8 July 2022
RALEIGH – Homebuilding is on the rise across the Triangle in a market that’s “hot, hot, hot” even as there appears to be some cooling in demand as a result of soaring prices, high demand and inflation.
The Raleigh metropolitan statistical area is among the nation’s top metropolitan areas for new construction homes by a number of measures, a report from Inspection Support Network shows.
The Raleigh-Cary region, which includes Wake, Johnston, and Franklin Counties, was ranked third in the nation among the 53 largest metropolitan statistical area by the report, with 39.5 new housing units authorized for every 1,000 existing homes in 2021. Only Austin, Texas, and Nashville, Tennessee outperformed Raleigh-Cary.
In total, 21,649 new construction homes were approved in the metropolitan area in 2021, the report found. That’s up from 13,320 new construction approvals in 2019, an increase of 62.5%, placing the region second in the nation for growth behind the Philadelphia metropolitan area, the report noted.
New construction is increasing at a torrid pace in the region, particularly in Wake County. That’s in part because of the region’s continued positive net migration, with population growth increasing and projections anticipating a continued influx of in-migration to the region.
“Taken together the statistics confirm what any Triangle resident already knew,” said Gian Hasbrock, the founder and president of Wowism, a firm specializing in residential new construction sales and marketing education, training, and consulting, in an interview with WRAL TechWire this week. “The housing market is hot, hot, hot.”
Here’s why, said Hasbrock, who is also a past president of the Home Builders Association of Durham, Orange and Chatham Counties.
“We led the nation in the percentage of reduction in inventory since the pandemic, posting a 70% reduction,” he said. “By late 2021, the Triangle also led the nation in the percentage of transactions with multiple offers with 90% of existing and new construction contracts in a bidding war.”
The Triangle was second in the nation (to Austin, Texas) for the percentage of new home sales relative to overall real estate transactions, with more than 4 of every 10 homes sold in the region a new build, Hasbrock noted.
When to consider a new build
Like many industries, home builders struggled during recent years with labor shortages and supply chain disruptions, as well as a spike in the price of building materials, particularly lumber.
Meanwhile, housing markets across the nation, and especially those in the Triangle, saw soaring home price appreciation as homebuyers competed to win contracts for a very limited supply of homes coming available on the marketplace.
“Despite new home builders’ efforts to meet demand, we still have a dramatic imbalance between supply and demand,” said Hasbrock. “Supply problems include the widely publicized kinks in the supply chain, with delivery of everything from roof trusses to windows and doors affected.”
That led many builders to change how they were selling homes in 2021, said Hasbrock. Some builders would release new construction homes for sale only when ready or nearly ready, and homebuyers and their agents would still need to compete to win the sales contract.
But now, though pricing for new construction materials is up more than 20% compared to last year, lumber prices are falling.
And the Federal Reserve recently increased the federal funds interest rate, which has quickly been priced into prevailing mortgage rates. Though rates have fallen from a recent high to an average 5.3% on a 30-year fixed rate mortgage this week, according to the latest data from Freddie Mac, they’re still up 2.4% on average from last year.
That’s changed what buyers would pay monthly on their mortgage, by about $600 per month, leading some would-be buyers to drop out of the market to compete for buying a home.
A “breather” for housing markets
So, there’s the possibility of a chill in the air, Hasbrock said. And the preliminary sales data indicates this may, in fact, be the case. WRAL TechWire previously reported that in both May and June 2022 there could be a pause in the market, even if the market continued to see price appreciation in the long run.
“Builders are now advertising no bid sales releases,” he noted. “Now builders are increasing closing cost assistance, and some of the national builders who have an in-house financial division, are paying for rate buydowns, both temporary and permanent, to take the sting out of the increase in initial monthly payments.”
Meanwhile, the median sale price of all residential properties sold in June 2022 in Wake County was $474,900, according to data from Triangle Multiple Listing Service obtained by WRAL TechWire last week, with 1,807 total transactions. So the housing markets may be cooling, unless you’re currently seeking a rental property, as rental prices continued to increase last month.
“Our fundamentals in the Triangle are so strong that a little cool down might help,” said Hasbrock. “The breather in the housing market may also give policy makers an opportunity to address the fundamentals that helped create the supply/demand imbalance.”
Hope for first-time buyers
A slowdown in the overall market may provide an entry-point to the many would-be first-time homebuyers who may currently feel priced out of the market or be weary from months of competing to win purchase contracts for new or existing homes, said Hasbrock.
Buyers may be able to win a deal on homes that were listed in June and remain on the market, said Linda Craft, owner and broker-in-charge of Linda Craft & Team REALTORS in Raleigh.
“I would agree if a house has been for sale two weeks or more the buyer will most likely not have to pay above asking price to win it,” said Craft. “And, yes may get a few dollars off or a little closing cost help.”
That’s on existing homes. When it comes to new construction, some Triangle-area home builders recently dropped prices, as well, by as much as 10%, said Hasbrock.
Still, new construction is on the rise in the region, and housing is very much in demand.
And new construction isn’t just happening in Wake County.
Burlington, North Carolina, ranked 10th overall for small metropolitan areas for new construction real estate markets, according to the Inspection Support Network report.
Chatham Park, a development in Chatham County that was promised as the 21st century version of Cary, continues to be developed.
And Johnston County is the fastest-growing county in the Triangle, according to Hasbrock, as well as the largest county in North Carolina by acreage. There’s planned development in Lee County, Harnett County, Franklin County, and Granville County, as well.
Editor’s Note: Gian Hasbrock is affiliated as a real estate consultant with Jon Parker Real Estate, based in Durham. WRAL TechWire reporter Jason Parker also holds an active real estate license in North Carolina and is affiliated with the firm.