Housing has long been an economic backbone of Chapel Hill. Is it showing signs of osteoporosis? If so, how do we restore its youth and vitality?
For decades, town public policy has helped create a robust local real estate market. By restricting development in an area with excellent amenities and schools, the supply of homes perennially fell short of demand. Except for recession years, housing sales and prices consistently rose in response.
Until this year.
In the first half of 2014, closed sales of homes in Chapel Hill and Carrboro have declined 7.9 percent. In contrast, Durham, Chatham and Triangle-wide sales all increased. Prices of homes sold this year were nearly flat here, but increased in all our surrounding areas.
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There are several potential causes of these diverging trends. First, it could be we’ve reached a tipping point in pricing. After all, the average cost of a home in Chapel Hill is the highest in the state, and well ahead of Durham and Wake counties. However, while the high cost of a home here may be driving lower-income residents out and keeping some young families from moving in, it is still much lower than many wealthy areas around the country. For retirees and dual income couples from Greenwich, Silicon Valley, and many major metro areas, this is affordable housing.
More likely the perceived value of living here, versus neighboring communities, may be narrowing. The value of a home, like all products, is a combination of cost and benefits. How does our cost stack up? If you spend $300,000, which is between the averages of Chapel Hill and Durham or Wake, you get more home outside our area – four bedrooms instead of three and over 25 percent more square footage.
But most striking is the age difference of the properties. The average $300,000 home sold in Chapel Hill this year was built in 1981. In Durham and Wake, it was 2002. That’s a 21-year difference. Chatham’s average home is even newer. That’s a result of our neighbors consistently adding new homes to their inventory.
When you consider those other areas now have some highly rated schools, along with nice amenities paid for by their higher tax bases, it’s no wonder we’re beginning to get some real competition for people moving to the Triangle.
Why is this important?
First, housing equity is the most important contributor to household wealth. Families depend on reasonable growth in the price of their homes.
Second, the town needs values to go up for tax revenue, since our tax base isn’t broadening quickly. Finally, housing is a leader in our local economy. Over 500 Realtors make their living as members of the local association, and housing sales totaled just under $600 million last year – making it one of the largest private business sectors in town.
Since our housing stock is so old, we need to combat this trend by encouraging renovation and redevelopment. We need to make it easy for property owners to update obsolete floor plans and dated décor. The time, cost and attitudes of permitting and inspections should assist, not impede, improvements. We should review easing restrictions on adding square footage, which is the best way to add value. That may mean re-looking at Neighborhood Conservation Districts.
Our homes are not getting any younger, but our rivals are beginning to turn heads. To keep our community strong, we must make our current housing the best it can be.
Mark Zimmerman lives and owns a real estate business in Chapel Hill. You can reach him at at email@example.com