By Brian Pate
The first quarter of 2016 (Q1) started with the stock market diving and making consumers nervous. In the real estate world, we had concerns of what that would do to the anticipation of the “Spring Market,” when the most homes are traditionally available and sellers receive the highest prices of the year.
Now that we are into May, the stock market has leveled out and so has consumer confidence, including our local market. As a result, we are again seeing robust real estate activity in Rolesville.
The number of sold Q1 homes has gone up from 41 in 2015 to 44 in 2016. Although that seems small, it is a 7% increase, and that is always a good sign. It still doesn’t come close to the boom in 2014 when 59 Q1 homes were sold, but it is progressing.
The average home price for sold properties in the first quarter was $350,755. That is still driven by new construction in Heritage, Cedar Lakes and others developing areas. That is up 6.5% over 2015 and up 7.9% over 2014. Because new construction continues to be 40% of the real estate market, we can expect that number to continue its crescendo.
The cost to build a home makes it very difficult to complete a home on more than quarter-acre and keep the sale price under $250,000. As Rolesville continues to grow, that will make it tough for builders and developers to provide affordable housing under $250,000. Considering I paid $67,000 for my first home in 1995, it is hard to accept that $250,000 is considered “affordable housing” today.
That is a reality of supply and demand, and in some areas of Wake County an acre of land can run $750,000 to over a million. That drives cost of development sky high and means that minimum prices in some cases requires a sale price of $500,000 or more just to break even.
A total of $15.43 million worth of real estate was sold in the first quarter in Rolesville alone. The even better number for sellers is that the list price-to-sale price ratio is 98.9% of list price. In other words, if your home is priced competitively, it will sell fast and for top dollar.
The quick sale is evidenced by Rolesville’s average of 59 days. This is down from 138 days in the first quarter of 2015, so houses are selling faster than ever.
The reason is because the inventory is so low. Buyers often must “settle” for the best home available. In addition, about 25% of competitively priced homes are selling above the list price. It is a repeat of what we saw happening in 1996 and in 2006. Notice any coincidence?
We always hear about real estate cycles, and we now are in one of our 10-year up cycles. After the 1990s, it was 2001 before we saw the first blip of recessionary activity after the dot-com bust. However, during that period, home prices remained stable and even after the tragic events of September 11, 2001, the market only stagnated for three or four months.
In 2006, we had seen another great buildup in pricing with the creation of the “bubble.” I am still of the opinion that consumers created that bubble due to buying homes they couldn’t afford just to live in a “McMansion” and impress friends.
We all know what happened after that, with home values dropping by as much as a 60 percent in certain hyperlocal areas across Wake and Durham counties.
I don’t think we are in fear of a recession as we saw then, but traditionally in a presidential election year, we see a 1 to 2 percent drop in prices after August because of uncertainty about the election’s outcome. In my opinion, we may see another blip on the radar, but I don’t think it will be significant, although there may be pockets of Wake County affected.
Looking ahead, more than 74.6 million Baby Boomers are aging out of their homes. As a result, we are seeing many more single-story floor plans being purchased. However, in order to downsize, those Boomers need to be able to sell their current homes. That is posing a challenge because the next generation buyer is looking for different amenities in a home.
The significant influx into the market over the next 15 years will be Millennials. There are more than 80 million of them, and they have just as much interest in homeownership as their parents did. They are well-aware of the net-worth gap that is a reality between homeowners and renters. Statistically, the average homeowner has a net worth in 2016 of $225,000 while the net worth of renters is $5,400. That is a huge difference, and Millennials know it.
Additionally, we are seeing an increase in first-time homebuyers being single. The largest portion of first-time buyers in 2015 was single females, with 18 percent of the market. Their average income was around $49,000, and the average age was 32. That is a significant difference from historical data because women are more focused on their careers these days.
As you can see, many factors go into a decision to buy or sell.
Brian Pate has been a well-respected real estate professional for over 22 years. During his time in the business, he has served as an agent, manager, coach, instructor and training manager. Brian leads a team as a mega agent at Keller Williams Realty in Wake Forest.