2020 Second Quarter Report
2020 has been like taking a leisurely walk in the forest on a beautiful summers day…
But all of the sudden a huge storm blows in, slamming you with wind and drenching you with rain.
Then lightning from the storm crashes into the trees above you, setting the forest on fire.
Which causes a massive bear to sleepily pop his head up from behind a log, only steps away from you.
You know your day just got bad… exactly how bad, you don’t know
This report is about the real estate market of southeastern North Carolina, specifically the Wilmington Metro Area.
In this report we won’t comment too much on the metaphoric forest we all find ourselves in right now, but these uncertain times are definitely having an effect on the real estate market locally and nationally.
Even without the use of graphs and charts, it’s easy to understand why in early 2020 the real estate market hit a snag. Despite the initial slow down in the amount of homes sold, "by the numbers it looks like we are now on a path back to normal…
All of the graphs are interactive so feel free to explore the numbers for yourself.
This graph shows the number of homes sold per month in the tri-county area of southeastern NC.
Looking at this graph, the trendline is generally going up.
You can see in September of 2018 the market took a dip after Florence hit the region. Understandably so, there were a lot of damaged homes and scared people.
We’ve recovered and had a strong 2019 which caused the trendline to keep going up and to the right.
All indications show the total number homes sold is still generally rising. This means homes are still being sold in spite of what’s happening across the country and in our own backyards.
Things look promising, right?
The graph shows us that more homes were sold in June of 2020 than any other month in the last 5 years. And the last 5 years have been hot years for real estate in southeastern NC.
It also shows the second worst May since 2015. This is because of buyer lag… From the time a buyer decides to enter the market until they get the keys is about 45 days or a month and a half. This is why we still see strong numbers for March. Most people who got keys in March, started buying in February before the coronavirus lockdowns began.
This graph shows the year over year number of homes sold in the tri-county area of southeastern NC. This graph is better for spotting trends.
As with all things, the answer is not clear or straightforward. It depends…
NOTE: The graphs below are for homes sold in the “affordable range.”
In this instance, “Affordable” homes are homes tha sell for $350,000 or less.
This graph shows the number of “affordable” homes sold per month in the tri-county area of southeastern NC.
In this graph, the trendline is not going up but looks more like it’s begun to plateau right around mid-2018. There are likely a number of factors that are contributing to this.
There’s a shortage of affordable homes for sale and has been for awhile now. This is partially because builders have focused on building more expensive homes where their profit margins are better. It’s also because the median household income is $52,756 annually for our area. Depending on a buyer’s debt, they would only be able to afford homes between $150,000 and $250,000. A lot of the homes in this price range have already been bought and sold.
This creates a price ceiling for most people looking to buy and forces most buyers to stay in this price range, driving up demand.
Looking at this graph, the number of “affordable” homes sold in June 2020 is high but not as high as June of 2017. The numbers are more inline with where we would be naturally, without coronavirus.
This also tells us that high-end home sales are contributing heavily to the growth seen in the graphs above. High-end homes sales are the last segment of the real estate market to grow and the first to fall. Affordable homes are the best segment to study to see the health of the local real estate market.
Affordable home sales have plateaued. This is particularly obvious when looking at the next graph. Plateaued sales isn’t necessarily a bad thing, it means we’ve reached a point of balance.
This graph shows the year over year number of “affordable” homes sold in the tri-county area of southeastern NC.
What does this mean?
SHORT-TERM
It means right now demand for homes is strong and will probably stay strong throughout the summer.
The demand for buying a home is possibly higher now than ever before because of the lockdowns. Buyer demand was pent up in March and April but beginning to release in May and June. That’s why we see a huge spike from May to June, buyers couldn’t wait to get out there and find a home.
LONGER-TERM
This fall/winter we can expect to see the real estate market to start to contract.
The US and world economies are not expected to quickly recover from the damage caused by the coronavirus. Especially in the US where civil unrest is contributing to a growing sense of uncertainty. Expect an economic recession to hit around the end of the year. Odds are this recession will be deep and take years to recover from. We are entering uncharted waters so no one really knows for sure.
What does this mean for you?!
SHORT-TERM
Right now is still a great time to sell a home and an “alright” time to buy one. Sellers will still get a premium for their homes and buyers will be paying top dollar for a home. One positive for buyers is that mortgage rates are at historic lows right now.
LONGER-TERM
Buyers will soon have the advantage when buying homes. Prices will soon begin to level off then fall. This will be a good time for homeowners to buy a larger home at a discounted rate. It will also be a good time to buy investment/rental properties.
Ty Shaw
Realtor/Broker/Owner
SWELL home & living
If you have questions about this report or anything real estate related, please let us know!
