It is becoming more apparent that there exists a major shift in sentiment as it pertains to interest rates and Central Bank Policy.
In my opinion the three factors that have driven the rebound in housing post 2008/09 have been: 1) Low to zero/negative interest rates; 2) Quantitative Easing (QE) or printing money by Central Banks; 3) To lesser extent better economy. I say this latter point because economic growth has averaged around 2% since the recovery much less than historical standards as wages barely grew and yet housing prices on average are HIGHER than the peak before the housing crisis.
In the Charlotte area there is no doubt demographics have played a key role in supporting the above trend stats here vs national averages as well. Immigration policy has also played a role too. Simply put, more people are moving here than ever before supporting demand.
Being fairly new to the Charlotte area, I can’t provide a true perspective on what was going on back in 2008/09, but I can tell there are plenty of people I met either have direct ties to housing either thru work and many thru their personal investments. Thus, why I want my fellow Charlotte residents to be aware that the factors that drove housing to where it is are shifting/changing rapidly. Interest rates have already risen from their lows as an obvious point and appear to be poised to rise further as more Federal Rate hikes are expected thru 2018.
The more recent development is the growing consensus to expect Central Banks to withdraw money from the financial system by reducing their asset purchases. Not to get too technical, but our Federal Reserve has been purchasing mortgages (among other assets) as part of their asset purchase program thus by definition supporting lower mortgage rates. Well, recently they and the European Central Bank have BOTH signaled that they may begin to reverse that by the end of 2017. Thus, 2/3 factors that supported housing will wane with the third, the economy, hopefully picking up some of the slack in 2018 if and when the proposed tax cuts get passed. The migration to Charlotte from other areas in the country appears firmly in place however.
For those connected to housing in Charlotte or North Carolina, you should be aware of these trends and we will monitor the data to see whether housing demand will slow. Whether it does or doesn’t, now is the time to prepare and discuss its implications either in your personal finances or business. For more specific insight on the economy, please contact me.