Tariffs. Uncertainty. Recession. Market crash. Interest rates.

Headlines buzz as buyers and sellers brace for economic news each day. Unrealistic expectations and overinflated media drama have created anxiety in the housing market. The pandemic housing craze has come and gone, and both buyers and sellers are struggling to adjust. Not only that, consumer confidence is dropping rapidly. It’s the perfect storm.

There is really only one word to describe the current state of the market: erratic. Some weeks feel like a Sunday afternoon drive: calm, quiet, and soothing. Some weeks feel like buying tickets for Taylor Swift’s The Eras Tour: too much demand, not enough inventory. And the best part is, there’s no way to know what each week will hold.

Before we break down how we ended up in this perfect storm of low demand, let’s add a little context. Because in North Carolina, the sky isn’t falling anytime soon.

North Carolina is a very insulated market. Not only do we have a significant amount of industry, we have a lot of variety in industry: agriculture, forestry, manufacturing, and more. This means that NC naturally boasts more income security, jobs that pay better than most states in the South, and economic policy that benefits all kinds of business.

North Carolina is a builder-friendly state. Many states are already “built-out,” meaning they don’t have room for any more new home communities in their metropolitan areas. North Carolina is not that way… for now. Many areas around Raleigh, Charlotte, and Wilmington have plenty of room for growth. As long as builders are investing in NC, the real estate market will hold somewhat steady.

North Carolina has a very bright future. As of now, there is a significant amount of industry and technology coming to the state. If mega corporations continue to invest in the state, NC will continue to be insulated.

Now, let’s unpack what the perfect storm really means: over half of sellers are accepting under-asking offers, days on market has been creeping up to recession-era levels, and the market has been providing some of the worst months since pre-2010. Here are what’s impacting the real estate market:

• Inventory levels have recovered to pre-pandemic levels, causing prices to fall. This is simple supply and demand: when supply is high and demand is low, prices will fall.
• Builders are finally able to float consistent inventory. COVID brought a severe labor and material shortage. Not only that, municipalities placed moratoriums on many aspects of new construction: building permits, septic permits, etc. Now that those issues have been resolved, builders are catching up to new home demand. However, as demand has slowed, builders have had to cut prices and offer special incentives to move products.
• Sellers think it is 2021, and buyers think it is 2008. There has never been a greater divide in expectations that consumers have. Sellers still have unrealistic pricing expectations, and buyers think they can ask for the sun, the moon, and the stars. While the market is favoring buyers, there is still a very balanced market in most cases, with homes closing around 97% of asking price in the Triangle. But, when sellers overprice a home, buyers won’t even go near it.
• Interest rates are keeping their thumb on the forehead of affordability. The Fed is controlling inflation in the housing market by keeping interest rates at an elevated level (not high, just elevated). And to be honest, this is really the only way that the Fed can control home prices. So no matter how painful, it’s been a measure of control. If you’re curious to know what happens when interest rates go low, just refer back to the 2021/2022 craze in the housing market. If rates are cut too far, the market will reflect the pandemic insanity. The good news is that there should be a rate cut in September!

The culmination of these things has created the erratic nature that the real estate market is experiencing. It really is all over the place: some sellers will give you the shirt off their back if it means you’ll buy the home. Some sellers go under contract in multiple offers and aren’t negotiating any repairs. It’s inconsistent and there’s no way to predict what’s coming next.

It’s not bad, it’s just different. And this information isn’t to inflict fear, it’s just to bring awareness to the situation. The market is in the era of correction after the pandemic insanity. Correction is normal in all markets (stocks, commodities, etc.), and is very much needed for most states.

If you are a potential seller, there’s a strong chance you still have much more equity in your home than you anticipated. If you are a potential buyer, there’s a great chance you can get a really awesome deal on a home you love.

There’s a lot to unpack here. Don’t let it overwhelm you, let it inform you. Informed decisions are good decisions, and if you’d like to talk about good decisions in real estate today, JDRE is here to talk back.

Cheers!