By Gene Galin
Pittsboro, NC – The real estate market in Chatham County mirrors national trends of rising home prices and climbing interest rates, leaving potential homebuyers and renters grappling with affordability issues. I had a chance to sit down with local real estate agent Eric Andrews. Our conversation revealed a complex interplay of supply shortages, demographic shifts, and economic policies that are reshaping the housing landscape.
State of the Real Estate Market: Local and National Perspectives
The real estate market in Chatham County, like much of the nation, has seen significant shifts in recent years. Eric Andrews, a local real estate agent with Realty World Carolina Properties, emphasizes the dramatic changes. “The housing shortage nationwide is about six to seven million units,” Andrews notes, attributing this in part to a high population generation entering the housing market. This shortage has driven up home prices, while interest rates have climbed, making homeownership more challenging for many.
Nationally, interest rates have risen to around 7.25% for those with excellent credit, and it’s not uncommon to see rates as high as 8%. “A few years ago, we were looking at rates as low as 2.75%,” Andrews says, highlighting how quickly the landscape has shifted. This change drastically affects purchasing power, making it harder for potential buyers to afford homes within their budget.
Economic Factors and Affordability
One of the most pressing issues in the real estate market today is affordability, particularly for first-time buyers and those seeking rental properties. Andrews explains that affordable housing, sometimes referred to as workforce housing, is scarce. This term encompasses housing options for essential workers such as teachers, police officers, and other critical service providers. In Chatham County, the average family income is relatively high, around $62,000, which translates to an affordable home price range of about $200,000 to $250,000. However, the average home price in the county has soared to over $500,000, far exceeding what many families can afford.
The rental market also reflects this trend. The average rent in Chatham County is approximately $1,400, but with property values rising, landlords are increasingly inclined to sell their properties rather than rent them. This further exacerbates the shortage of affordable housing. “If a landlord can sell a property purchased for $200,000 ten years ago for $500,000 today, the financial incentive to keep renting diminishes,” Andrews explains.
Impact of Rising Interest Rates
The rise in interest rates has had a profound impact on the real estate market, influencing both buyers and sellers. Higher interest rates mean higher monthly payments, reducing the purchasing power of buyers. For example, a family with a $62,000 annual income might have been able to afford a home priced at $300,000 at a 3% interest rate, but at 7%, their affordability drops significantly.
Moreover, many homeowners with low-interest mortgages are reluctant to sell and face much higher rates on a new property. This reluctance disrupts the natural cycle of real estate, where typically, older homeowners sell to downsize and younger families move into starter homes. “We’re not seeing the normal turnover,” Andrews notes. “Older homeowners are staying put because selling their current home and buying a new one at higher interest rates doesn’t make financial sense.”
Regional Disparities and Growth Patterns
North Carolina’s growth patterns also play a role in the real estate market dynamics. While areas like Raleigh, Greensboro, and Charlotte—the so-called “Magic Crescent”—are booming, other regions, particularly between the coast and Raleigh, are experiencing population declines. “You assume all of North Carolina is growing, but it’s not,” Andrews says. This uneven growth affects local real estate markets differently, with some areas seeing rapid appreciation in home values while others stagnate.
Chatham County is part of the booming areas, but it faces unique challenges. Limited sewer infrastructure restricts development, keeping supply low and prices high. Unlike neighboring counties, Chatham has fewer townhomes and condos, which are typically more affordable housing options. This lack of diverse housing types contributes to the high average home prices in the area.
Equity and Wealth Accumulation
Despite the challenges, there are positive aspects to the current market conditions. Homeowners have seen significant increases in their property values, building equity that can be leveraged for other investments or financial needs. “The single greatest way for Americans to accumulate wealth is through home equity,” Andrews emphasizes. This equity can be used for home improvements, education, or other financial goals, providing a cushion of financial security.
However, the disparity between those who own homes and those who don’t is growing. Younger generations, in particular, are finding it harder to enter the housing market and build equity. “People in their 40s, 50s, and 60s are able to accumulate wealth through homeownership, but those in their 20s and 30s are struggling to get in,” Andrews notes. This generational divide could have long-term economic implications, as younger people may miss out on wealth accumulation opportunities their parents enjoyed.
The Future of Real Estate in Chatham County
Looking ahead, the future of Chatham County’s real estate market will depend on several factors, including interest rates, housing supply, and regional economic conditions. Andrews believes that if interest rates stabilize or decrease, there could be another surge in the market. “If interest rates soften, we’re likely to see another explosion in demand,” he predicts.
Developments like the new projects by Disney, which include smaller homes and potentially higher-priced properties, will also impact the market. While these developments might not solve the affordability issue, they will add to the housing inventory, which is sorely needed.
It’s a Challenging Time
The real estate market in Chatham County is a microcosm of broader national trends, reflecting issues of affordability, supply shortages, and demographic shifts. As the market continues to evolve, potential buyers and sellers must navigate a complex landscape shaped by economic forces and policy decisions. For now, the best strategy for those looking to enter the market is to stay informed and be prepared for a competitive environment. “It’s a challenging time, but opportunities exist,” Andrews concludes. “With the right approach, people can still achieve their real estate goals.”
Watch on YouTube – Conversation about the state of the real estate market in Chatham County – 5.17.24
00:16 Discussion on the state of real estate market locally and nationally
Highlighting the current housing shortage in the US due to increasing population and generational shift
Focus on the impact of interest rates on the real estate market, with rates around seven and a quarter percent
02:05 Interest rate changes affecting home affordability.
The rise in interest rates impacts people’s monthly payments and purchasing power.
Workforce housing shortage is one of the biggest issues in Chatham County.
03:45 Real estate market trend affecting landlords
Landlords considering selling properties due to increased value
Impact on rental housing market and tenant dynamics
05:24 Real estate prices in Chatham County are rising rapidly.
Average home prices have doubled relative to average household incomes.
The average new construction price is close to a million dollars.
07:03 Real estate market in Chatham County is up 25% in the last three years.
Good side: Homeowners have equity to borrow from for investments or expenses like education.
Bad side: Younger generations find it challenging to enter the housing market and accumulate wealth.
08:38 Real estate market seeing abnormal cycle
Older homeowners reluctant to give up low interest rates, affecting market cycle
More people moving from urban to suburban areas or from West Coast/Northeast to Sun Belt
10:16 Real estate market in North Carolina is diverse and evolving.
Areas between the coast and Raleigh are experiencing a decline in population.
The I40-I85 Corridor, including Raleigh, Greensboro, and Charlotte, is experiencing rapid growth.
11:57 Chatham County real estate prices driven by sewer availability
Orange and Wake County have more sewer availability and offer condos and townhomes, unlike Chatham County
Anticipated introduction of smaller homes in Chatham County, but not necessarily less expensive