Triangle sees a ‘shocking’ decline in the number of starter homes for sale
The Triangle’s housing market remains robust heading into the summer months, buoyed by low interest rates and steady demand from the region’s growing economy.
That is a stark departure from how many were feeling last winter, when rising rates started driving up the potential mortgage payments for buyers.
“I think it’s the interest rates,” Stacey Anfindsen, a Cary-based appraiser with Birch Appraisal, said about the strong housing numbers for the spring. Anfindsen puts together the monthly Triangle Area Residential Realty Market Report.
“Last year, there was such an upward trend in interest rates and now those rates have gone down almost a full percent. I think that’s it,” Anfindsen added.
Last year, the interest rates on a 30-year mortgage rose nearly a full percentage point from January to December, with rates peaking in November at 4.87%.
By this May, the rate had fallen to 4.07% — the lowest since January 2018.
While that may seem like a small drop, it translates into real savings for buyers. If you were to apply those November and May rates to the average home price in the Triangle, you would be looking at a monthly payment of $1,719 and $1,630 respectively.
For the Triangle, that helped create a 5.7% jump in closed sales in May compared to the same month last year — as well as a 5.5% jump in the median sales price to $281,500, according to the Triangle Multiple Listing Services data. Those totals broke previous May records, Anfindsen noted in his report.
It’s not just the Triangle’s housing market — which has been much stronger than the nation as a whole — feeling a shot in the arm from lower rates. The number of mortgage applications across the U.S. increased by 27% in the first week of June, the largest weekly increase in four years, The Wall Street Journal reported.
“I feel very good about the housing market,” Lawrence Yun, chief economist at the National Association of Realtors, told the Journal. “Inevitably, I believe that home sales, which have been down year-over-year for many consecutive months, will turn positive in the second half of this year.”
For Adrian Brown, a Durham-based broker at Inhabit Real Estate, the past two months have been strong ones.
“For me personally, basically April and May I didn’t get my head above water,” he said in a phone interview. “I had multiple closings every single week.”
He noted his firm is up 30% over what they did last year and the Durham market has been especially strong. Closed sales in Durham in May were up 9.2% compared to the same time last year, according to Triangle MLS.
Brown said he put that increase down to a combination of low rates and a continued migration of residents moving to the Triangle from all over the country.
“So many transactions I’ve had were people moving here from other states,” he said. “And it’s not just to take jobs. I have some clients right now who are looking at getting closer to their family.”
Kevin Whalen, 66, is one of those clients.
A retired CPA, Whalen and his wife decided to buy a home in Durham last month and move here from San Jose, California, to be closer to family members on the East Coast. Their search for a place to retire, he said, began online, with simple searches like “best places to retire.”
“I grew up in Baltimore and my wife is from Brooklyn,” he said. “All of our relatives are from somewhere up and down the East Coast” and Durham was convenient to them all.
Whalen said he had three criteria when looking for a city to live in: access to a major airport with nonstop destinations, major universities and good health care. The Triangle had all three, he said, plus it was warmer than Boston and New York.
He and his wife ended up buying a home near the Durham-Orange county line in the mid $500,000s.
“The market was hotter than we expected,” Whalen said. “Prices were going up and houses were getting multiple offers, which is the norm out here” in California.
“We ended up spending more than we thought we would, but in comparison to California prices, it is not bad,” he added.
David Zanaty, eastern division general manager for the online home selling platform Opendoor, said the Triangle is one of his company’s strongest markets in the country. He oversees metro areas such as Atlanta, Charlotte and Orlando for Opendoor.
The Triangle “is very strong and what I mean by that is it’s very much a sellers market,” Zanaty said. “If you are a seller, you are still seeing home price appreciation and demand for your product. A lot of that is driven by months of inventory, which is less here than other markets.”
The entire Triangle market had an inventory of 2.5 months in May, according to Triangle MLS. Lyndsey Roach, a spokeswoman for Opendoor, added that the company’s internal data around inventory also paints the Triangle market as quite strong.
Roach said the Triangle’s market’s absorption rate, which is defined as the number of months it would take for all currently listed homes in the area to be sold, was 1.91. Any number below three indicates a sellers’ market, she said.
Zanaty said those numbers indicate the region needs more housing, especially homes under $250,000.
“We see starter homes under $250,000 doing really well because there is an under-supply,” he said. “First-time home buyers are having a hard time competing.”
Brad Nelson, of Davidson Homes, agreed with that assessment, noting that’s why his company is investing heavily in townhouses right now. With so much demand for land in the Triangle, he said, building densely is one of the best ways to drive down prices.
“I think land prices almost dictate” building more townhouses, Nelson said, adding that buyers have grown more accepting of attached housing in recent years. “In order to make something work (here), you find the need to be a little more dense in your development.”
Davidson Homes is currently targeting its projects in the Wake County suburbs, with communities going up in Wake Forest, Apex and Holly Springs.
Nelson said that selling for under $350,000 in those areas are not “sticking around for a while.”
“Because we are trying to stay in affordable markets, Holly Springs and Fuquay-Varina are areas that we think are going to continue to grow and stay at an affordable price point,” Nelson said. “Johnston County is also continuing to grow in the right direction.”