The Dance

It’s like watching So You Think You Can Dance, all of the seasons back to back in a row, in super fast forward! The housing market and interest rates move together in this partner dance that can sometimes be too much to watch. I just want to be like Twitch and try to explain how that looks and judge whether it’s good or bad!

Let’s start with where we came FROM…unsustainable high rates of appreciation, ridiculously low rates of interest, and a market that no longer served the individual buyer because it served the conglomerate company that had assets and cash readily available. Homes appreciated at more than double the normal appreciation rate all over the country. Interest rates bottomed out at under 3% for refinance and barely over for new home purchases. Due to the high competition in the market, cash was really KING, so anyone that had it could get anything they wanted, and those that didn’t couldn’t get anything!

Now let’s look at the adjustments. As home values increase at a slower rate, or even decrease, the market makes a correction. The growth we were seeing was unsustainable. The Charlotte area saw value increase in 2021 of 16.9% (in 2020 it was 9.4%). That means if you bought a home for $300,000 in 2020, you may have seen an increase in the value of your home by $50,000 that year. Maybe today that home looks like it’s worth $350,000. The Charlotte area normally sees appreciation of real property at an average of 6 – 8% per year. After 2 years, the home should realistically be worth $340,000. That is what we are adjusting for! We will not go too far backwards (this is very different than 2008), but we will begin to level out that average. And that is good! Because the income rate did NOT increase by 20% in 2021! Therefore, fewer people are able to become homeowners, or at least become homeowners at a payment that they can truly afford (and that is reminiscent o 2008). The American economy thrives on homeownership, no matter what people try to ay about renting. Ownership builds wealth, but it also builds a community.

What about interest rates!? As I’m writing this, we are at about 7% for a mortgage loan with a decent credit score. Other than discussing how the interest rates of 2 years ago were impossible to sustain, I’m going to try to explain how it doesn’t even matter. We’ll go back to our $300,000 house. In one year you will pay about 5.5% in interest (and I can make that happen) and still make 6-8% in appreciation. Yes, the margin is much lower than it was in 2021, but it is not a negative! And the numbers from COVID will never come back. They were done in an emergency situation to spur the economy. Unfortunately we let it run amuck. And now we have to get back to normal! Yes, your house is going to take 30 – 60 days to sell. But your home will still sell in Charlotte, NC. Yes, you are going to pay a higher interest rate, but it is still a much more solid investment than the stock market! How many investors in Bitcoin can say they have increased their investment by 6-8% per year since their investment?

The bright side…negotiation becomes a thing again! We are slowly shifting back to a buyers market. I prefer working with buyers! This season of everyone wanting to sell has been crazy for me. I usually have a goal of 3 or 4 listings per year. I have almost doubled that this year. I can’t wait to getting back to searching for just the right thing for a particular buyer!