Triangle new home sales continue to drag

Tighter lending rules are a factor

It's official: The once-hot Triangle housing market is hurting.

Sales of new homes declined 10.9 percent in July, August and September, the biggest drop in a year, according to residential researcher Market Opportunity Research Enterprises.

New home sales for the first nine months of this year are now down 9.8 percent and likely will continue declining as tighter lending rules and weak job growth further reduce demand, economists said.

"For the longest time, we avoided what happened nationally because of the strength of our market, but with the mortgage and liquidity problems nationally [now], nobody dodges that," said Hampton Pitts, division president of Texas-based Centex Homes, one of the region's biggest builders. "It's somewhat of a wet blanket over the entire industry regardless of your market strength."

Centex Homes had more than 900 sales last year, but this year, sales are down 10 to 15 percent, and the slump is affecting all company price ranges, which run from $130,000 to $700,000, Pitts said: "Everything is a little slower."

Job growth has long propped up the Triangle's biggest industry, but a cooling economy has slowed employment increases to a crawl.

"It's been cut in half," said Michael Walden, the N.C. State University economist, who expects minimal job growth through mid-2008.

This week, a Missouri maker of vinyl siding, windows, doors and fencing, Ply Gem, announced plans to move its corporate headquarters and 100 jobs to Cary in 2008. Large companies such as Fidelity, meanwhile, are adding hundreds of jobs. But in the third quarter, jobs increased only 1.9 percent compared with a year ago, down from a 4 percent increase in the first quarter of 2007, Walden said.

The result is a drag on the Triangle's biggest industry. New home sales make up about 40 percent of the $10.5 billion housing market, and suppliers, appliance dealers and interior decorators contribute billions more dollars to the economy. Sales have set yearly records since 2003 but began falling in late 2006 as higher mortgage interest rates reduced the number of buyers. Tighter lending rules which followed record defaults in the subprime mortgage market further reduced demand.

Audie Barefoot, president of Fonville Morisey & Barefoot, one of the region's largest home marketers, blamed weak job growth for declining sales. Last year, the company, which sells homes for dozens of independent builders, sold about 1,000 homes with a total value of $360 million. This year, sales are down 10 to 12 percent. Barefoot said Wednesday's interest rate cut by the Federal Reserve likely won't improve things, because it won't affect mortgage rates.

"We've got a good housing market here, and there's still demand here, but people [moving here] still can't sell their houses where they're coming from, and job growth is down," Barefoot said.

The Triangle Multiple Listing Service last week reported that sales of existing homes fell 24 percent in September. Statistics compiled by Rocky Mount-based MORE are based on closings recorded in register of deeds offices versus reports by brokers to the Triangle MLS.

New home sales totaled 3,825 for the period in Wake, Durham, Orange, Chatham, Franklin and Johnston counties, according to MORE. Resales were off 15.9 percent in the region for the quarter.

One bright spot for sellers is that prices kept going up. The average new home sold in the Triangle cost $296,574, up 7.7 percent from a year ago.

But builders try to find "sweet spots" in the market, price points which appeal to the most buyers, and there are few price ranges not feeling declining sales.

Sales of homes priced between $130,000 and $139,000 dropped 49.5 percent, those between $180,000 and $189,000 fell almost 26 percent, and homes between $290,000 and $299,000 fell 25.9 percent, according to MORE.

Sales of homes priced in the $350,000 and higher bracket rose 13.5 percent, but even those homes are expected to start dropping. Builders and lenders say they seeing a drop in demand and say it's because interest rates on loans over $417,000 have increased.

"Borrowers are now paying about 7.5 percent on jumbo loans," said DNJ Mortgage senior loan officer Glen Astolfi, up a percentage point from this summer. On a $500,000 loan, that's enough to raise monthly payments $376 to $3,496. Many potential borrowers are holding off purchases, he said.

"Where I see the difference is in $500,000, $600,000 and $700,000 homes," Astolfi said. "The move up guy is not happening now."