Over the past year, the Triangle housing market has displayed all the signs of a market on the mend.
The number of sales has been rising – up 23 percent in 2012 compared to the prior year – while the number of homes on the market has been falling. The region now has just a four-month supply of homes on the market at the current pace of sales, a level that is typical of a healthy market.
The law of supply and demand dictates that such conditions should eventually lead to higher prices, but in the Triangle that hasn’t happened yet. By most measurements, Triangle home prices have been basically flat even as sales have picked up and inventory levels have dipped to historic lows.
“I think that we’ve seen the bottom of the market back in 2012,” said Jason Graves, a broker and listing partner with Linda Craft & Team Realtors in Raleigh. “The question now is how high and how fast can we push those prices up again.”
Depressed prices are part of the reason that inventory levels have been able to get so low over the past 18 months. Many owners have taken their homes off the market, or delayed putting them up for sale at all, because they can’t get the price they want. Some are under water, meaning their house is worth less than what they owe on their mortgage.
Graves predicts that the Triangle market’s strong sales numbers in recent quarters will cause a rush of sellers to put their homes on the market this spring. But he said many may be disappointed at how little prices have improved.
“Inventory is moving, but prices haven’t shot up,” he said. That the market hasn’t reacted as it traditionally would to such a significant drop in inventory speaks to both the depth of the housing crisis and the sluggishness of the economic recovery that has followed. The recent improvements in the housing market, while welcome, have not dramatically changed the dynamic between buyers and sellers.
“Most people are thinking things are still pretty rotten and why should they pay a higher price for something,” said Stacey Anfindsen, a Cary appraiser who analyzes Multiple Listing Services data for area agents. “That’s kind of the mentality that’s going on.”
Follow the leader
Anfindsen said buyers appear content to wait until there’s more inventory to choose from. While interest rates are now at historic lows, they have been low for some time and most expect them to remain low.
“Buyers are strangely patient right now,” he said.
Anfindsen said sellers looking for an indication of where prices are headed should focus on the new home market.
“New homes lead the way in terms of pricing,” he said. “New home prices go down; re-sale prices have to go down. New home prices go up, than re-sale prices can increase.”
Homebuilders were forced to lower prices and offer significant concessions to buyers in the years after the market downturn as they worked through a glut of inventory. Much of that inventory is now gone, with new home listings down 70 percent from five years ago.
Still, the average sales price, on a per square foot basis, for the new homes that sold last year was $111, down 2 percent from 2011, MLS data show. And financial concessions were paid in 64 percent of the new home closings in the fourth quarter, compared to 63 percent during the same period in 2011.
Rich Van Tassel, head of the Raleigh-based Royal Oaks Building Group, said he expects new home prices to rise this year in large part because the Triangle now has a shortage of lots. Many builders were able to scoop up distressed lots cheap after the crash, enabling them to be more flexible on price. As builders pay more to replenish their inventory of lots, they’ll be forced to raise prices, he said.
For now, builders’ willingness to negotiate is benefiting buyers such as Ruth and Mike Pincus. The couple, who are relocating to the Triangle from New Jersey, recently put a new house in Holly Springs under contract for $306,000.
“The house listed at $322,500 and I understand it had been reduced since before we started to look at it,” Ruth Pincus said.
The Pincuses are the type of relocation buyers that the Triangle is likely to see more of as the housing market recovers. The couple had been considering a move for several years, and recently took the plunge after selling their house in Lumberton, N.J., for their asking price of $374,900.
Ruth Pincus said the couple was seeking a “lifestyle change.” Mike Pincus, 51, is a retired police officer, while Ruth, 50, has already found a job in the Triangle in the insurance industry. The lifestyle change will also mean paying considerably less in taxes than they were in New Jersey.
“It’s going to be about a third less than what we’re paying now,” she said.