
The government has also initiated a $700 billion program to help ease some of the economic hardship that Americans are facing. Part of this program, the federal government’s Coronavirus Aid, Relief and Economic Security (CARES) Act, states that all adults will receive $1,200 and an additional $500 for each child. They are currently finalizing the details on how to distribute this money to the American people.
They have also cut emergency lending rates to .25 and have extended loan terms to 90 days. This will help in an emergency.
Stock prices are falling at record speed. They should recover long-term; however, people may need to cash them in and tap into their investments just to pay day-to-day living expenses. Hopefully, the money people will receive from the easing program will be spent and put back into the economy to help.
Foreclosures and Evictions
The federal government has passed legislation that foreclosures and evictions cannot be filed for now. This will help homeowners and tenants keep their homes during these trying times.
The federal government is also being more lenient with student loans. They originally stated that students would pay interest only and not have to keep paying down their principle. Now they are stating that no federal student loan payments are required until further notice.
Cutting the federal interest rate should also make credit card interest rates go down. Americans are advised to call their credit card companies to see if their interest rates have been lowered.
What’s Happening to Mortgage Rates?
Mortgage interest rates have fallen to historic lows. The economic activity indicates that mortgage interest rates will fall even more. The mortgage rates are typically tied to the 10-year Treasury note. The hope is that people will still purchase houses. The real estate industry has been deemed an “essential” industry during the Coronavirus pandemic. The 2020 spring real estate market started off strong in January, February and the beginning of March. Now, with many “stay at home” orders in place it has slowed down. There are still many people who have to find a place to live or sell their homes for one reason or another.
First Time Home Buyers
The group of millennials that are now turning 30 years old, make up the largest percentage of first time home buyers. These people tend to take more risks. They are out on the front lines purchasing homes at great mortgage interest rates right now.
This is a great time for investors to add to their real estate portfolios. Money is extremely cheap to borrow right now. Also, rent prices continue to increase.
Adjustable-rate mortgages (ARMs) are the most closely tied to the federal interest rate cuts. Most variable rates are tied to the prime or London interbank offered rate (LIBOR.) This means that the people who have variable interest rates will see reductions to their mortgage bills.
The government is hopeful that the emergency cuts in the federal interest rates and the historically low mortgage interest rates will stimulate the economy and keep the United States from a recession. The government and banking is working hard to ensure that the COVID-19 pandemic doesn’t economically affect Americans in the long run.
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What’s the forecast for our 2020 Triangle area market? To answer that question, I’ll share a brief recap of our 2019 market and look at how home prices have fared the past three years.
In November 2019, home showings rose 8% compared to November 2018, pending sales rose 14%, and inventory dropped 3%. Overall, closed sales rose 5% as a whole in 2019, and the average days on market stood at 47 days.
In Chapel Hill, the average price appreciation was 3.5% in 2017, 3.1% in 2018, and 4% in 2019. This type of appreciation is fairly normal in our market.
Durham, meanwhile, has been on fire. In this area, prices appreciated by 7.2% in 2017, 9% in 2018, and 7.6% in 2019. This is why the Durham city government raised property taxes again at the beginning of last year—just two years after they previously raised them. Typically, home values are recalibrated for property tax purposes every four to eight years.
With the economy doing well, conditions are set for us to have a strong, dynamic year.
In the Cary/Apex/Morrisville area, price appreciated by 6.4% in 2017, 4.1% in 2018, and 4.3% in 2019. Finally, in Chatham County, prices appreciated by 4.5% in 2017, 4% in 2018, and 5.9% in 2019. All in all, we’ve been doing pretty well in terms of price appreciation.
As we move further into 2020, our market is poised to do well. Interest rates are low, and inventory is extremely low. It’s usually low this time of year, but in this case, it’s lower than low. In most price ranges, we only have a month of inventory. With the economy doing well, conditions are set for us to have a strong, dynamic year.
As always, if you have questions about this or any other real estate topic or are thinking of buying or selling a home soon, don’t hesitate to reach out to me. I’d be happy to help.
The latest are numbers in for our real estate market and I’m excited to share them with you today. In the Triangle Area, new listings are down about 2.9% year to date. At the same time, inventory is down 8% and the median sale price is up 3%.
The market has been pretty good so far this year, but there are indications that it’s slowing down. A healthy inflation rate is about 2%, but we’re a little below that now. A certain pressure is being applied on the Federal Reserve to decrease interest rates right now to stimulate the economy.
In the Chapel Hill market, listings are down, closings are down, average prices are up, and days on market remain flat at about 39 days. We currently have about 3 months of inventory right now—a low mark that puts us in a seller’s market.
The indicators in Durham are a little different. This year, listings are up, closings are up, average prices are up, and the average days on market is only about 23 days. They have about 2 months of inventory.
Planning in advance is easier with a local real estate expert.
