Dear Friends & Clients,
We hope you all are doing well and staying safe. We are writing today to provide you with a quarterly update of the Triangle real estate market. Headlines may give you different impressions but we are pleased to present data and facts. In the current market, those conditions seem to be changing on a weekly basis.
Trends We Are Noticing
As you may have read in the news, the market is experiencing all-time lows of inventory and continues to experience all-time highs in demand. Due to the Triangle’s many positive economic factors, we have one of the hottest real estate markets in the country. Though there are many positives associated with that, if you are a buyer in the current market, you are certainly not feeling those positives.
A few things we have noticed over the last 90 days:
- 63% of buyers made an offer on a house they had not seen in person
- 49% of buyers said they were outbid on a home in the past year
- 62.1% reduction in inventory in Triangle MLS over the last 12 months
- A $100,000 increase in the average list price in Triangle MLS over the last 12 months (new and resale homes included)
- 56% increase in new home Google searches
- 35% of home searches for Raleigh, NC occurred out of the market
Anecdotally, we have a number of stories from the last 90 days we could share with you to give you a representation of the market. A few of those are:
- A listing of ours that sold for $41,000 over the list price in just 2 days. (The listing did appraise.)
- A buyer client offering $46,000 over the list price of a home in Cary and was not the winning bid.
- A listing that sold off-market and the seller was able to stay in their home for 60 days after closing, completely rent free.
New Construction and Rising Material Cost
Another headline you may have seen, is the increase in lumber prices. Depending on the source, lumber prices are up 100%-200% year over year. A builder that we work with told us the following: “When I built this house in 2019, the framing package cost me $29,000. That same house and the same framing package is costing me $68,000 this year.” This is the story we are hearing over and over from builders. While lumber is surely the headline, there have also been increases in almost all building materials. Additionally, we are seeing lag times in the delivery of many materials. For instance, a builder-client of ours, has already ordered appliances for a home that is scheduled to be completed in January 2022.
Given the fluctuation and unknown of pricing, many builders are holding off on selling their inventory until it reaches a certain point of construction. Most often, this is around the time that drywall or cabinets are installed. Typically, builders would be most interested in selling a home prior to start of construction but not in the current market. While this trend will certainly dissolve when material costs are not as volatile, we are currently seeing many builders with waiting lists for their neighborhoods. This trend will only increase as buyers start to flee the resale market hoping for reprieve in the new construction and unable to find it.
Is This A Housing Bubble?
This is a question we are receiving on a regular basis. For many reasons, we do not believe this is a bubble. One reason is due to the credit worthiness of the buyers in today’s market. In the Triangle, we typically see around 10%-15% of transactions as cash transactions, that number has increased to 25%-30% of the market. Of the remaining buyers who are borrowing from banks, the median credit score is over 730 and the average down payment is in the 10%-15% range. Additionally, today’s inventory is the exact opposite of the inventory prior to the 2008-2009 bust. In 2007, the average months of supply was over 9 months and today the average months of supply is less than 1 month. With that said, we still believe that real estate should be a long term investment to maximize the return on investment. Like the stock market, timing the real estate market is nearly impossible. However, if you are patient and can wait on the returns, you will maximize your investment. We would never advise anyone to speculate on the timing of the market.
What Do We See In The Next 90 Days
We believe that we will start to see an increase in available supply. This will come for many reasons including basic seasonality patterns, an increase in vaccines and confidence of homeowners to allow buyer traffic, and an increase in desire to take advantage of current market conditions. Also, with the increase in remote work, we do expect that some homeowners will decide to leave their home near their office hub and move to a second-home city. This should increase supply for those who will be making a return to the office. Finally, we have increased our expectations of pricing and expect to see around a 10%-12% appreciation in prices through 2021 with those numbers falling in 2022 as mortgage rates start to rise and demand begins to slow.
As always, know that we are thankful for your support of our business. A shameless ask we have, is that if you or someone you know is considering buying or selling, please share their contact information with us and we will take great care of them. We are finding creative solutions that involve both on-market and off-market properties for our clients. More than ever, an experienced, full-time, patient and calm broker is needed and we would love to be that for you and your friends and family.
Annette Holt & Davis Holt
The Results Team, LLC | Raleigh-TriangleHomesNC.com
Annette@holtteamnc.com | 919-810-2203 & Davis@holtteamnc.com | 919-810-2188