Historically low mortgage rates have helped some Charlotteans keep up with high home prices. But for others, homeownership and the opportunity to build wealth are further from reach.
Why it matters: Homeownership creates stabilization, which is the basis for generational wealth, council member Julie Eiselt said. With these historically low mortgage rates and the momentum of a new administration, now’s the time for Charlotte leaders to act and enact change.
State of the rates: In some cases mortgage rates have dropped below 3%. Around 90% of homeowners could benefit from a refinance, Casey Crawford, the founder of Movement Mortgage, said. Whether you want to lower your monthly payment, or use that money saved to pay down your home’s principle.
Let’s say you have a 30-year mortgage on a $250K at 4%. This data shows how much your monthly payment could change from refinancing, and how much you could save over the lifetime of the loan.
How does that relate to the wealth gap? Lower mortgage rates increase your buying power, Crawford said. When buyers have more power, there’s more demand. High demand, combined with low inventory, drives home prices.
- “The losers in that situation are those currently renting that don’t own a home and don’t benefit from any of that appreciation in home value,” Crawford said.
- And when there are fewer homes in the affordable price range, it’s harder to enter the game and start building equity.
Zoom out: The relationship between mortgages, housing and wealth isn’t new. Developer Clay Grubb, CEO of Grubb Properties, grew up in the business. Recently though, he’s looking at neighborhoods like Grier Heights, where 92% of its residents rent.
Home values rose 30% last year, according to Canopy MLS data. The majority of people in the neighborhood don’t get to reap the benefits from that, Grubb explained.
“If we don’t provide access to mortgages, low interest rates really are just a subsidy for the rich,” Grubb said.
So, what needs to change?
- Eiselt says Charlotte needs some sort of federal assistance to keep investors from gobbling up affordable properties. And measures in place that keep people in their homes when an emergency pops up.
- Crawford says education is key to access. Many people qualify for a mortgage loan, such as an FHA loan, even if they’ve had a credit “hiccup” or don’t have enough saved for a large downpayment, he said.
Grubb has an idea he’s already shared with leaders at Wells Fargo and Eiselt. He’d like Charlotte to use COVID-19 relief funds to create revolving lines of credit. The funds would:
- Help people with down-payments, one of the biggest barriers to homeownership.
- Be available for those homeowners during emergencies, from job loss to roof repairs.
Grubb says this wouldn’t take long. But it requires leaders from big banks and city officials to put it in motion.
Yes, but: Inventory is still a problem in Charlotte. First-time homebuyer specialist and owner of JClay Realty Jeff Clay said homes under the $300K price typically have 20-30 offers. “Frankly, the lower the price point, the harder it is,” he said.
Bottom line: The opportunity to build wealth in Charlotte is not equal. And while assistance programs and education might help people secure mortgages, the lack of affordable housing makes it difficult for many people to enter the game.