If you’re thinking about selling your home anytime in the near future, it’s smart to plan in advance by reaching out to a local real estate expert early in the process. This will help you plan accordingly, prepare your home, and get the most bang for your buck when it comes time to sell.
If you have any questions for me about the current market or about real estate in general, don’t hesitate to give me a call or send me an email. I look forward to hearing from you soon.
When you are saying that the Cary North Carolina market has a low inventory it depends on what you are comparing it too. Are you comparing it to the number of homes on the market last year at the same time? Are you comparing it to homes in a price range? Or even homes in a certain area?
According to Reuters, “U.S. home sales fell more than expected in December as the supply of houses on the market dropped to a record low, pushing up prices and sidelining some potential first-time buyers”. They also said, A shortage of affordable homes for sale will frustrate the ambitions of many first-time buyers. First-time home buyers are forced to stay in rental market longer than planned. This information was provided by Matthew Pointon, property economist at Capital Economics in New York.
“We expect little growth in sales in 2018, given tight inventories,” said Gregory Daco, chief U.S. economist at Oxford Economics in New York. Affordability is crimped by rising mortgage rates, posing an additional headwind to sales.
The Cary North Carolina market will fluctuate depending on price and area of the property. A 6 month supply of property often considered to be a balance market by that National Association of REALTORS®. When homes sell faster than 6 months it is considered to be a seller’s market. Likewise, when homes take longer than 6 months to sell that is considered a buyers’ market.
Everyone knows that supply and demand affect price. When the so called “Housing Bubble”, the demand decreased so much that the supply increased to 4 million houses or more. The prices of homes took a beating. Also, the increased inventories of foreclosures, short sales, bank refusing to loan and the home building industries lack on new housing starts all contributed to very low home prices.
“New construction has showed signs of perking up, but remains well below estimates of demand,” said Aaron Terrazas, as senior economist at Zillow. “More importantly, builders face rising labor, materials and land costs making it difficult to build at a price point attractive to entry-level buyers”.
Since that time the economy has improved, and banks have started to lower requirements, interest rates have stayed low and foreclosures have slowed. Inventory nationwide is reduced to approximately 2 million homes. When demand is at a constant level and inventory is reduced, home prices trend upwards. This is because there are the same number of buyers trying to buy less number of homes.
Mortgage rates are now climbing each week in 2018 and consumer confidence level is going up. This means that Cary North Carolina market is having an increase in demand. Buyers are now noticing that home prices are increasing.
Spring is almost here and that is the normal busy time of year. Home prices are going up and inventory is dropping. So it is time to decide what you want to do before it is too late.
Real Estate Market Update: Sales prices in Chapel Hill, Durham and Cary are on the rise. The three-year trend is excellent with median prices in Chapel Hill and Cary around the $400,000 mark. Houses in much of the rest of the Triangle, including Durham, are more affordable. Median prices in Durham, NC are about $250,000. Nationally, housing affordability remained flat for 2017.
Real Estate Market Update: Days on Market (DOM) have been are still are amazingly low. This means that overall houses are selling fast. In January, however, DOM have increased a bit. I think this is primarily due to a slightly slower start to the season and the weather. To be specific; in July 2017 Average DOM were 13 in Chapel Hill, 5 in Durham and 6 in Cary. In November 2017 this increased a bit to 33 in Chapel Hill, 8 in Durham and 10 in Cary.
In January, this has stretched out a bit more to 36 in Chapel Hill, 10 in Durham and 14 in Cary. I expect to see these numbers come down as the season heats up.
Real Estate Market Update: The supply of inventory is incredibly low. I don’t remember a time when inventory was this low. In Chapel Hill there is less than 3 months of inventory and in Durham and Cary there is less than 2 months of inventory. This is truly an excellent time to sell. If you have been sitting on the fence, with inventory low, it is a sellers market. Prices are rising. With interest rates still low, buyers are moving on the opportunity before prices rise further.
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Real Estate Market Update — The National Association of Realtors Chief Economist Lawrence Yun says that “the national housing market is nearly stalled due to a lack of supply.” This theme resonates in our Triangle real estate market, although we are experiencing fairly robust activity, despite inventory challenges.
North Carolina is now the 9th most populous state with 4 Triangle Counties among the fastest growing in NC since 2010: Wake (+16%), Chatham (+14%), Durham (+13%), and Johnston (+13%). The Raleigh-Cary Metro area population grew by 2.5% in 2016 alone, and is the 14th fastest growing region in the US. The Durham-Chapel Hill Area grew by about 1.5% in 2016.
Fueling this growth is the general migration pattern in the US from North to South. Newcomers are attracted to our climate, employment opportunities, affordable housing, quality of life, healthcare, and by their adult children who moved here over the past 15-20 years – “trailing grandparents”.
Immigrants and investors have also contributed to growth in our area, including sizeable Mexican, Asian, and Indian populations. One less obvious factor influencing the market, especially at the entry level, are the increasing number of investors who are flipping homes, and who now account for nearly 6% of purchases nationwide.
