are the rising interest rates gonna cause a real estate market crash in raleigh north carolina
hello everyone this is chris morton real estate broker with exp realty in raleigh north carolina
and on today's video we're going to talk about the rising interest rates
and this potential crash that's going to happen so
one of the things that we deal with all the time literally on a daily basis is we have
buyers calling us that have kind of looked at the raleigh real estate market the real estate market
in general in the united states and they see prices going up and up and up and they say you
know what instead of buying now we're just going to hold off and wait until there's a crash and
then we're going to buy and make a ton of money so on today's video we're going to talk about that
crash and what we see is going to be happening and hopefully give you some advice as to if now is a
good time to buy or if if you should sit on the sidelines and wait as well so yes we are seeing
prices going up and up and up in 2022 they've gone up at a rate faster than we even saw in 2021
believe it or not at the beginning of 2022 we said we thought we were going to see about a 15
increase incidentally 21 we saw like a 25 30 increase well 22 has been even worse than that
there's just been less inventory more demand and prices have just been skyrocketing up so
lately we've seen interest rates go up it was around three and a half three percent now we're
creeping up towards five percent and so it's got a lot of people wondering what should happen
and and that they think they're going to get a deal coming up soon and well the cliff notes
version is unfortunately we don't see that as the case so first how did we get here
what's the cause of all of this going on with prices going up and this crash that's
gonna happen so well the main cause of this market run up that we've had is the millennials
millennials represent one of the largest pools of population growth in our country ever
and a good percentage of the millennials are now reaching the age to buy their first house
some even put off buying that house during the great recession during the
pandemic times all of that and so now a bunch of the millennials are now getting into the first
time home buyer market and in a normal market this giant pool of people jumping in would cause
disruptions in a normal market but as you're well aware we're not in a normal market we've
not been in a normal market for the last couple years really ever since the pandemic we've not
been in normal times so for example normal times would be we would be sitting at about 10 to 15
000 homes for sale right now as we're filming this currently literally an hour ago when we
checked the numbers we're sitting at 2450 homes for sale in the triangle region and this is not
one county this is 22 counties so this is a very large geographic area where again we should have
10 to 15 000 homes we're sitting at only 2 450 homes and therefore as you can imagine demand
far exceeds supply and to make matters worse current homeowners are not selling their homes why
are they not selling well they don't want to deal with the hassle of trying to find their next home
when there's low inventory so they're sitting on the sidelines for that they just basically don't
want the hassle of chasing this few homes that are out there and getting into that fight with
the other buyers that are out there in addition these homeowners most of them are in a mortgage
and their current home of 5 or less why would they want to get out of that low mortgage
and go possibly get into a higher mortgage if interest rates keep
ratcheting up it just doesn't make sense so the majority of these folks that own homes currently
are simply going to stay put fix up their current home maybe modernize it a little bit and stay
where they are even if the home is too big for them too small for them maybe the master bedroom
is on the second floor and they really need a downstairs master they're basically just gonna
lump it like it and lump it stay where they are love it and list it they're gonna love it and be
where they are and hopefully write things out and ideally they're waiting for inventory to pick up
but by them not putting their home on the market inventory is not picking up and what about new
construction is new construction helping out with this inventory problem well unfortunately not
ever since well before the great recession the housing industry new construction housing
has not been keeping pace with demand it's been going back forever the the pandemic
doubled that because of course supply chain issues and labor issues made it even worse so there's way
more people looking to buy new construction homes than there are new construction homes available
and projections are it's going to be a number of years before this problem even gets fixed and
there's even some semblance of equilibrium between demand for new construction and the supply that
the builders are putting out there so with all this you have high demand low inventory and it
causes rising prices so with all this in mind will rising interest rates coupled with the frustration
buyers are feeling by the lack of inventory is all of that going to tamp down on demand
and cause either a crash in the housing market or at least a slowdown on the housing market
that's sort of the burning question so the short answer is yes i absolutely do believe
that there will be a reduction in the number of buyers out there in the housing market
in the raleigh area absolutely going to happen will that result in prices going down on homes
no it will not result in prices going down on homes and let me explain why
