How Will Rising Interest Rates Affect the Wilmington, NC Real Estate Market?

Mortgage interest rates have been climbing like a Blue Angel’s fighter pilot over the last month. I’ve been getting questions from clients concerned about interest rates and whether the recent increases will adversely affect the real estate market in Wilmington, NC. 

Mortgage rates in the 4% range are still very low when you consider that in the 1980s and early 1990s, rates were triple what they are today. Oh, the good ole days! What happens when mortgage rates go up? How will the Wilmington, NC, real estate market be affected? No one knows for sure, but here are a couple of points you may find interesting.

Buying Activity May Slow

What may seem like a modest interest rate increase will price some buyers right out of being able to qualify for a mortgage. It happens in every real estate cycle. Usually, this is in the lower price range of homes for sale. 

Other buyers may need to lower their expectations and move from one price level to a lower price level to afford a home. Rising interest rates have a ripple effect that changes demand in the market at every price point. This is part of the reason that higher-priced homes start taking longer to sell in a downturn.

Combine interest rates with how much homes have appreciated, and some can no longer afford it. The offers they are submitting, some buyers up to 20 to 30 over time, aren’t competitive in today’s market.

The Inventory of Homes for Sale Begins to Increase

As I said above, 4% is not a high-interest rate, and we’ve seen mortgage interest rates at 4% as recent as May 2019. In the short term, buyers priced out of the current real estate market may not have much effect. 

But as rates rise further, it could price even more buyers out of the market. Rising rates could slow, on whatever level, demand. When demand slows, the number of homes for sale will slowly increase.

The buying season is coming in the next month or so, and we’ll see just how the market changes, if at all.

2022 Mortgage Interest Rate Outlook

I’ve been going over the prognostications on what interest rates may do in 2022 to stay current on local and national trends. Most economists think mortgage interest rates may finish the year around 4%. 

Surprise!

Here we are now at 4% and above. The reality is that no one knows what interest rates will do to finish out the year. It’s just a semi-educated guess. 

What we do know is what is happening now. I have a client that locked in a 3% loan just before the January jobs report came out, which was expected to be negative and turned out to be better than expected. They avoided an increased mortgage rate by not pushing their luck and locking in at 3%.

My advice is if you’re interested in buying a Wilmington, NC home, get it done sooner than later. Between mortgage interest rates going up and home prices continuing to go up, it gets more expensive to purchase. We don’t know where rates will end the year; however, the difference in affordability could be dramatic.

If you need help buying a home, don’t hesitate to contact me. I can help you find the perfect Wilmington, NC home within your budget. Please click here for my contact page.

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