The Triangle housing market continued its run of positive sales growth in May, with sales increasing 28 percent and pending sales up 30 percent over the same period a year ago.
The numbers were particularly encouraging given that most real estate experts predicted that the monthly year-over-year gains would shrink as the year went on, in large part because sales early last year were particularly dismal.
The increased activity is a sign that the market is finally succumbing to the laws of supply and demand. The number of homes listed for sale in the region has been falling for more than a year and a half now, while the number of sales occurring has been steadily rising.
At the current pace of sales, the Triangle now has a five-month supply of homes on the market, the lowest level since August 2007. Supply peaked at 16 months in January 2009.
“These double-digit percentage decreases in inventory at some point in time have to show up in other metrics where they had not been showing up,” said Stacey Anfindsen, a Cary appraiser who analyzes Multiple Listing Services data for area real estate agents.
Still, while it is certainly easier to sell a house now than it was a year ago, real estate agents caution that such lofty year-over-year percentage increases have not changed the overall dynamic in the marketplace.
It remains very much a buyer’s market, where sellers must make the necessary improvements to their homes and price them aggressively if they hope to find a buyer.
“It’s a problem when you’re trying to talk to sellers because they’ve read this stuff and they think that they can then price their home higher,” said Carol McCormick, a real estate agent with Allen Tate Real Estate. “And you go ‘not really,’ there’s too much inventory you just can’t do it. … Sellers still need to be sharp with their pricing.”
McCormick said the five-month supply is an average of the entire market, noting that inventory levels at higher price points remain much higher.
The Purser family’s recent experience selling their Raleigh home is indicative of how the market remains fraught with challenges.
The family’s home is in the Still Meadow subdivision in Northeast Raleigh. Charlie Purser, 46, said the neighborhood has not had a lot of recorded sales in recent years, and many of the ones that have occurred have involved distressed properties. The owner of an adjacent property sold for $40,000 less than they paid seven years ago.
“That’s bringing the price point and negotiating power for people like us completely down,” he said.
Before placing their home on the market in January, the Pursers spent from $12,000 to $15,000 updating the kitchen, bathrooms and entrance ways, adding granite countertops and ceramic tile. At the suggestion of a professional house stager, they painted the entire inside of the 2,000-square-foot house a neutral color.
The Purser’s house was listed for $219,000, the same amount it appraised for nine months earlier when they refinanced their mortgage.
It just recently was put under contract for $211,000, or $1,000 less than the family, which is relocating to Asheville, paid in 2004.
“We’re taking a net loss in the hopes that we’re also going to be on the other side of the coin when we get to Asheville,” Purser said. “We’re going to be looking at houses that are probably $50,000 to $70,000 above what we would normally look at with the expectation that we’re also going to get a deal just like everybody else.”
Indeed, the ability of people like the Pursers to sell their homes – even at a loss – is crucial to the overall health of the market.
Andy Ammons, the developer of the Heritage community in Wake Forest, said sales of new homes have picked up in the community as more people have found buyers for their existing homes.
“We’ve got a lot of folks that have put off selling for a while or have been unable to buy because they couldn’t sell their existing home,” he said. “A lot of those existing homes are starting to go under contract so now they come over to us.”
Heritage, which consistently ranks as the top-selling community in the Triangle, sold 15 new homes in the past two weeks and is about to open a new 310-lot neighborhood. Ammons said the price points at which homes are selling is also rising.
“We haven’t shot through the roof, but we used to be at $135 to $140 a square foot and now we’re going above that,” he said. “We feel good.”
The community’s biggest problem is making sure builders have the financing to maintain a fresh supply of new homes.
“People have been so concerned with having inventory,” he said. “We’d like to have 80 or 90 homes on the ground – we’re down to like 50 now.”
The slowdown in new home construction is a major reason inventory levels have been able to drop so far. New home construction in the Triangle has traditionally filled in the gap when existing inventory lagged, but the number of new homes on the market has now fallen for 10 consecutive months.
Anfindsen, the appraiser, said if the current trends continue, eventually the market should begin to see consistent price increases. The big wildcard remains the possibility that a wave of foreclosures will come on the market as banks purge their balance sheets of all the distressed properties they’ve taken back in recent years. That hasn’t happened yet, and many now clearly wonder if it ever will in the Triangle.
“The market reacts to what’s in the store today, so you can’t really react to something that may or may not be coming,” Anfindsen said.