Editor’s Note: Each Friday, WRAL TechWire takes a deep dive into the Triangle’s real estate markets, including new home sales, why a drop in sales doesn’t always mean a drop in prices, and the state of the rental market, the topics of this week’s reports. WRAL TechWire reporter Jason Parker, the author of the report and a licensed real estate agent in North Carolina, works with journalists from WRAL.com to track and present market data and report on how people are experiencing the region’s changing real estate markets. These special reports will use the category tag “Triangle Real Estate” or “Triangle Real Estate Market.”
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RALEIGH – “Housing market enters a recession” declares CNBC headline, but in the Triangle that’s hardly the case.
Nationally, the sales of new construction homes plummeted by nearly 30% in July 2022 compared to July 2021, the latest data from the U.S. Census Bureau of the U.S. Department of Housing and Urban Development shows. But sales of new construction homes across the Triangle jumped 11% during that same time period as demand for housing in the Triangle remains strong.
Here’s what’s happening: According to the latest data, released last week, the number of new construction homes sold in the United States in July 2022 was found to be a seasonally-adjusted rate of 511,000.
That’s a drop of 12.6% from the revised June 2022 sales of 585,000 homes and a decrease of 29.6% below the July 2021 estimate of 726,000 new home sales.
And, nationally, across all of those new homes sold in July, the median sale price was $439,400.
A year ago, the median sale price for a new construction home was $406,000.
So even as fewer new construction homes were sold in July 2022 compared to July 2021, the median sale price rose 8.2% during that time period.
Triangle rents surge – 6% in just a month – spurred by new high-wage jobs
Sales dropped – but prices rose
And prices rose month-over-month, too, even as sales dropped. In June 2022, the median sale price was $414,900, according to the data, meaning that the median sale price for new construction jumped by 5.9% during the month.
“Recession absolutely does not equal housing crisis, and it certainly isn’t going to mean housing crisis nationally, and definitely wouldn’t mean that for the Triangle,” said Jim Allen, the founder and broker-in-charge of the Jim Allen Group, a real estate firm in the Triangle that also does new home construction in the region.
“There’s so much scarcity, that it’s just not happening,” added Allen. “Agents aren’t seeing any depreciation of housing, they’re seeing less appreciation.”
Triangle rents surge – 6% in just a month – spurred by new high-wage jobs
Triangle new home sales
Even though new construction home sales slowed month-over-month and year-over-year across the nation, many areas of the Triangle are still seeing an increasing number of new home sales.
In Wake County, for example, there were 425 new construction homes sold in July 2022, according to the latest data from Triangle Multiple Listing Service, TMLS.
That’s up 17.4% from a year ago, when 362 new construction homes were sold in Wake County, according to TMLS data.
Across the Triangle’s 16-country region, as measured by TMLS, new home sales increased 11% year-over-year, with 906 new construction homes selling in July 2022 compared to 816 in July 2021.
And in Johnson County, 173 new construction homes sold in July 2022, an increase of 32.1% year-over-year, as 131 homes were sold in July 2021.
But not every part of the Triangle saw an increasing number of new home sales in July 2022 compared to the prior year. For instance, in Durham County, the rate of new construction home sales dropped 34.2%, with just 73 homes sold in July 2022 compared to 111 in July 2021.
“There’s less than 2 months of supply of housing, in every price point,” said Allen. “We’re still in the same boat of just not having enough housing.”
Here’s a snapshot, according to Allen, whose company builds homes in the region.
“I don’t have any completed houses, not one,” said Allen. “That is not normal, what is normal is that I may have 200-300 houses that are active and listed at any given time.”
Still, some slowing of new home sales in the Triangle
“New home sales are down both nationally and in the Triangle,” 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.
But that doesn’t mean that we’re in a recession, noted Hasbrock.
“The Triangle’s fundamentals remain very strong— job and population growth—making us, at least for now, recession proof,” said Hasbrock.
And even though home sales have fallen by some measures, that doesn’t mean prices are falling, too.
“But pricing has not taken the expected hit in light of slowing traffic and sales,” said Hasbrock. “Demand is still far outstripping supply.”
Here’s why, said Hasbrock, who is also a past president of the Home Builders Association of Durham, Orange and Chatham Counties.
Material costs are up about 20%, which is yielding pricing pressure on builders, said Hasbrock. That’s keeping prices from falling, even as builders have ceased using a tactic described as “base price hikes.”
So instead of lowering prices, which Hasbrock said might hurt homebuyers in the community who’d bought previously at similar or higher price points, and hurt the whole community’s appraised price or perception of home values, some builders are changing how they incentivize homebuyers, and their agents, to bring a deal to the closing table.
What’s happening with new home sales
And more new construction sales could be occurring, said Allen, but what’s happening in the current market is that the timeline for building a new home is nearly double what it used to be, prior to the onset of the COVID-19 pandemic in early 2020.
“Everything is taking longer,” said Allen, noting that it’s not just about material shortages, labor shortages, or zoning and permitting approval processes. “Getting a normal lot to the ground now, by the time you find a piece of dirt to the time you develop it is now about three and a half years.”
So the sales numbers are down because production is down, said Allen, not because demand has slowed.
Instead, builders just aren’t able to keep up with demand, said Allen. “They’re not able to build enough houses.”
Opportunity for interested homebuyers
But for homebuyers who are looking at their options, there might be an opportunity in new construction right now, or this fall, said Hasbrock. That’s because mortgage rates have again increased this week after falling in recent weeks. So buyers that are backing out of deals to buy new construction homes may leave an available home that the builder had planned on closing, perhaps before the end of the quarter at the end of September.
“Cancellations are double what they were six months ago,” said Hasbrock. “Making now an excellent time for a well qualified buyer to emerge to take a cancellation off the builders hands.”
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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.
