In a nod to the 1980s girl band, Bananarama, we are getting ready for a cruel summer in real estate.
Halfway through 2023 and we now have seen the effect of higher mortgage rates on the real estate market nationally, regionally and locally. Through the rest of summer, expect the continued struggle with mortgage rates along with a resurgence in bidding wars and the lifeline of new construction in the business.
Nationally, new listings are down 28% year over year which places us at about half of what was on the market prior to the pandemic in 2019. Why is this happening?
In order for a seller to put their home on the market, they must have a place to go. Many sellers who refinanced in late 2020 or early 2021, likely have a rate close to 3% if not below. Why would a seller trade a 3% mortgage rate for a 6.5% mortgage rate on a home over 1.5 times the value? Most wouldn’t and that is why we are seeing such a low inventory of current resale listings on the market.
The sellers are benefitting right now because they can still create a bidding war on the sale of the current home by pricing it at market value or only slightly above. However, we are seeing many sellers sit on the market longer.
Here in the Triangle MLS, the average days on market for pending resale listings has gone from 70 days in January 2023 to 51 days as of July 5, 2023. The median days on market is also down during that same period from 58 to 29 days respectively.
Luckily for Buyers and real estate agents, new construction communities have been a lifeline. 53% of active listings are by builders selling new construction homes.
Builders have slowed building just enough to keep inventory low and prices climbing. As a result, 48% of pending listings are new construction.
Builders have also seen supply chains open up over the last six months and are able to build on a more reliable timeline. Delays in closing are not as common as they were during the peak challenges of the pandemic.
Lastly, there are economic indicators nationally that we are likely headed toward recession. Here in North Carolina, most residents will not realize there is a recession until it has already passed. North Carolina has positioned itself nicely with continued job growth, low unemployment and a business-friendly environment.
As a result, many people are still relocating to North Carolina from other parts of the country to take advantage of the opportunities.