The Real Estate Market Is Frozen
WILMINGTON, NC - The real estate market in most parts of the country, yes, even here in Wilmington, is at a state of a standstill. Despite a significant decrease in buyers in the market, inventory levels just aren't increasing. In fact, according to recent industry data, last month, we had only just over 12,000 newly listed homes in all of North Carolina, a 26.2% decrease from the previous year. There may be fewer buyers, but there are even fewer homes available.
One would think that with fewer buyers searching for homes that inventory would rapidly skyrocket, like the slow-downs of the past. Over the last two years, inventory levels were held low because of the sheer number of homebuyers and investors on the hunt for properties. As soon as a property was listed for sale, buyers swarmed to make offers. Today, the offer environment has changed. Buyers are looking at much higher finance costs, which heavily impacts their buying capacity.
As the housing market continues to shift, many potential homebuyers find themselves in a pinch when it comes to rising mortgage rates. This shift has not gone unnoticed as it's created a unique challenge for those wanting to secure a property, even though there are fewer buyers in the market to compete against.
Sellers Are Afraid To List Their Properties
The challenging mortgage environment has not gone unnoticed by sellers. While home prices haven't taken as big of a hit as some expected, sellers have another concern regarding listing their property. Unless a seller isn't looking to purchase another property or happens to be an all-cash buyer, they will be faced with the same high-interest rates and low inventory of homes to choose from as current buyers.
Imagine being a homeowner with a current mortgage interest rate of around 3% and then being faced with a 6 to 7% interest rate should you choose to sell your home and purchase another. Such an interest rate jump could mean hundreds, if not thousands, more on monthly payments of a loan of the same value as your previous mortgage. Furthermore, potential sellers are aware of the lack of inventory in the market and know they could have difficulty securing a replacement property. For many sellers, this is enough motivation not to move and to wait out the current mortgage interest rate climate.
And thus, we have a frozen real estate market. Those homebuyers and investors still in the market remain hungry for inventory, while potential sellers no longer see it financially beneficial to move unless absolutely necessary. Yes, they can still sell at a much higher price than they could pre-Covid and likely for more than they could in the coming year, but they are frozen with nowhere to perceivable go.
Opportunity for New Home Builders
The current home finance climate and lack of inventory are highlighting the already existing housing shortage in Wilmington and surrounding areas. As a result, the market is frozen, but it's also creating a unique opportunity for home builders to consume even more of the area housing market. Sure, it's going to take longer to sell, and home builders will have to pay attention to buyer demands and be welcoming to agents again, but if builders stay focussed on being fair and attentive to what buyers want, they will do quite well in the coming year.
What Will Be The Disruptor?
There's always a disruptor, and a disruptor is needed to improve market conditions; the only solution is more new inventory. New home builders or existing homeowners that can sell should not fear high-interest rates as the market is desperate for new inventory and achievable prices remain high. Wilmington has one of the fastest-growing metros in the country, with the median sale price increasing by over 35% in the last year.
If you’re looking to sell your home, or need help finding a property, contact Buddy's team at Waypost Realty. We sell properties through traditional listings and offer an easy wholesale purchase through our investment team, who complete a buyer-friendly fix and flip.
by Buddy Blake, Broker & owner of Waypost Realty, located in Wilmington, NC.