RALEIGH- Mortgage interest rates rose again and lending activity slowed. Still, the median price of Wake County real estate sold in May 2022 hit a new high, according to the Wake County Deeds Registry.
The report shows the median sale price for a parcel of Wake County real estate was $462,000 in May 2022.
That’s an increase of $8,000 from April 2022, when the median sale price was valued at $454,000.
The Wake County Deeds Registry uses statistics derived from legal instruments registered at the Wake County Office
The registry of deeds and the value and sale prices of real estate are measured by the excise tax imposed on the sale and transfer of real estate in accordance with the laws of North Carolina.
The methodology is different from that used by the Triangle Multiple Listing Service, which released data for Wake County and other Triangle areas earlier this week. Data from TMLS revealed that, in Wake County, the median sale price of homes remained at $485,000 in May 2022, the same median sale price measured from April 2022.
And while the median property price in County Durham in May 2022 was $424,250, down from the median sale price of $426,000 in April 2022, local real estate agents are still forecasting prices houses in the Triangle will increase over time.
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A primer on the 30 year fixed mortgage
When mortgage rates rise, the cost of borrowing to finance the purchase of a home also rises. Where homebuyers think is in their monthly payments. Some may even choose to stop buying a home because the cost and the monthly payment become too high.
A 30-year mortgage is amortized, meaning the debt is paid off over time, and a monthly mortgage payment consists primarily of interest payments – the cost of borrowing funds – and principal, the amount total loan borrowed. For many lenders, taxes and insurance are also paid into an escrow account on a monthly basis, but the majority of monthly payments are made up of principal and interest payments.
So while the Federal Reserve decided to raise interest rates by three-quarters of a percentage point yesterday – a move that many analysts, investors and lenders have been waiting for in order to curb soaring inflation and cool the appreciation in the prices of many consumer goods – the typical mortgage interest rates had already risen in expectation. Mortgage News Daily measured average rates on a 30-year fixed loan over 6% on Tuesday and Wednesday.
And yesterday’s weekly report from Freddie Mac shows that the previous week the average mortgage rate for a 30-year fixed loan rose 0.55% and was 5.75%.
A year ago, the average mortgage rate was 2.93% on a 30-year fixed loan for the week ending June 17, 2021, and in 2020 the average loan product rate was 3.13% for the week ending June 18, 2020, based on data from Freddie Mac.
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Impact on Triangle’s real estate market
“Moving a mortgage rate up to 6% will have a significant effect on who can afford housing,” Greg Brown, executive director of the Kenan Institute of Private Enterprise and Sarah Graham Kenan professor emeritus of finance, told UNC Kenan. . -Flagler Business School during a virtual briefing earlier this month. “I would imagine that would be heading towards a cooling of price pressures.”
So, when the cost of borrowing money increases, fewer people are expected to seek to borrow money. In the housing market, competition for homes for sale may slow as interest rates rise. But the Triangle is still in the throes of bidding wars as buyers seek to place homes under contract.
Still, Brown said, there are other factors impacting the Triangle’s housing market, and affordability is always a concern.
“But overall there’s a huge housing shortage,” Brown said. “The cost of housing has increased, it may continue to increase.”
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Lending activity down in Wake County – but that doesn’t mean fewer homes sold
Data from the Wake County Deed Registry shows a slowdown in mortgage activity, as measured by trust deeds registered in May 2022.
“Home lending activity in May 2022 was down 3.1% from the April 2022 level and compared to May 2021 was down 31%,” the report said. “There were 4,507 trust deed transactions in May 2022, while April 2022 trust deed transactions showed 4,680.”
Still, the data shows that more deeds were filed in May than in April, meaning there were more property deals completed in May. Thus, the report’s conclusion notes that mortgage activity has not slowed in the new home market, rather it has fallen in the refinance market.
“[R]Funding activity continued to slow in May 2022,” the report notes. The deed-to-deed ratio, a metric used by the Wake County Deed Registry to track new purchase mortgages versus refinance or second mortgage activity, is now 1.29 , down 3.7% from the prior month, and down from its broadest measure. ratio gap of 2.5 in February 2021.
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Real estate economist Ken H. Johnson, co-developer of an index that measures real estate markets considered overvalued relative to historical price data, ranked Raleigh among the 15 most overvalued markets nationwide in a recent analysis conducted end of May 2022.
“Right now, my concern, if I was looking in Raleigh and looking to buy, is that I would be buying at the peak of the housing cycle,” Johnson told WRAL TechWire earlier this month. Others disagree, including UNC Charlotte economist John Connaughton, who suggested that if one was looking to buy a house, the time would be before interest rates rise. Connaughton’s advice came before the recent rise in average mortgage interest rates, however.
But what’s more likely to happen, Johnson said, is market easing as mortgage interest rates rise. A meltdown and meltdown similar to 2007-2010 is unlikely, at least in Raleigh and other similar metro areas where net migration remains high and jobs are added to the local economy.
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“If you look at the last peak, which was in 2007, it would take until about early 2016 to be able to sell at the same value,” Johnson warned. “The holding period, or the period that you would own the property, would have been nine years.”
But the Triangle could be immune to a downturn in the real estate market, even if that were to happen in other markets across the country, he said.
This is due to the region’s continued population growth. Additionally, Johnson said, housing inventory remains low.
“Those two things are dramatically different now than they were in 2007,” Johnson concluded. “It could be a drop in prices and a long-term trend towards a lack of affordable housing,”
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