All of these factors are driving the robust demand and appreciation impacting our real estate market, so let’s look at an overview of the trends and statistics of the Triangle, and then try to unpack some of this data for several of our submarkets such as Chapel Hill-Carrboro, Durham, Chatham, and Cary-Apex.
Triangle Real Estate Market Update
We are now in a strong “Seller’s Market” in the Triangle due to increasing demand for housing, decreasing inventory of homes, and historically low interest rates. The average “Days on Market” is now under 2 months, with about 2.5 months of inventory in pre-owned homes. New construction inventory is 3.5 months, with 1.5 months of inventory for townhomes and condos.
With strong demand for housing coupled with low inventory, appreciation is gaining ground in the Triangle, ranging from a low of 4.2% in Chatham County to 15% in Durham, with 5-6% per year appreciation for most of the remaining Triangle regions.
Average median sales price is up 6.5% over the past year (Sept 16- Sept 17) to $264,000, and overall sales were up 4.5% for the same period. The strongest sales volume has been for 4+ bedroom detached homes over $300,000. However, the fastest pace of sales has been for homes under $200,000, selling in just under 30 days.
Nationally, new homes are being built at only half the rate needed to keep up with demand. Rentals and apartments are a major focus of the
national new construction boom.
“Metrostudy’s New Construction Survey” of the Triangle housing market shows that 2,547 new homes were started in the first quarter of 2017, up 4.3% from 1Q16. Annual housing starts through the end of 1Q17 were 8.5% higher than for the same period in 2016, and annual closings for new construction were up 11.5%.
The average sale price of a new home was up 15% with the most popular price point in the $300K – $399K range. Lot sales increased by 23% to 12,050 units for the year ending 1Q17.
Chapel Hill – Carrboro Real Estate Market Update
Year to date (Sept 2017), listings and closings are down 4% an 1% respectively, compared with the same period in 2016. There are 3.7 months of inventory now, and the average Days on Market is 54. Median sale price is up 0.6% to $360,000 with sellers seeing 97.4 % of their original asking price. There seems to be downward pressure on prices from new construction and affordable alternatives in neighboring areas such as Chatham, Hillsborough, and Southwest Durham.
Southwest Durham (Southpoint Area) Real Estate Market Update
There were 5.7% fewer listings in 2017 and 2% fewer sales, but the median price increased by 6.7% to $240,000, and homes sold for 99.2% of asking price. There is only about a month of inventory available, so the pace is quick for sales in Southwest Durham, especially in “tried and true” subdivisions such as Woodcroft, Twelve Oaks, and Hope Valley Farms. Some higher end homes such as those in Colvard Farms have longer market times and more price concessions to reach a sale. Drees, Toll Brothers, Terramoor, and Pulte all have new home communities active in this market.
Durham (Overall) Real Estate Markete Update
Again, inventory is down to 2 months supply with fewer new listings coming online, and 4% more closings over the same period last year, so demand is there. Prices reflect this tight supply of homes and are up 9% over the past year, with the median home price at $229,000. Days on market is down to about a month. The most active price point is under $399K. Entry level homes within walking/biking range of downtown are often under contract within days and with multiple offers due to the rejuvenation of downtown Durham.
Cary-Apex-Morrisville Real Estate Market Update
This region has been very active with high demand and increasing prices, with new construction balancing out some of that demand. Bella Casa subdivision in Apex has closed 33 new homes averaging $509K just in the third quarter of 2017. Lochmere, Cary Park, and Kitts Creek had strong resales of over 20 homes each in the third quarter of 2017 with an average home price close to $400K. 4,100 of the 5,400 homes listed this year to date have been absorbed with an average of 31 days on market. Cary and the Apex-Holly Springs Area continue as popular destinations for transplants seeking affordable, newer home options that are close to Raleigh and RTP.
Chatham County Real Estate Market Update
14% more homes closed in Chatham County this year to date (Sept ‘17) compared with the same period in 2016, with the median sales price up 4.5% to $365,000. There are over 450 homes currently for sale in Chatham with an inventory of about 4 months and “Days on Market” of 2 months. Much of this inventory is new construction such as Briar Chapel (about 2 yrs. inventory left), Chapel Ridge, Westfall, Legacy at Jordan Lake, and so on. Prices have rebounded significantly, but not completely, from lows in the 2008-2010 years.
Chatham is still an affordable alternative compared with some other regions of the Triangle, and remains a desirable destination for “tax refugees” and “downsizers” from Chapel Hill-Carrboro, Cary, and Durham. Retirees and transplants also abound, as in Fearrington Village and Briar Chapel.
Chatham Park is the “800-pound gorilla” in this room with 7,100 acres of mixed use community, and 60,000 potential new residents in 22,000 homes. Construction of homes will reportedly begin in North Village near Bynum by early 2018.