Eight years after the housing bust, the Triangle housing market has entered a prolonged state that is perplexing even to the most veteran real estate agents.
The number of houses for sale, which has been falling for years, has sunk so low in some areas that there is a feeding frenzy for properties, particularly those priced at the lower end of the market.
When Terry Thrower, an agent with Fonville Morisey Realty, recently listed his client’s North Raleigh house for $249,900, he knew it would attract plenty of interest. But even he was unprepared for what happened next.
After placing a “coming soon” sign on the property several days before activating the listing on a Friday morning, the house had 35 showings over the weekend. Come Monday, Thrower had received a staggering 19 offers.
“I’ve been with Fonville Morisey for 29 years ... and I’ve seen multiple offers before, obviously,” Thrower said. “But I’ve never had 19 offers on a house before. It was crazy.”
Crazy. Strange. Extraordinary. These are some of the adjectives being used to describe the Triangle housing market, which is baffling agents with its stubborn resistance to adhere to the law of supply and demand.
While demand is healthy and home prices have been rising about 5 percent annually, Triangle homeowners remain largely unwilling to put their properties on the market. The number of existing homes for sale has fallen 25 percent over the past year and is down 55 percent over the past four years. This has created a catch-22 situation that isn’t going away soon.
If you do list it, you’re probably going to sell it really quick but then where are you going to go?
Jay Colvin, regional director for research firm
“We don’t have enough inventory for people to list their homes, which is sort of a weird thing,” said Jay Colvin, regional director for Metrostudy, a research firm that tracks Triangle housing trends.
Colvin said because new homes are appreciating faster than existing homes, many owners would likely lose some or all of the equity they’ve built up if they sought to move to a newer, similar-sized house. That is particularly true for owners who bought in the years leading up to the crash.
“If you want to keep the same equity in your new house, it’s really hard to do,” he said. “... And if you do list it, you’re probably going to sell it really quick, but then where are you going to go?”
Instead, many owners are choosing to stay put and, if necessary, renovate. For those willing and able to sell, the overheated market is a welcome change from just a few years ago.
The average price of all homes that sold in February in the Triangle was $265,900, up 7 percent compared with a year ago and 23 percent higher than four years ago, Triangle Multiple Listing Services data show.
But for buyers the competition for houses, particularly those priced under $300,000, has become intense. Fifty-eight percent of the resale listings that came on the market in February had their status change to pending or sold before the month was out.
“You can’t wait; you have to be on the front end of things or you’ll miss out,” said Landra Cunningham, 34, who lost out on two properties before paying $142,000 – $3,000 over the list price – for a townhome in northwest Raleigh last month.
Cara Pierce, a Fonville Morisey agent who represented Cunningham, said in multiple-offer situations it’s often those with the fewest contingencies that win out. That puts buyers who need to sell their existing home at a disadvantage. In some cases, buyers are even removing the contingency that a house appraise for the sale price in an effort to make their bid more attractive.
Pierce has also seen a sharp rise in the amount buyers are putting down to get a house under contract. A few years ago buyers would put down anywhere from $200 to $500; today such nonrefundable deposits can total $1,000 or more.
“Those are really going through the roof just for buyers to try and lock the house down,” she said.
The inventory shortage is most acute for first-time homebuyers such as Cunningham, who works as a technical writer for SAS in Cary. The lack of listings at the lower end of the market is being exacerbated by rising land and development costs for homebuilders.
Home construction in the region is now heavily concentrated on the western side of the Triangle from South Durham down through Apex, Cary, Morrisville and into Holly Springs. That is pushing up the average lot price in those areas, which typically accounts for about a fifth of the cost of a new home.
Colvin notes that in western Wake County a typical starter home is priced at $300,000 or higher. In largely built-out places such as Cary and North Raleigh, new homes start at $500,000 and above.
Priced out of Fuquay
Buyers looking for lower-priced homes in established neighborhoods are being forced to consider other options, such as townhomes, or expand their search to areas farther out where land is cheaper and more plentiful.
When Daniel and Jayne Therrien began house hunting earlier this year ,they originally wanted to buy in Apex, where they had been renting a house for two years. The couple quickly realized their $250,000 budget made that impossible.
“We just crossed Apex right off the list because everything was selling for over the asking price and houses are going before they’re even put on the market,” Jayne Therrien, 28, said.
The Therriens, who have two children and a third on the way, also found that everything in their price range in Cary either needed too much work or was too small.
The couple shifted their search to the south, first to Holly Springs and then to Fuquay-Varina, where they were able to buy a 2,300-square-foot home for $244,500. Jayne Therriens said she never imaged the family would be able to afford a new home that size.
People are getting priced out of Fuquay now.
Lauren Fours, Allen Tate real estate agent
“We never even thought that was an option,” she said. “Although I think our budget was pretty decent, around here it’s really not.”
The Therriens bought in the more affordable section of the Gray’s Creek subdivision where the homes are built on slabs, not crawl spaces, and most homes are priced at $250,000 and under. Lauren Fours, an Allen Tate agent who represented the Therriens, said all of the lots in that section have sold.
“And the reason it’s sold out it is because of the price point,” she said, noting that “people are getting priced out of Fuquay now.”
In Holly Springs, Fours said, it’s gotten to the point where a $200,000 house will get 10 offers and a client who offers $10,000 over the list price may not get it.
“It’s a battle,” she said. “You’re in competition with other Realtors not really for what you’re producing but for getting houses.”
Few housing experts believe the current dynamic will change anytime soon.
Colvin said the Triangle’s inventory issues can be traced back to the years after the housing bust, when home construction largely came to a standstill and yet the region continued to add new residents. A similar situation is taking place in the apartment market, which has continued to see a surge of new development after several years of inactivity.
The population of Durham, Johnston, Orange and Wake counties has grown by 9 percent over the past five years, with the vast majority of those new residents moving into Durham and Wake.
The two counties added nearly 120,000 people over that period, but the number of single-family building permits issued was just over 30,000, according to Metrostudy. While the region is building enough homes to sustain its current rate of growth, there is still several years of excess demand to work through.
“Now we’re in this big game of catch-up,” Colvin said.
The situation is also unlikely to improve soon for buyers looking for homes under $250,000. At some point, rising prices will force more buyers to go to less-developed areas of the region, which will lead to more builders becoming active in places like eastern Wake County, Chatham County and Johnston County, where new home sales rose 15 percent last year.
But that shift will take time.
“If you’re in a sub-$250,000 house or if you’re a buyer at that price point ... you’re not going to have an option for a while until something drastically changes,” Colvin said.