so back to that number we have 2450 homes for sale on the market right now to in order to
have a balanced market meaning that prices are steady there's no paying over asking price or
having to dump a house and paying well under asking price in order to have that asking
price equilibrium you basically have to have the same number of buyers and the same number
of houses for sale so for every buyer there's a house for them to buy well in order for that
to happen you're gonna have to have 2450 buyers to handle those 2450 homes for sale
definitely no way in the world it's possible that we're that we have only 2450 buyers
even if interest rates skyrocket my guess is we probably have somewhere around 10000 buyers right
now we literally are getting about 70 families or buying units coming into the raleigh triangle area
every single week coupled with the large number of potential buyers that are setting in rentals
right now wanting to buy a home but they're sort of on the sidelines because they wanted to figure
out what part of the area they wanted to be in or maybe they were saving up money to buy a house
or maybe they got freaked out by the market last year and so they're kind of sitting on
the sidelines waiting to buy a house so there's a huge pool of people in raleigh currently or in the
triangle currently there's a huge full of people coming in so there's no way we're going to have
a reduction of interest such that we will hit equilibrium only by having less buyer interest
than we do houses that's when you're going to have price crashes that's what happened in 2008
9 10 when we had way too many houses chasing way too few buyers right now we've got way too many
buyers chasing way too few houses that of course causes a price increase if we get ourselves to
an equilibrium then we're probably going to just have a slow down in price increases and be back
to where we were in traditional times the good old days where we saw an increase of maybe two three
four percent a year i really missed those days those were i've been selling real estate 18 years
and those were the good days when you did not have to rush out and put an offer in
an hour after you saw the house that the buyer actually had a chance to look at the house think
about the house and then put in a fair offer those days are long gone unfortunately but to get to
that equilibrium we're going to have to have again 2 450 buyers to 2450 houses that's not happening
right now and i don't see it happening in any time in the future i mean even if we have a 50
reduction in demand that's still going to put us at about 5 000 buyers in my guesstimation chasing
those 2 450 houses i have this saying i don't know if i invented it or if i heard it from somewhere
but basically it's that you can't fall down and hurt yourself if you're laying on the floor
well right now the raleigh real estate inventory market is laying on the floor we're only at
we were recently like 1700 homes which was insane 2450 it sounds like a ton compared to 1700 homes
but that being said that's still laying on the floor there's no way the market is going to
hurt itself by being damaged by price collapse if it's laying on the floor and the way you're going
to get that damage to the market is if sellers have to kind of dump their homes well let me
tell you typically in the raleigh market sellers sell their homes every three to four years well
lately it's been like six to ten years people have been staying in their homes so they're
building up a ton of equity if they had to sell they got themselves in a financial bind
if they had to they could easily sell their homes because again there's no inventory
so the idea that you're going to have a flood of homes come on the market with foreclosures
and short sales and all of that stuff again it's just not possible that it's going to happen it
would take a tremendous flood for something like that to happen and homes are getting gobbled up
so quickly that i think it would take quite the effort for there to be an influx of of inventory
coming on the market so again our prediction housing prices may slow down from that 30 percent
increase that has been going on for the last couple years yeah that's not sustainable i don't
see but it would not go down from like 30 to the positive to 30 to the negative you're not gonna
see a 500 000 house today be priced at 350 000 in the next months or years more likely you're
going to see again that good old days of the three percent four percent increase but again that would
mean that 500 000 house is going to be worth 510 520 not 350 so our advice to you if you need to
buy a house it's to go ahead and buy a house get yourself into the real estate market invest in a
home especially a home that you can see yourself living in for a good number of years because
unlikely we're going to see a price decrease such that you're going to get a deal the deals
that you're going to get are the deals that you get today so in other words buy what you
need today be happy in the home that you're going to buy love it and love living there for
however many every years you need to live there so as always we would appreciate it if you like
this video to hit that like button and subscribe if you've not done so my team and i would love to
be your real estate agents of choice if you're planning a move either into the raleigh area
or out of the raleigh area and if the way you can reach out to us is by clicking on
either the link below or emailing us at hello at mortonbradberry.com with that being said we
appreciate you watching and we look forward to seeing you on the next one take care bye bye