What’s driving southeastern N.C.’s housing shortage?
WILMINGTON, N.C. (WECT) - The housing market in southeastern North Carolina is hot. In fact, according to one study, Wilmington topped the charts last year for inbound moves. There are several factors that contribute to the current housing market including the obvious, like supply and demand, but what else is driving people to the Cape Fear region?
To understand the current market, we must look back at the housing crisis of 2008. Amanda Parmer, broker in charge and president of Blue Coast Reality, explained how that housing crisis played a role in what we are seeing now.
“When we hit our recession in the ‘07-’08 timeframe, historically, it should have bounced back in about a 10-year span. That’s just kind of how the market cycles — so our market was kind due to come back in the 2016 to 2018 timeframe and it did,” Parmer said.
But, due to the geographic location of Wilmington and the surrounding areas, weather events play a role in the housing market as well, more so than in other markets. For Wilmington, that weather event was Hurricane Florence in September of 2018.
“Properties were appreciating, builders were building more, and then we had Florence. Florence wiped out a bunch of the inventory in an already heating-up market. So, not that Florence was the catalyst to our housing crisis, it just didn’t help matters,” Parmer said.
Not only did Florence exacerbate the housing problems in our region, but there is also another, more unpredictable factor to account for — a global pandemic.
“A lot of the builders now are really — have mothballed a lot of their production, they are afraid they are going to be losing money if they are putting houses on the ground by the time it gets completed due to a lot of the material shortages,” said Jake Wyre, a relator with EXP Realty.
The COVID-19 pandemic led to a number of changes for people including the new ability for many to work remotely.
Wyre said he has seen a major domestic migration in response to the pandemic, which is unlike anything he has ever seen.
“I think people are moving to places that have a beach, or have mountains, or have some sort of natural resource because I think people are starting to realize that once you turn off society a little bit, what are you going to do?” he said.
Sara Posey and her husband have been looking to buy their first home for the past year, but really started getting serious about it over the last two months, but the current market is making things difficult.
“We both work a lot, so we’ll find something on a Monday or a Tuesday and we’ll shoot Jeanette, our realtor, a message and say, ‘Hey, I like this house, let’s go check it out,’ and by the time we have a weekend come around, it’s gone,” Posey explained.
A nice place to live plus affordability equals a red-hot market
With a mostly pleasant year-round climate, proximity to the beach, and the relative affordability of North Carolina, there’s plenty of reasons driving newcomers to the region, especially from out of state.
“There was a two-month period where our agents here were meeting people that were flying into the area for a weekend, they would bring them into a conference room and say, ‘Look, here is what Wilmington looks like on a map, we’re going to check out these areas,’ and everybody was from California or the Northeast — everybody,” Parmer said.
But it’s not just the beach life that is attractive to people from the Northeast, taxes are yet another factor to consider. For example, a $300,000 home in New Hanover County pays around $2,000 in taxes. A similarly-priced home in Atlantic County, NJ would pay more than $8,000, annually.
Those who have grown up in the region might have sticker shock when they see the prices of homes compared to previous years. People are able to get more ‘bang for their buck’ when compared to other locations in the country.
“Our median price point right now in the three-county area — Brunswick, Pender, and New Hanover — is $360,000. That is the median sold price, in somewhere like Connecticut or New Jersey. They can sell their house and probably net that much in cash,” Parmer said.
Supply and demand
It’s one of the most basic concepts in economics — supply versus demand — and in the Cape Fear Region, the demand is high.
“I mean we’re down, we are down inventory across the board. We’re down like 50 percent inventory,” Wyre said.
The migration study conducted by United Van Lines shows that of all the moves involving a Wilmington address, 79 percent were inbound while just 21 percent were outbound. The problem is clear, without more houses on the market there is just simply not enough supply to match the demand and that drives the prices up.
So what about new development? A common complaint is that there is too much development in Wilmington and the surrounding counties, but, that isn’t exactly the case — at least according to the numbers.
Right now, Wilmington has about a 30-day housing supply.
“Literally what’s on market now will be gone off-market in 30 days given the trends that are happening with purchasing. So, a healthy market has a much larger amount of homes available. This is a very small amount, so that exacerbates a lot of problems,” Wyre said.
That’s roughly 50 percent lower than this time last year and there does not seem to be any signs of a slowdown in terms of people moving to the area.
Another of the other factors leading to this crunch is because there are so few houses for sale, people like new families or second-time home buyers are not selling their homes.
The 2008 housing crisis was a direct result of irresponsible lending practices, problems that have largely been addressed within the industry, both Wyre and Parmer said. Neither of them is expecting to see any sort of ‘bubble burst’ like we saw then. But, they also don’t expect home prices to fall off anytime soon, either.
“I would love to be able to tell you the end is near, we’re going to have a normal market soon but I don’t believe it,” Parmer said.
A lot of that has to do with interest rates remaining at historic lows and because there are so many cash purchases in our area, she said. However, home builders are ramping up efforts to get more homes built not only in Wilmington but surrounding areas like Leland and Hampstead. So, she expects the market to level off at some point.
As for the Poseys, Sara says they are making sure they don’t act too impulsively or settle for a home that is just not right for them.
“We’re trying to be a little bit more realistic, and say, ‘OK, if we are going to buy a home — we want a home, we know what we want, but what’s it going to be like in five years? Are we going to be cut short because we splurged on something so quickly?’” she said.
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