GREENSBORO, N.C. (WGHP) – A new report analyzing the nation’s real-estate markets – balancing prices, sales rates and affordability in 300 cities – rates four in North Carolina as among the very best.
Three of those are part of the Triangle – Cary, Durham and Raleigh – joining with Charlotte to give the state four spots in the top 25, as evaluated by the financial advice site WalletHub in its latest data analysis.
Because real estate is such a deep well of information, there almost is too much information to consume in this report, which also ranked cities based on population groupings, but one thing is for sure: The Piedmont Triad is not as hot as many other markets.
WalletHub’s report says that “the housing market is skewed much more toward sellers, with mortgage rates continuing to trend upward and home values having risen over 1.0% in the last year on average.”
What that showed us is that Texas dominates the top of the list – five spots among the top eight, led by McKinney and Frisco (which was first for affordability) and Denton at No. 4. Allen and Austin also were ranked highly.
Cary was best in North Carolina, ranking fourth overall and third among mid-sized cities (150,000-300,000 population). Then came Durham at No. 7 (and fourth among mid-sized), Raleigh at No. 14 (and fourth among cities of more than 300,000 population) and Charlotte at No. 23 (eighth among large cities).
Wilmington was next best in North Carolina, ranking No. 59 overall and No. 22 among small cities (less than 150,000 population), and the Triad’s three cities were well down the list.
High Point was No. 135 overall and No. 56 among small cities. Winston-Salem was No. 148 (and No. 52 among mid-sized cities), and Greensboro was No. 177/61.
Fayetteville also was on the list, at No. 252 (and 85th among mid-sized cities).
Only three cities outside of Texas and North Carolina made the overall top 10, which were:
- McKinney, Texas
- Frisco, Texas
- Nashville, Tennessee (No. 1 based on sales and prices)
- Denton, Texas
- Cary, North Carolina
- Allen, Texas
- Durham, North Carolina
- Austin, Texas
- Port St. Lucie, Florida
- Gilbert, Arizona.
At the bottom of the 300? Portsmouth, Virginia; Baton Rouge, Shreveport and New Orleans; and Baltimore.
The shifting markets
Real estate markets have changed significantly in the past 18 months because what had been a very hot pace – quick sales, high profits for sellers – was moderated by the Federal Reserve’s efforts to quell rising inflation with 17 interest rate changes in the past two years.
The result is about a 7.4% average rate for a 30-year fixed mortgage and 6.5% for 15 years. Adjustable-rate mortgages are trending higher. And experts disagree about how that affects home buyers.
“Now is a pretty tough time to buy a home in many markets due to a lack of inventory, a shortage of listings, and a fast market when a home does come up for sale,” John Baen, a professor of real estate at the University of North Texas, told WalletHub. “The cost of financing upfront and long-term interest rates have tripled from the lows of the COVID era.”
But Kelly Snider, a professor of urban planning and real estate at San Jose State University, said that “in most parts of the country, now is a good time to buy because sellers are willing to negotiate on price and terms. Although many people pay attention to interest rates (which are substantially higher today than they were 12 or 18 months ago), I would advise buyers to pay more attention to job growth rates and unemployment rates within their metro area. In most parts of the country, small and mid-size employers are hiring and growing, which means the local economies are strong and local markets are stable.”
How they did it
To reach its rankings, WalletHub weighted 17 data points and created a point scale. The data were grouped into two large categories: Real Estate Market (think sales and prices), which was worth 80 points, and Affordability and Economic Environment (think population and employment trends and median credit scores), which made up the other 20.
High Point and Winston-Salem, for example, did much better on the affordability aspect (ranking No. 109 and 105, respectively) than market trends (165, 142).
Raleigh was No. 11 for real estate but No. 93 for affordability. Only Cary (Nos. 6 and 13) showed consistent balance in both evaluations. By contrast, McKinney and Frisco were in the top three in both.
Nashville, No. 3 overall and the best real estate market, was No. 96 for affordability. Oddly, Murfreesboro, Tennessee, which is just east of Nashville, ranked about the same in both (17 and 16).
But what do experts see in the future?
Nikhil Shah, a real estate professor at Rice, said he expects the Fed to continue to increase rates and that will “drive out the ‘speculators,’ and there will be more choices available to prospective homeowners. Lower construction and labor costs and less restrictive development laws may help increase new supply.
“Compared to the 2008 Financial Crisis, the banks did not make aggressive home loans, existing homeowners refinanced their mortgages at record low interest rates, and housing was undersupplied, so there are less chances of a crash, at least I hope so.”
Bennie D. Waller, an economics professor at the University of Alabama, offered an example of what this means: “Two years ago, a $200,000, 30-year mortgage at a 3% interest rate would have cost a buyer a monthly payment (interest and principal) of $843.20. That same mortgage today at a 7% rate would be $1,330.60.
“This, coupled with the significant increases in housing prices, makes buying a home difficult, particularly for low- to middle-income buyers.”
One of the big questions is why millennials (people born between 1981 and 1996) aren’t buying homes much at all. They formally were No. 1 among age groups but have dropped precipitously.
“Millennials also enjoy the flexibility of being able to relocate, so renting is preferable for this portion of the population,” Waller said.
“They are sitting out because their jobs do not pay enough for them to afford a house; it is simple,” Snider said. “The best solution would be for Fannie and Freddie (along with HUD) to make long-term low-interest loans for ADU construction and for states to allow second units to be built and sold like condominiums. That way Gramma and Grampa can build a second unit in their (overgrown and neglected) backyard, which they can move into, and the “main house” can be sold to their grandkids to raise the next generation.
“Adding infill and missing middle housing on existing residential lots is definitely the cheapest, fastest, and most desirable way to create more low-cost housing for young families.”