ANDERSON \u2014 A year ago, when they decided to sell their 11-acre property near Middletown and look for a more suitable house in the Pendleton area, Caleb and Samantha Laurie believed they were making a calculated decision.<\/p>\n
Although the sale netted them a healthy return, the couple soon found that that money wouldn\u2019t get them nearly as much house as they were hoping for.<\/p>\n
\u201cEverything we\u2019re finding is already too high, and it needs (to be) remodeled,\u201d Samantha Laurie said. \u201cEverything is exceptionally high. Everything we go look at, it\u2019s very outdated.\u201d<\/p>\n
What the Lauries are seeing in the local housing market is analogous to what tens of thousands of would-be homebuyers across the country are experiencing.<\/p>\n
Inflation-driven interest rate hikes, lingering supply chain issues with building materials and scarce inventory are bringing a booming post-pandemic housing market to heel more rapidly than many industry analysts had expected.<\/p>\n
According to the National Association of Realtors, pending home sales nationwide fell 1.2% in March, marking the fifth consecutive month of declining contract activity. Year-over-year, the numbers are even more stark, with March\u2019s 8.2% dropoff marking the 10th straight month of decreased sales.<\/p>\n
The Federal Reserve has raised its benchmark interest rate twice this year, including a half-point increase earlier this month \u2014 the largest in more than 20 years \u2014 and as many as six more increases could happen by the end of the year, analysts say.<\/p>\n
Those higher loan costs, coupled with what some buyers see as a lack of appealing choices in available inventory, are driving many people to the sidelines. But some real estate agents say the decision to wait the market out carries its own costs.<\/p>\n
\u201cYou might only be competing against two to three people (for a house); however, that same $200,000 house last year is now $240,000, and that 3% interest rate is now a 5% interest rate,\u201d said Steve Thompson, owner of F.C. Tucker\/Thompson in downtown Anderson.<\/p>\n
\u201cYour buying power as a consumer has decreased by 20% because of the appreciation of prices and because of the appreciation of interest rates. That\u2019s now pricing people out because they\u2019re frustrated that they can\u2019t buy the house they thought they were going to buy last year.\u201d<\/p>\n
\u201cFrustration\u201d is a good word to describe what the Lauries have experienced in their home search, especially as they\u2019ve had to renew their loan preapproval twice within the last eight months. Samantha Laurie said they originally were approved for a loan in the 3% range, but that rate has risen to 5.4%.<\/p>\n
\u201cWe keep running out of time to find something,\u201d she said. \u201cYou only have, I think, 90 days, so then you run out of time, and they have to pull your credit again.\u201d<\/p>\n
THE PERILS OF BUILDING<\/h3>\n
Some buyers unable to find their ideal home are turning to custom building, but following that path carries its own risks and expenses. Builders in many areas, including Madison County, are still dealing with leftover issues related to the pandemic, including labor shortages among contractors and suppliers\u2019 backlogs of materials ranging from plywood to windows.<\/p>\n
\u201cWhat that means to us is it takes longer to build a house, because none of our contractors can find employees,\u201d said Lawrence Johnson, president of Mustin Builders. \u201cIt takes longer to do the job if you only have two guys instead of four guys.\u201d<\/p>\n
Johnson added that a shrinking pool of available subcontractors also presents scheduling challenges and contributes to costs during each step of the production process.<\/p>\n
\u201cA lot of contractors are competing for the same subcontractors, and that can lead to inflation as well,\u201d Johnson said. \u201cWhenever the cost goes up, the market shrinks.\u201d<\/p>\n
Another consideration that is driving up building costs, he said, are the permit fees and other costs incurred by developers, usually when construction is happening on a larger subdivision. Johnson said those expenses are rising even more rapidly than those associated with building materials.<\/p>\n
\u201cA lot of people don\u2019t realize, when you build a house, the developer has to pay for the street, the water lines, the curbs,\u201d Johnson said. He estimated that by the end of this year, the average cost for lots paid by developers will have nearly doubled within the last three years.<\/p>\n
RIDING OUT THE STORM<\/h3>\n
Despite ominous signs that interest rates will continue to rise and buying power will continue to decline in the coming months, local real estate agents stress that, unlike the housing bubble that burst in 2008, the market will end up correcting itself. Getting there, however, will likely be painful.<\/p>\n
\u201cI\u2019ve heard a lot of talk about a crash. I don\u2019t think it\u2019s going to happen,\u201d said Amanda Malone, an agent with F.C. Tucker\/Thompson.<\/p>\n
\u201cI hope things are just leveling out and they\u2019ll continue to do so. I think prices will kind of stabilize a little bit. We\u2019ll probably get into some higher interest rates, but they\u2019re not as high as they have been before, and people were still buying and selling, so hopefully that\u2019s a good thing.\u201d<\/p>\n
As of this week, the average rate on a 30-year fixed mortgage stood at 5.89%, according to NerdWallet. Some local real estate experts believe that number could reach 8% by the end of the year, which may end up relieving some pressure on the limited supply of houses for sale in the county.<\/p>\n
\u201cI wouldn\u2019t say it\u2019s shifting more into what I would call a buyer\u2019s market,\u201d said Heather Upton, owner of Real Estate Pros of Keller Williams in Pendleton.<\/p>\n
\u201cWe\u2019re weeding out a lot of buyers, but that\u2019s not necessarily a bad thing. The buyers who can still be in the market, they\u2019ll have more choices. I still think we\u2019re going to be in a seller\u2019s market for quite some time. It just won\u2019t be as intense.\u201d<\/p>\n<\/p><\/div>\n
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