Prospective home buyers in the Triangle are facing higher-than-ever prices on houses that are selling faster than ever
Prospective homebuyers in the Triangle are facing higher-than-ever prices on houses that are selling faster than ever, making the process far more jangling than it was just a few years ago.
“We lost three houses, all of which we made offers above list price,” said Greg Thomas, who along with his veterinarian wife, Adele, in November bought their first home, in Wake Forest. “To walk in a place and see it in 20 minutes and then make a decision: Do you want to buy this house? If you do you better put an offer on the table, and even then you still may not get it.”
Were it not for a patient real estate agent, Colleen Lawrence, Thomas said, “I would have lost my mind.”
There has been a shortage of houses for sale across the Triangle for the past several years, and that demand is pushing the price of homes that are on the market through the roof.
“Buyers are stressed,” longtime Raleigh agent John Wood said. “The emotional roller coaster is enormous.”
The average sale price of a home in Wake County last year reached $324,682, a record high and an increase of 7.5 percent over 2016. Across the Triangle, the average sale price was up 6.5 percent. Sales that closed were up 5.6 percent in the Triangle and 3.2 percent in Wake, according to Triangle Multiple Listing Services data, which covers 16 counties.
Johnston County, where construction started on nearly 2,000 homes last year, had an increase in new listings of 15.5 percent and a 12 percent increase in closings. The average sale price was $217,450.
More homes are selling in the upper ranges, which Stacey Anfindsen, a Cary appraiser who writes the Triangle Area Residential Realty market report, finds notable.
That’s been the red-headed stepchild of the market. There’s a lot more activity in the upper-end price range than there had been.
“This year the big improvement is for metrics above $800,000,” he said. “That’s been the red-headed stepchild of the market. There’s a lot more activity in the upper-end price range than there had been.”
Buyers coming in from other parts of the country who have good-paying jobs, a large amount of home equity and a growing stock portfolio are driving that trend, he said.
There were many high points in the Triangle market last year, Anfindsen said, with record numbers of showings, pending and closed sales, and median sale prices. Although an affordability index shows housing is increasingly out of reach for many, that is offset by other factors, such as wage growth, investments and home equity.
The higher-end homes that builders are putting up don’t help the first-time homebuyers and others who a decade ago could find something closer to $100,000. “That’s not a possibility at all,” Wood says. “It’s a pretty rare event. Most new construction is about $300,000 and many are $400,000.”
Adding to the pressure on some buyers who haven’t closed a deal is deciding whether to sign up for a one-year lease or take a chance on finding the home of their dreams soon. With a strong rental market, few landlords do short-term rentals.
Nationally, home sales have dipped, although December saw record prices, quick sales and low inventory.
Why inventory is low
Many factors are combining to keep housing inventory low:
▪ Houses are spending less time on the market. In some cases, sellers are taking longer to move because they haven’t found the house they want. Houses were on average 26 days on the market in Wake County last year, down from 30 days, hitting another record.
Those are crazy numbers.... There’s a buying frenzy out there.
“Those are crazy numbers,” said Wood, who is a RE/MAX agent, noting that just a couple years ago the average was 80 days on the market.
“There’s a buying frenzy out there,” Wood said. “Spring markets start earlier every year and it is starting now. We are seeing buyers be very aggressive in their offers.”
▪ The Triangle has about a two-month supply of houses. Wake County has slightly less than that. Five months is considered a healthy number.
▪ There is more competition for older houses in some areas where investors and developers looking to tear down and renovate houses are outbidding traditional home buyers.
▪ A national trend seen locally is increased competition from buyers 36 and younger who are no longer renting. The National Association of Realtors reports millennials and Gen Yers have comprised the largest generational share of buyers for the past four years, and 66 percent of them are first-time buyers. More of them are buying in the suburbs, too.
▪ Fewer homes are being built, in part because builders don’t want to get too far ahead of the market and have to leave houses vacant, says Amanda Hoyle, regional director for the research firm Metrostudy. The problem is exacerbated by not having enough workers in the construction trades, which hampers developers’ efforts to stay on schedule.
Construction outlook promising
Still, Hoyle says, the outlook is promising. New home construction starts in the Triangle last year were up 9 percent, which put more than 12,000 new homes on the market. The number of new homes sold increased about 5 percent.
But construction has not reached its 2006 level when more than 16,000 homes were bought and sold in the Triangle, she says.
That period led up to the nationwide crash in home prices, mortgage delinquencies and foreclosures caused in part because loans were made to people who couldn’t make the payments. It drove building speculators into bankruptcy, and resounded over the next decade. Mortgage underwriting has been reformed since then.
What’s driving all this demand?
“A lot of new people with a lot of new money,” Anfindsen said.
Wake County is attracting an average of 67 new residents a day. Considering that people also move out every day, Wake is growing by a daily average of 47 people, including children, according to the county.
As long as the region keeps making national best-of lists and can boast of good public relations like making the list of 20 potential sites for a new Amazon headquarters, people will move here, Wood said.
“We continue to be, still, an area of growth,” he said. “The accolades we continue to get just bring people here without jobs.”
But there is sufficient job growth, along with a wide diversity of employment — which includes universities, government and the service industry — and investment in downtowns like Raleigh’s and Durham’s to make analysts confident the rise in housing prices is a steady climb, not a bubble.
“There’s no indication 2018 will bring setbacks in the real estate industry, based on current conditions,” Wood said. “Nobody is forecasting 2018 to be a slow year.”
A slice of the Triangle housing market
Closings in 2017 compared to 2016:
Triangle +5.6 percent
Wake +3.2 percent
Orange -2.8 percent
Durham +3.7 percent
Johnston +12 percent
Average sales price:
Source: Triangle MLS