In 2022, Allen Tate Company logged the best year in the 65-year history of the company, with more than 20,000 sales transactions totaling $8.5 billion. But after several years of low interest rates and low inventory – translating to high buyer demand and double-digit appreciation, the Carolinas’ real estate housing market has started to normalize.
Allen Tate Companies President and CEO Pat Riley, who has led the market-leading company since 1992, shares his insights about market changes, what we can expect this year in 2023, and what buyers and sellers need to know.
Give us a recap of the Carolinas’ real estate market over the last few years.
We’ve enjoyed historically low interest rates for the past 5 years and low inventory because of new construction lags and Baby Boomers staying in their homes longer. But with the pandemic, home became more important that ever. The demand created a market frenzy, with homes commanding multiple offers and appreciating at unprecedented levels. We’ve also been fortunate to see continued in-migration of both families and companies to the Carolinas.
What’s happening in the market now?
We entered 2022 fast and hard but started to see the market cool a bit by late spring as the Federal Reserve began to hike interest rates to curb inflation. In Q4, the rate hit 7% for borrowers, and we’ve finally hit the pause button.
We are in an interest rate lock, with 64% of homeowners having an interest rate of 4% or less and 34% with a rate of 3% or less. Any decision to move means giving up a low rate that they may never see again. And while 7% has been the average interest rate since World War II, it’s going to take some time to get used to.
What can we expect in 2023?
Across the country, market dynamics continue to shift. Housing-wise, we are in a recession, but it will be short-lived and moderate. Housing is one of the first sectors to slow and one of the first to rebound. I would call this a recession with a small “r”– a short-term drop of about 18 months before we level out, not a four-year downturn like we experienced in 2007.
In the Carolinas, we are somewhat insulated, because people want to move here. In 2023, interest rates will drop slightly, inventory will keep it a seller’s market, and appreciation will slow. Residential real estate is very local and varies by market.
Will homes continue to appreciate?
In 2021 and 2022, we saw average appreciation of 13-15% in much of the Carolinas. In Charlotte, median home prices increased from $273,500 in January 2020 to $420,000 in September 2022.
In 2023, I expect that to drop to around 8-10% – well above the historic norm of 3.8%. It is important to note that homes are not depreciating; they are just not appreciating as fast as 2020 and 2021. Sellers must understand that they will still get a competitive price, but not the price their neighbor achieved during those two outlier years.
Is it a good time to sell?
It’s still a seller’s market, because of inventory. Sellers must price their home fairly and present it in the best possible condition. It will take longer to sell than in the past few years – even a few months. Sellers and buyers will continue to pay buy down interest rates at the closing table to get a lower rate.
Is it a good time to buy?
With less buyers in the marketplace, homes will be easier to find. First-time buyers may need help from family members for down payment assistance or as co-signer to get out of the rental market. Current homeowners, struggling with higher interest rates, must remember that the interest rate on a fixed-rate loan will not increase – but can be refinanced at a lower rate later.
Interested in more homes like the one featured here, and more insight into the real estate housing marking 2023? Check out Allen Tate’s listings online now.
Photos by Jordan Vilonna/Lighthouse Visuals and provided by Elizabeth Phares/Allen Tate Realtors