The housing market in 2022 saw a significant slowdown from 2021 with the combination of rising interest rates, inflation, and home prices. Although signs from the Federal Reserve indicate that interest rate increases may be slowing, they are still expected to rise this year, which will have a negative effect on mortgage rates. Price declines are expected especially in more affluent neighborhoods, but inventory is still below demand, which provides resistance to lower home prices. Taylor Oxendine, co-executive officer of the Central Carolina Realtors Association, says, “We saw a slowdown late in 2022, but activity picked up in December. Inventory has increased compared to 2022 as mortgage rates equalize. Housing affordability is still an issue and won’t improve until more homes are built to meet demand.”
New listings in the Columbia metro area were down 10.7 percent in 2022 from 561 to 501 homes. Many homeowners are waiting for more favorable market conditions before listing their homes for sale. With mortgage rates topping 6 percent, more than double what they were in 2021, the added cost is significant and prices many out of the market. Pending sales in the Columbia metro area at the end of 2022 went from 462 homes in 2021 to 396 homes in 2022 — another indicator of a slowing market.
Homes, however, are selling faster, with the average number of days on the market decreasing from 123 to 110 days. This may be an indicator that even though mortgage rates have risen, the underlying demand is strong. The Columbia metropolitan area is growing, and people need homes. The median sales price increased 15.1 percent in 2022 over 2021 and is remaining steady in 2023. This again is another indicator of a lack of supply, which has held the price up even against the headwinds of rising interest rates.
With the possibility of a recession looming, the direction of home prices for the remainder of 2023 is uncertain. The general state of the market is stronger than the last housing cycle that took place during the Great Recession of 2008. At that time, job cuts net of job gains was 8 million; currently there are none. Back then, subprime loans were prevalent and today there are virtually none. Mortgage delinquency amounted to 10.1 percent while today it is 3.6 percent, and home foreclosures were 4.6 percent and currently are 0.6 percent. Due to their larger home equity position today, homeowners are not pressured to sell as they were in 2008. Homeowner equity grew 15.8 percent in 2022. High homeowner equity decreases the probability of foreclosures and distressed sales that were common during the Great Recession.
The longer a market environment of higher mortgage rates goes on, the greater likelihood prices will eventually fall. Buyers in 2020 and ’21 may come to regret the premiums they paid for their homes. Rates may rise as high as 8 percent before receding; the 40-year average mortgage rate is 7 percent. Columbia is considered an affordable real estate market compared to the rest of the nation, and realtor.com ranked Columbia as a top 10 market for 2023 for real estate activity. Columbia has a stable economy, and housing appreciation has not risen so much as to price a significant number of buyers out of the market.
Information for this article was provided by the Central Carolina Realtors Association and Guild Mortgage Co.