2020 Third Quarter Report
The third quarter of 2020 has been strong. How long will it last?
Last quarter we predicted a strong summer selling season, which happened.
We also predicted that in the fall/winter we’d see the real estate market start to contract, which happened too.
So what’s going to happen next?
This report is about the real estate market of southeastern North Carolina, specifically the Wilmington Metro Area.
Real estate is local, which is to say that every market is unique. Every neighborhood is also unique within a market. That said, there are forces that impact the national real estate market as a whole. These are typically national or international economics and we are seeing them in action as we speak.
Let’s take a deeper look…
All of the graphs are interactive so feel free to explore the numbers for yourself.
Tri-County Homes Sold
New Hanover, Brunswick, and Pender Counties
Pent Up Demand
This graph shows the number of homes sold per month in the tri-county area of southeastern NC.
The graph shows a huge spike in the number of homes sold this summer. In fact, there were more homes sold in July of 2020 than at any point of the housing bubble in the early 2000’s.
The old monthly high for sales was June 2005 with 1322 homes sold that month. July 2020 beat that by 292 homes or 22%, which is simply incredible!
August and September have started to soften, which is common as fall starts and kids go back to school. This year though, more homes sold in August and September than in the same months of any previous year. Demand for homes is still strong. The number of pending home sales for September show that October will most likely be a record month for homes sold too.
This graph shows all homes, in all price points and is representative of the real estate market as a whole. The trendline of the graph on the right is still generally going up and right, which is good.
So why are we seeing record numbers of homes sold?
The main reason is pent up demand. Home buyers waited for this summer to really start buying and selling homes. This is likely due to concerns over COVID 19, a lack of information regarding the disease, and the national economy slowing down.
As consumers gained back lost confidence, many likely decided now is the time to buy or sell a home. With historically low interest rates, it makes financial sense.
Renting an apartment and living close to strangers right now is not as desirable as owning a home. Owning a home gives a sense of security and control in uncertain times.
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.
The whole story isn’t being told here though….
NOTE: The graphs below are for homes sold in the “affordable range.”
In this instance, “Affordable” homes are homes that sell for $350,000 or less.
Affordable Home Sales
In the Tri-County area
Starting to Stagnate
The number of “affordable” homes sold reached a high in July, more than any other month within the last 3 years.
August sales were back with normal range and September sales are higher than normal. October will most likely be a strong month for home sales too.
High-end home sales are still contributing heavily to the growth and strength of the market. 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.
Let’s take a look at all of the different price segments together to get a clearer picture….
This graph shows the number of “affordable” homes sold per month in the tri-county area of southeastern NC.
The graph above shows the different housing price segments and how many homes sold in each per month. As you can see, homes over $350,000 are showing strong sales whereas homes under $125,000 are weak and flat.
Higher-end homes are often bought by people relocating to the area, especially from the Northeast. They sell a home and move down, often getting a much nicer home in the process.
The decline in homes under $125k sold is most likely due to a lack of inventory, also investment-grade houses are selling for higher prices due to high demand and low supply.
This graph shows the year over year number of “affordable” homes sold in the tri-county area of southeastern NC.
As you can see in the graphs on the left and below, “affordable” home sales aren’t really growing. They’ve begun to plateau as we’ve mentioned before so we won’t dwell on this too much.
There was a drop in early 2020 but sales have recovered. The current recession will get worse and we will soon see a decline in sales overall.
The Big Picture
We’ve had a record summer selling season this year
Pent up demand and renewed consumer confidence has lead to a market rebound from earlier this year
October should be a strong month for home sales
High-end home sales are helping drive the market
Affordable home sales have plateaued
The recession will likely deepen and the economy become much worse
What does this mean?
SHORT-TERM: Next 2-3 months
This fall, the market will begin to slow. Less homes will be for sale and fewer buyers will be looking.
The fall is a time when home sales naturally begin to decline. This fall will be no different, except for the possibility an abrupt decline in demand/sales caused by new Coronavirus lockdowns, civil unrest, economic instability, or a combination of all the above.
LONGER-TERM: Next 3-6 months
This winter we can expect to see the real estate market start to contract even more, though prices won’t fall yet.
It is difficult to predict what will happen, especially these days. One thing is certain, the US economy is in recession. Most likely this will continue no matter who wins the presidency. Many jobs have been lost but with a vaccine, many jobs could come back relatively quickly. The number of permanent jobs lost will depend on how long it takes to have a widely available vaccine. This will be the number one driver of the US economy for the foreseeable future.
The number one driver of the real estate market will be low interest loans and their availability. Demand for homes will probably stay high, the ability to get a loan is what will have the biggest impact on home sales. In uncertain financial times, banks may slow down or even stop lending which would cause a sharp decline in home sales.
What does this mean for you?!
SHORT-TERM: Next 2-3 months
Right now is still probably a good time to sell a home and an “alright” time to buy one. Sellers will still get top-dollar for their homes and buyers still have historically low mortgage rates.
LONGER-TERM: Next 3-6 months
Buyers will probably see a rebalancing of power/leverage when buying homes, giving them an edge. Home prices will probably begin to level off and then slowly start to 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 start investing in real estate, especially if you have cash. Finding a loan may become difficult which would cause an even steeper decline in home sales.
Ty Shaw
Realtor/Broker/Owner
SWELL home & living
If you have questions about this report or anything real estate related, please let us know!
