By Jean Garin
PITTSBORO, NC – The Chatham County real estate market is mirroring national trends of rising home prices and rising interest rates, leaving potential homebuyers and renters with home affordability issues. I had the opportunity to speak with local Realtor Eric Andrews. Our conversation revealed a complex interplay of housing supply shortages, demographic changes, and economic policies that are reshaping the housing market.
Current state of the real estate market: Regional and national perspectives
Chatham County's real estate market, like the rest of the country, has undergone significant change in recent years. Local Realtor Eric Andrews of Realty World Carolina Properties highlights the dramatic shift. “There's a housing shortage nationwide of about six to seven million homes,” Andrews said, attributing part of the reason to a larger demographic entering the housing market. This shortage has led to higher home prices and rising interest rates, making homeownership harder for many.
Nationwide, interest rates for those with good credit have risen to around 7.25%, with rates as high as 8% not uncommon. “A few years ago, interest rates were around 2.75%,” Andrews said, highlighting how quickly things have changed. This change has had a dramatic impact on purchasing power, making it more difficult for potential buyers to purchase a home within their budget.
Economic factors and affordability
One of the most pressing issues in today's real estate market is housing affordability, especially for first-time homebuyers and those looking for rental properties. Andrews explains that there is a shortage of affordable housing, also known as workforce housing. This term includes housing options for essential workers such as teachers, police officers, and other essential service providers. In Chatham County, the median household income is relatively high, at about $62,000. This means that the affordable home price range is about $200,000 to $250,000. However, the median home price in the county has skyrocketed to more than $500,000, far beyond what many families can afford.
The rental market reflects this trend. The average rent in Chatham County is about $1,400, but rising property values mean homeowners are more likely to sell rather than rent, further exacerbating the affordable housing shortage. “If a homeowner can sell a property they bought for $200,000 10 years ago for $500,000 today, they have less financial incentive to continue renting,” Andrews explains.
The impact of rising interest rates
Rising interest rates are having a major impact on the real estate market, affecting both buyers and sellers. Higher interest rates mean higher monthly payments, reducing a buyer's purchasing power. For example, a family earning $62,000 a year may have been able to purchase a $300,000 home with a 3% interest rate, but with a 7% interest rate, the amount they can afford is significantly reduced.
Additionally, many homeowners with low mortgage rates are hesitant to sell, and new properties have much higher interest rates. This reluctance disrupts real estate's natural cycle of older homeowners selling to downsize and younger families moving into their first homes. “We're not seeing the normal relocations,” Andrews notes. “Older homeowners are staying put because it doesn't make financial sense to sell their current home and buy a new one with a higher interest rate.”
Regional disparities and growth patterns
North Carolina's growth patterns also influence real estate market trends. While the so-called “Magic Crescent” areas like Raleigh, Greensboro and Charlotte are booming, other areas, especially from the coast to Raleigh, are losing population. “People think that all of North Carolina is growing, but that's not the case,” Andrews says. This uneven growth has different effects on regional real estate markets, with home prices soaring in some areas and stagnating in others.
Chatham County is part of a fast-growing region, but faces unique challenges. Limited sewer infrastructure limits development, leading to low supply and high prices. Unlike neighboring counties, Chatham County has fewer townhouses and condominiums, which are typically more affordable housing options. This lack of diverse housing types contributes to the high average price of homes in the region.
Equities and Wealth Accumulation
Despite the challenges, there are positives to the current market conditions. Homeowners are experiencing significant increases in property values and building assets that can be leveraged for other investments and financial needs. “The number one way Americans accumulate wealth is through home equity,” Andrews emphasizes. This equity can be used for home improvements, education, and other financial goals, providing a cushion of financial security.
But the gap between homeowners and non-owners is widening, with younger generations in particular finding it harder to enter the housing market and build wealth. “People in their 40s, 50s and 60s can accumulate wealth through homeownership, but people in their 20s and 30s have a harder time getting in,” Andrews notes. This generational gap could have long-term economic implications, as younger generations may miss out on the wealth accumulation opportunities their parents enjoyed.
The Future of Real Estate in Chatham County
Looking ahead, the future of Chatham County's real estate market will depend on several factors, including interest rates, housing supply and the local economic situation. Andrews believes that if interest rates stabilize or fall, the market could surge again. “If interest rates soften, we could see another explosion in demand,” he predicts.
Developments like Disney's new project, which include smaller homes and potentially more expensive properties, will have an impact on the market. While these developments may not solve the housing affordability problem, they will add to badly needed housing inventory.
Conclusion
Chatham County's real estate market is a microcosm of broader national trends, reflecting issues of rising home prices, limited supply and changing demographics. As the market continues to evolve, potential buyers and sellers must navigate a complex landscape shaped by economic forces and policy decisions. For now, the best strategy for those looking to enter the market is to stay informed and prepare for a competitive environment. “These are tough times, but there are opportunities,” concludes Andrews. “With the right approach, people can achieve their real estate goals.”
Watch on YouTube – A Conversation About the State of the Chatham County Real Estate Market – 5/17/24
00:16 Discussion on the state of the domestic and international real estate market
- Highlights America's current housing shortage caused by population growth and generational change
- Focus on the impact of interest rates on the real estate market. Interest rates are around 7.25%.
02:05 Changes in interest rates affect your ability to buy a home.
- Rising interest rates affect people's monthly payments and purchasing power.
- The lack of workforce housing is one of the biggest issues in Chatham County.
03:45 How real estate market trends affect landlords
- Landlords considering selling their property due to rising property values
- Impact on the rental housing market and tenant trends
05:24 Real estate prices in Chatham County are soaring.
- Average home prices have risen twice as fast as average household incomes.
- The average price for a new home is nearly $1 million.
07:03 The Chatham County real estate market has increased by 25% over the past three years.
- Pros: Homeowners have equity that can be borrowed against for investments, education, and other expenses.
- The downside: It's harder for younger generations to break into the housing market and accumulate wealth.
08:38 Real estate market goes through unusual cycle
- Older homeowners unwilling to give up low interest rates, affecting market cycle
- More people are moving from cities to suburbs, and from the West Coast and Northeast to the Sunbelt.
10:16 North Carolina’s real estate market is diverse and evolving.
- The area between the coast and Raleigh is experiencing population decline.
- The I40-I85 corridor, which includes Raleigh, Greensboro and Charlotte, is experiencing rapid growth.
11:57 Real estate prices in Chatham County are driven by sewer availability
- Orange and Wake counties, unlike Chatham County, have good sewer systems and offer condominiums and townhouses.
- Chatham County is expecting more tiny homes, but they won't necessarily be cheaper
