We have become a nation of Zillow watchers. Depending on your situation, peeking at real estate on the Internet is fun because you own a home and have been watching it jump up in value, or not great because you want a home and it is a seller’s market.
There’s a metric that the real estate industry uses called “Days on Market,” how long listings are sitting before the seller has signed a contract. The term has lost some of its relevance in North Carolina’s metros.
I talked about this recently with Stacey Anfindsen, a residential appraiser and housing market analyst, and probably one of the most knowledgeable folks when it comes to the Triangle’s real estate.
“Most of it is hours on market,” says Anfindsen. “I mean, the average days on the market, most submarkets I’m looking at, it’s less than 10 days. Less than a week. You have houses being bought sight unseen.”
He calls it a “perfect storm” of low interest rates, folks moving to the Triangle in large numbers and the arrival of the millennials who want homes. “They’ve healed a little bit from their student loan debt, and the scars of watching their parents lose their house have kind of gone away.”
The average sales price of a home in Wake County is $463,000, says Anfindsen, up 23% from June of last year. “It was a bit stable from January to February, but in February to the end of June, it has probably gone up about 2% per month.”
Looking at the housing market today makes it easy to forget the impact of the Great Recession on the homebuilding industry.
Builders were busy in the early 2000s. In 2005, they got nearly 14,000 single-family home permits in the Raleigh-Cary metropolitan area, up nearly 35% from 2003. A similar pop was happening in the larger Charlotte-area market. And then the wave of buyers who had flooded into the market started struggling to make payments, and the foreclosure signs started going up, here and around the country.
“It was October 2008 . . . when everything shut down,” recalls Tim Minton, executive vice president of the North Carolina Home Builders Association. “I remember it distinctly, how quiet it was. One hundred miles an hour to literally 10 miles an hour.”
Buyers wonder today how the inventory of single-family homes got so tight. There are a number of reasons, but one is that a lot of construction stopped after 2008, and for a while. In the Raleigh area, annual single-family home permits dropped from around 12,000-14,000 to as low as 4,377 in 2009. In Charlotte, they went from nearly 20,300 in 2006 to 4,338 in 2010.
The damage was long-lasting. While there are big, national builders, a lot of the housing industry is made up of small companies. Many of them got overextended with homes built on “spec,” without contracts. The industry had nearly 7,000 companies in North Carolina in 2004, with more than 30,800 employees, according to census figures. By 2012, there were nearly 1,800 fewer companies and the number of employees had dropped by 44%.
“A lot of the small builders were really hurt when the housing crash happened,” says Danushka Nanayakkara-Skillington, an economist with the National Association of Home Builders.
The industry has made a comeback, but even as recently as 2019, employment wasn’t yet back to 2004 levels. One problem is that the industry has traditionally skewed older, and skilled labor is tight.
The 30%-plus growth in North Carolina’s population since 2000 – mostly in urban areas – absorbed the Great Recession’s foreclosures and then some.
Millennials are in peak home-buying years, notes Nanayakkara-Skillington, defined as between 25 and 45. “The oldest millennial is at 40 right now.”
But it’s not just millennials buying homes. North Carolina is a popular Baby Boomer destination. There are around 800,000 more residents 65 and older today than 20 years ago. Some of them are people like me who were already here in 2000 and just aged in place. But some of this is retirees who sold their homes up north and came here to be near their kids and grandchildren.
All the demand for homes is causing something not often seen: Existing homes are selling for more than comparable new ones in some places.
In the old days, when more spec homes were built, a buyer would come along and negotiate a price that reflected up-to-date costs and market conditions. Then came the 2008 wipeout, and now, says Anfindsen, a majority of new-home transactions are “presales.”
“So, they were put under contract in the fourth quarter of last year. Six to nine months to almost a year to get it built, and those prices were negotiated back in the fall. What’s going on with resales, a house comes on the market, and there’s 30 people that want to look at it, and it goes on the market at 400 and then it goes under contract at 475.”
He said he has heard that new-home builders are going to “dial back on presales … and put specs out there so they know what the costs are.” And, he says, “Maybe they can get the same bidding mentality that’s going on in the resale market.”
The Triangle market that he tracks is filled with highly educated knowledge workers and, Anfindsen says, “the knowledge workers prospered tremendously during the height of the pandemic.” They just went home and kept working. “And those are the ones that are buying houses now. You’ve got a lot of money chasing a finite resource.
“I don’t see any headwinds for demand in this market. Matter of fact, I see it accelerating.”
