Local realtors and homebuilders agree that they’re getting at least a taste of what their counterparts in much more troubled locales are experiencing, but thoughts about the degree of the slowdown and how long it will last are much more varied.
Weaver Street Realty’s Gary Phillips said he has a running bet with another realtor who thinks the situation is highly temporary.
Although the local market has a lot of promise going forward, thanks in part to the lure of local schools and a commitment to expand the university, Phillips said there are major forces at work around the country that are having an affect here.
“There are a lot of debts coming due,†he said, both literally and figuratively. Phillips, who is part of a national mortgage study group looking at debt issues, said that the country has been trying to “live off its fat, its debt†for far too long. Too many people are using their home-equity credit line like a piggy bank, he said. Couple that attitude with the “false assumption that property will appreciate forever,†Phillips said, and you have the making of a long-term crisis.
While this area is not feeling it as much as other places, the impacts are being felt, from price drops to longer times on the market to buyers moving from elsewhere being unable to sell their current homes.
“This is much more than a slowdown,†Phillips said. “There’s a lot of softness out there.â€
Local foreclosures are on the rise, even some out in the tonier neighborhoods. Phillips said he’s personally had to do a good bit of “reality therapy†with sellers to help them understand what they can really expect to get out of their homes.
While the high-quality $800,000 to $1.2 million homes and those under $300,000 are likely to continue to do well here, there’s a lot of inventory of homes in between, Phillips said.
The slowdown is evident in recently compiled statistics for the fourth quarter of 2007, which showed a marked slowdown in home sales in Orange and Chatham counties.
“Orange County presents a stronger performance than the rest of the Triangle,†said Bernard Helm, president of Market Opportunity Research Enterprises, a Rocky Mount-based research firm that analyzes an array of local data from building permits to land inventories to types of sales and prices. Part of that, he said, is that overall in the Triangle sales of homes in the less than $250,000 range are suffering the most. Since Orange County, where the average home in 2007 cost $329,006, has a much smaller inventory of properties in that range, Helm said it has not been hit as hard as other spots.
But while the year-to-year numbers don’t show a huge drop, a comparison of the fourth quarter of 2006 and 2007 do detail a slight decline in the number of transactions and a bigger drop in the sale prices.
Of the 419 transactions in the fourth quarter of 2006, 43 were new single-family detached homes. The average price was $500,814. In 2007, the total number of transactions dropped to 363 and the number of new single-family homes rose to 46. The sale price for those homes dropped to $364,565.
Another look at the market compiled by the Chapel Hill Board of Realtors also showed a distinct change in the fourth quarter, with the homes sitting on the market longer and prices adjusting lower.
Though Orange County, particularly the traditional buoyant real estate market in Carrboro and Chapel Hill, is small enough that its statistics tend to swing more wildly, the fourth quarter results put some numbers to what realtors were experiencing on the ground.
“The last few months have been noticeably different,†Mark Zimmerman, owner of Re/Max Winning Edge and vice president of the board of realtors said. There’s no question that, since the fourth quarter, the market has slowed. But keep in mind, he added, “that we’re coming off pretty historic highs.â€
Zimmerman said it’s hard to say what’s ahead for the market, but that he and others will keep a close eye on the next few months.
“The big clue will be what happens during the spring, traditionally selling season,†he said. “That will be a good barometer in terms of our market.â€
Next week: Sellers and realtors may be feeling the pinch, but mid-sized local homebuilding companies are taking the biggest hit in the slowdown.