Triangle sees a ‘shocking’ decline in the number of starter homes for sale
For the past few years, the Triangle’s housing market has been on a blistering pace, as thousands of people moved here to take well-paying jobs and find a place to settle down.
And even as mortgage rates rise and the Triangle’s relative affordability compared to other metro areas tightens, the area’s housing market will remain strong in 2019, according to an annual forecast from Realtor.com.
Home sales in Raleigh are expected to grow by 2.4 percent and prices are expected to increase by 3.9 percent in 2019, according to Realtor.com’s forecast. In the Durham-Chapel Hill metro area, sales are expected to increase 2.9 percent and prices by 4.1 percent.
“I think a lot of the factors behind the growth is really solid demand,” Javier Vivas, director of economic research at Realtor.com, said in a phone interview. “We are expecting some sort of slow down in some markets, but I think, in Raleigh, the economy is still growing at a quick pace” compared to other places.
Stacey Anfindsen, a Cary-based appraiser with Birch Appraisal, who puts together the monthly Triangle Area Residential Realty Market Report, described the Triangle’s current housing market as having a “negative mood” because of increasing mortgage rates.
Sales in the Triangle did indeed soften this fall — caused in part by Hurricane Florence — and a quarterly report from Metrostudy noted that “builders in the third quarter were reporting signs of a slowdown in buyer traffic compared to 2017 and the first half of 2018, as home mortgage rates have started to rise alongside continuing new home base price escalations.”
The number of closed sales in Wake and Orange counties was both down in October compared to a year prior. In Durham County, closed sales were up 1 percent in October compared to last year.
Nationally, home sales are expected to decline 2 percent next year and prices are expected to increase by 2.2. percent, according to Realtor.com’s forecast.
Beyond the strong job numbers in the Triangle, Vivas said that Raleigh’s relative affordability compared to other metros has kept its market healthier.
In a way, prices in the Triangle are “playing catch up” with areas such as Atlanta and Tampa, Fla., Vivas said. But that relative affordability could be disappearing.
According to a measure of affordability that Realtor.com tracks, Raleigh is still more affordable than markets such as Charlotte; Nashville, Tenn.; Atlanta; Tampa, Fla.; and all of the major markets in Texas. The Durham-Chapel Hill market, which is smaller than the Raleigh market and includes pricey Chapel Hill, is relatively more expensive.
The average sales price of a home in Wake County was $342,614 in October, up 6.3 percent from the year, according to Triangle MLS. In Durham County, the average sales price was $272,194, an increase of 7.8 percent from the year prior, and Orange County’s average sale price was $389,675, which was actually down 5.2 percent from last October.
“With Raleigh, you see a market that is slightly more affordable than other markets, which is why it did so well this year,” Vivas said. “We are expecting to see that shift in 2019 and a big part of that is price pressure, but the other piece is the mortgage rates movement. That is going to affect affordability.”
That affordability will be felt most dearly by first-time home buyers, whose down payments will be affected by rising mortgage rates, which Vivas said could hit 5.5 percent next year.
“I think what we are going to see is a lot of repeat buyers driving the demand” rather than first-timers, Vivas said. “So I think what is going to happen a lot of the homes sales are going to be shifting from entry-level to mid-tier and upper-tier.”
New construction has also not been able to come in at prices low enough for first-time home buyers as well, Vivas said, because of increases in land prices and labor costs shrinking builders’ profit margins.