What will the NC housing market be like in 2021? COVID-19 effects offer clues.
What will the real estate market look like in 2021? Market experts say the pandemic is a main predictor.
The nation will continue to see COVID-19’s unprecedented seller’s market effect on the single-family housing market, experts say, and it will be evident in North Carolina — particularly in the Triangle and Charlotte.
Since the summer’s housing boom began, sales surpassed those in 2019 due to the Triangle’s existing popularity and to all-time-low federal interest rates, which allow more people to afford mortgages.
But the boom has also led to home prices rising due to scarcity, with the supply of available, already built homes reaching record lows since construction halted in the beginning of the pandemic. This has resulted in heightened costs for home construction materials.
“I know that these builders have had to proactively raise their prices in an effort to try to slow down the sales,” said Amanda Hoyle, the Triangle’s regional director for Metrostudy, a residential housing data firm.
“[Homebuilders] have a limited number of lots that are entitled to start building on,” in addition to limited material delivery and limited labor, Hoyle said an in interview. “The homebuilding market is going great, but it’s putting a lot of pressure on builders to deliver and deliver at the quality that buyers are expecting.”
Homebuilders will continue working through this “bottleneck” into 2021 until more normal economic conditions can resume.
The incoming Biden Administration and the pending Senate party leadership will affect the housing market, said Lawrence Yun, chief economist for the National Association of Realtors, in a December presentation.
If they manage the COVID-19 vaccine delivery well, it will allow for job creation as the economy recovers.
Undersupply of homes
In the Triangle, the annual number of housing starts grew by 4.5% in 2020 from last year, but the number of homes sold far outpaced that number, growing by 11.4% from last year, according to Metrostudy.
There are only 1.28 million available homes in the country, down 22% from last year, according to the National Association of Realtors. It’s the lowest number on record since the association started tracking it almost 40 years ago.
That represents a 2.3-month supply, meaning it would take that long for all available homes to be sold at the current sales pace.
That supply has dropped to less than one month in the Triangle and Charlotte metro markets.
In Charlotte, the current inventory of 4,554 is a staggering 54.5% decrease from last year, according to the Canopy Realtor Association. Homes there averaged 24 days on the market before being sold.
“That level is unprecedented in the 30+ years I have been observing the residential market,” says Stacey Anfindsen, an appraiser and market analyst for the Triangle Multiple Listing Service (TMLS). It has typically had a supply of two or three months, with six months being the ideal for a balanced market.
According to Anfindsen, housing undersupply in the Triangle is demonstrated by some of the following metrics in November:
▪ 76% of listed resale homes having a sale status change to pending or closed.
▪ 24% increase in closed sales on home resales from a year prior.
▪ 81% of resales were only on the market for a month or less.
▪ 36% of resales had sale prices higher than final list prices, an increase from the usual 14-17% the past five years.
Price increases, seller’s market
Nationally, the average home price of $310,000 in November is already 15% higher than a year prior, according to the National Association of Realtors.
In the Triangle, the November average overall home sale price was $369,000 and the average resale price was $359,000, the highest in the last four years for both categories, TMLS data shows.
In the Charlotte region, the annual average overall home sale price is $349,562, a 14% rise from last year.
Metrostudy estimates that due to lumber prices skyrocketing, the base price for homes nationally has risen by an average of $7,000 to $12,000 per home.
George Ratiu, a senior economist with Realtor.com, says new home construction will increase next year but still not enough to meet demand and cut prices.
“Considering how short we are already, I don’t think there will be enough to really tilt the market in the buyer’s favor,” Ratiu said in an interview. “Nationally as well as for the Raleigh-Durham area, I think that 2021 will still be a seller’s market and things will level out toward the second half of the year.”
But Ratiu said this still won’t discourage first-time buyers from hopping on opportunities.
Millions of millennials reaching an average homebuying age of 30 in 2021, and more workers with work-from-anywhere conditions, will motivate potential buyers to save money and make the purchase, he said.
This story was originally published December 30, 2020 at 4:40 PM.
