RALEIGH – Homebuyers in Raleigh’s statistical metropolitan area are increasingly withdrawing from property contracts to buy homes, new data from the national real estate firm Redfin shows.
Of the 102 metropolitan regions surveyed, the region sees the tenth-smallest percentage of contracts fall through with 7% of the deals falling out of the contract in June 2022. Raleigh’s Statistical Metropolitan Area (MSA) includes Wake, Johnston and Franklin Counties.
While 7% is the highest percentage in Raleigh’s MSA since February 2021, it is well below the June 2022 national average, 14.9%.
And this is happening even though buyers may be in a slightly better bargaining position than in previous months, with home sellers in the Raleigh area dropping the prices of one in four homes for sale in June. And a separate Redfin report found that Raleigh also has an increasing number of homes entering the market after two years of historically low inventory, with 20% more new ads than in the same period in 2021.
Still, our local real estate market is undersupplied, said Jim Allen, owner and responsible broker of The Jim Allen Group, in an interview with WRAL TechWire this week. Still, there are some signs that more homes may come on the market, Allen said. “We’re discovering that salespeople are now getting off the fence about selling,” Allen said. “And list their home with us to maximize their equity in their property.”
Prices are falling for many homes in the Raleigh area; listings are also growing
At the national level, almost 15% of all purchase contracts were canceled in June, Redfin’s analysis showed. But in the Raleigh market, only 7% of deals fell apart.
“North Carolina has a particularly difficult contract to get out of,” Courtney Brown, a real estate agent at Hunter Rowe and a former attorney, said in an interview with WRAL TechWire. “On the seller side, it’s really hard.”
On the homebuyers’ side of the standard contract form from the North Carolina Bar Association and the North Carolina REALTORS Association, buyers typically have a contractual right to walk away from the deal during the due diligence period, although many homebuyers have waived this right to compete for homes in a competitive environment. real estate market.
“I tell my buyers that due diligence is a bit of a miniature contract,” Brown said. “It’s a fee you pay to take the home out of the market so you can continue with the contract.”
And while there may be fewer bidders in more bidding situations now than in previous months, when stocks were lower, Roger Bernholz, vice president and general counsel at Triangle real estate firm Coldwell Banker HPW said in an interview with WRAL TechWire, Triangle is still largely a seller’s market.
“The price increase is probably declining, but I do not see that we are experiencing a decline in value,” Bernholz said. “There’s simply too much going on on the business front in the triangle and the surrounding counties.”
North Carolina was ranked first for business twice this week, with a leading factor in both analyzes being economic development activity in the greater Triangle region and across the rest of North Carolina.
Wake County real estate market sees a price break – agents still predict prices will rise
Why the jump?
The Redfin data show that June 2022 saw an increase in the percentage of homes that fell out of contract in the Raleigh area. Nevertheless, the June rate of 7% is lower than the average across the entire data set in the period since January 2017, which is 9.34%.
But since June 2020, the average percentage of homes that have fallen out of contract is 6.6%. And for each month between February 2022 and May 2022, the proportion of homes that fall out of the contract has been below 5%.
So what changed in June?
“The only obvious answer for me is the rise in mortgage rates,” said Matt Fowler, CEO of Triangle Multiple Listing Service, TMLS. “When you have people who are not locked into an interest rate before they close, they may have seen their effective mortgage payment increase.”
Another study published by Redfin earlier this year showed that a rise in mortgage rates of just 0.4% could affect the purchasing power of Raleigh area home buyers by $ 13,500. But mortgage rates have risen dramatically since the report came out, with the latest average interest rate on a 30-year fixed-rate mortgage at 5.51%, according to Freddie Mac’s weekly survey.
“I can imagine someone looking at a payment of $ 2,400, but when they were close to closing, it was $ 3,200,” Fowler said.
Still, Allen said, most buyers withdraw for personal reasons. “Most fall through the due diligence period due to a buyer’s change in relocation plans, job losses or other personal family reasons.”
It is normal to see declines in the 5-7% range, Allen said.
Interest rates on mortgages fell last week, but falls provide little relief for triangular homebuyers
Triangle residents still feel the pressure
First-time homebuyers may feel particularly outstretched right now, and anyone looking to change homes may feel pressured under current market conditions, Fowler said.
“We’re still in a position and we talk about it all the time and say the market is tight or hot, or all of those phrases,” Fowler said. “If you’m a tenant or buyer, you’re probably feeling pretty pressured right now.”
It can also be a factor: There is more of a housing pressure in the triangle than in other markets, so for those lucky enough to win a contract, they are less likely to withdraw from the deal.
“In the last two months, it seems like due diligence fees have dropped,” Brown said. “When I started in real estate, for example, due diligence was $ 1,000, and although it has fallen recently, it is not that far down.”
The fact is that once you get a home under contract and you have put up a large amount of financial capital as a non-refundable due diligence fee, you are much less likely to walk away, Brown explained.
“People do not walk away from $ 10,000 in due diligence fees,” Brown said.
Data show that Triangle’s housing markets may have cooled in June – except for tenants