May 11, 2022 - Real Estate

Surging mortgage rates making home buying more expensive in Raleigh

Illustration of a house's roof being taken off by a trend line soaring upward through the home

Illustration: Annelise Capossela/Axios

Mortgage rates surpassed 5% — the highest they've been in more than a decade, according to data shared by Freddie Mac.

Why it matters: Low mortgage rates made buying in a sellers' market more affordable during the first year of the pandemic.

  • But in March 2022, median home sale values in Raleigh were up 27% year-over-year, and now borrowing money is more expensive, too.
  • Price-weary buyers could be forced out of the market.
Data: Freddie Mac, Redfin; Chart: Simran Parwani/Axios

State of play: A year ago, mortgage rates were just below 3%. In late April 2022, mortgage rates were higher than 5%.

Yes, but: There are so few homes on the market that whenever one does list, it still attracts many bidders, Adrian Brown, a partner at Inhabit Real Estate, told Axios.

  • Just 2,093 homes were listed for sale across the Triangle region in March — a figure that was down 29% from a year prior, according to Triangle Multiple Listing Service data.

What they're saying: "With so many jobs announcements, like Apple, coming, I don't see demand going away," Brown said.

  • "But what I do see is buyers who now, because of the interest rate uptick, have to come down to a lower price point in a market where everything keeps going up," he added.
  • Some buyers will need to compromise on how much space they want, if rates hurt their budget, Brown said.

If you had taken out a $300,000, 30-year mortgage loan in April 2021, your monthly principal and interest would be around $1,260, according to Freddie Mac.

  • Your monthly payment on that same loan in April 2022 (at 5.11%) would be $1,631.
  • That's $371 more per month; $4,452 a year; and $133,560 more over the life of your loan.

What's next: Mortgage rates are expected to rise throughout the year, averaging 4.6% for 2022 and 5% for 2023, according to Freddie Mac's trend forecast.

  • If demand cools because of rising rates, housing prices could stabilize.
  • We're still in a critical supply crunch, so inventory would have to catch up to the remaining demand for prices to actually cool.

The big picture: Rising home prices around Raleigh, Cary and Durham have pushed homeowners into the region's exurbs for more affordable housing. That could continue, especially if mortgage rates price out lower earners, said Stacey Anfindsen, who writes Triangle Area Residential Realty Market Report.

  • "[T]he combination of rising mortgage interest rates and house price metrics produces strong headwinds for entrance into one of the great wealth creators in our society," he wrote in a recent report.
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