Triangle housing market sales improve, but sellers are scarce

dbracken@newsobserver.comApril 12, 2014 

RALEIGH

As a couple looking to move from a townhouse to a larger single-family home, Kenan and Julie Barnes are now experiencing both the good and the bad of today’s Triangle housing market.

With the number of listed homes for sale in the region at historically low levels, the Barneses were able to find a buyer for their townhouse in Northwest Raleigh within two weeks of listing it. They received two offers, and the sale price was $1,000 more than the list price and $20,500 above what they paid in 2005.

But the process of finding a new home has not been as easy. The Barneses, both 36, have made offers on two houses – each time offering above the listing price – but have lost out each time. The couple need to be out of their house by the end of May.

“Both of them were multiple-bid situations,” said Kenan Barnes, noting that in one case a house off Falls of Neuse Road in North Raleigh received at least four offers within 24 hours of it coming on the market.

The Barneses are now resigned to the fact that they may end up renting for a spell while they search for their dream home.

“We’re willing to wait and we’re able to wait, and that’s not the case for everyone,” Julie Barnes said.

Of all the gyrations in the local housing market over the past six years, perhaps no development has been more puzzling than the chronically low inventory levels. The Triangle had just 6,589 homes for sale at the end of February, down 7 percent from a year ago and off 46 percent from four years ago, Triangle Multiple Listing Services data show.

While most industry analysts expected inventory levels to fall off dramatically in the years immediately following the housing bust, few expected they would remain so low for so long even as the market entered an extended recovery.

“I think this is uncharted waters for a lot of practitioners because we’ve never felt this before,” said Stacey Anfindsen, a Cary appraiser who analyzes Triangle MLS data. “It’s a strange market in terms of why aren’t there more houses coming on the market.”

Ask real estate agents what’s causing the inventory shortage, and you’ll get no shortage of theories. Anfindsen thinks it’s likely not one thing but a host of factors that are now at work. For a growing number of buyers, the lack of homes for sale is creating the kind of frenzied multiple-bidding situations that few expected to see so soon after the market crash.

“Almost all of my buyers that I’ve gotten under contract this year have been multiple-offer situations,” said Van Fletcher, a real estate agent with Allen Tate who is the Barneses’ agent. “If it’s a good house and it’s under $300,000, it’s a foregone conclusion that it’s going to be a multiple offer.”

In a typical market, the law of supply and demand would dictate that increasing demand would lead to rising prices, which in turn would entice more homeowners to put their homes up for sale. That hasn’t happened in the Triangle.

Price increases modest

One factor is surely that despite modestly rising prices over the past year, some Triangle homeowners remain trapped. Either they owe more on their mortgage than their home is worth – they are underwater, in industry parlance – or they are simply unsatisfied with what buyers are currently willing to pay.

While the Triangle largely avoided the steep run-up in prices that took place in some other markets, there is a significant swath of buyers who paid inflated prices between 2005 and 2008. Most price measurements now put the region’s annual rate of home appreciation at between 3 percent and 6 percent, meaning some owners may still be years away from being able to get what they originally paid for their home.

“However quickly you can jump off a cliff, the climb back up will undoubtedly be slower,” said Jason Graves, an agent with Triangle Real Estate Group. “We have sellers that still can’t afford to sell for what the market is willing or able to pay.”

And that group isn’t limited to buyers who bought at or near the peak. Deana Southerland, 33, paid $129,000 for her townhouse in the Highland Creek neighborhood in Northeast Raleigh in 2011.

Southerland has since gotten engaged and is looking to move in with her fiance, who lives in Mebane. She is considering putting her home on the market later this year, but Southerland is also considering renting it because she’s worried she may not get her money back.

“I just don’t want to end up paying out anything at the end of it. I don’t want to try and sell a home for $123,000 and end up getting offers for $121,000,” she said. “Either I want to break even and not have to come out of pocket with anything, or I want to make a small profit.”

For sellers, the post-bubble market looks very different than it did in the middle of the last decade. With a mortgage harder to obtain, buyers have less purchasing power and less money to spend making improvements. That has helped keep a lid on prices.

It also means that most buyers are looking for a house to be “move-in ready,” meaning it won’t immediately require costly improvements. The Barneses, for example, repainted their townhouse, installed new fixtures and carpets, and had the home professionally “staged” to make it as attractive as possible.

Many would-be sellers, faced with the prospect of having to spend thousands of dollars just to attract buyers, are choosing instead to stay put.

Fletcher, the Barneses’ agent, also believes that the preferences of buyers – particularly young buyers – are shifting.

“People do not want to move out to the suburbs, which is where you’re seeing the majority of the building,” he said. “They want to stay in town. I’m seeing a preference for convenience and amenities over size and newness.”

Fewer speculative homes

Anfindsen, the Cary appraiser, points to the new housing market as being the biggest issue affecting inventory levels.

New homes have historically accounted for about a third of the inventory on the market in the Triangle at any given time. They now account for 23 percent.

Part of that drop is the result of homebuilders constructing fewer speculative houses. But it’s also a sign that the residential construction industry, which came to a screeching halt following the housing bust, is still operating at well below capacity in the Triangle.

“There were no new subdivisions that came on line for a period of time,” said Tim Minton, executive vice president of the Home Builders Association of Raleigh-Wake County. “If you and I got together today and said we wanted to start a subdivision, you’re looking at two years down the road by the time you get it approved and lots on the ground.”

Homebuilders have spent the past several years finishing subdivisions that were started before the crash, but now those developments are mostly complete.

During the peak of the housing bubble, in 2005 and 2006, builders were being issued more than 11,000 building permits annually in Wake County. Last year, 6,195 permits were issued, which was about a thousand fewer than were issued in the county in 1996.

Minton said the industry considers 2003, when there were 8,748 permits issued in Wake, to be a normal year. That means Wake’s numbers were about 71 percent “of a normal year last year,” he said.

Stepping in to pick up the slack has been the apartment industry, which has been constructing new communities in the Triangle at a record clip. The Triangle is now on pace to expand its apartment inventory by 6.1 percent – the third-fastest expansion rate in the country behind only Charlotte and Austin, Texas, according to MPF Research.

Those numbers indicate that while many Triangle homeowners remain reluctant to put their homes up for sale, that hasn’t stopped people from moving here.

“We’ve got more people living here than in the heyday,” Minton said.

Bracken: 919-829-4548; Twitter: @brackendavid

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