2020 Fourth Quarter Report
The Number of Homes Sold This Year Was Tremendous…
So What’s Next?
Last quarter we predicted a slowing of the market and October would stay strong for sales, which happened.
So what’s going to happen in 2021?
This report is about the real estate market of southeastern North Carolina, specifically the Wilmington Metro Area.
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
Pandemic 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.
In fact, more homes sold in the final quarter than did during the peak-sales months of previous years. The demand for homes right now is simply staggering...
The average number of homes sold in the tri-county area per year is approximately 11,500. This year 14,501 homes were sold, a 26% increase overall.
The image below better illustrates what’s happened this year.
The next 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 nearly vertical for much of 2020, which is phenomenal.
So why are we seeing record numbers of homes sold?
Clearly, home-ownership has become a top priority for many in the era of the coronavirus. Mortgage interest rates are at historic lows which is helping to fuel the demand for homes.
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.
Lastly, many people sense this opportunity to buy a home will end soon. At a certain point, this bubble will burst and buyers know it. Seller’s do too and those who held off selling are now getting top dollar for their homes.
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
Falling Behind
The next graph looks like a child’s drawing of mountains, probably the Rocky mountains… It’s actually a month by month graph of affordably priced homes sold over the last 4 years. The thing you should notice is that the mountains all look pretty similar.
Affordably priced homes have been remarkably consistent over the last 4 years. In fact, the number of affordable homes sold only increased 0.9% over the last year and increased by 1.5% over the last 4 years. By comparison the number of homes priced $350k and above have increased by 250% over the last 4 years. In 2016, 80% of homes sold were in the affordable range. In 2020, that number dropped to 65%.
This tells us a few things but the main takeaway is the majority of new homes built aren’t affordably priced. Much of these homes are actually more than $350k, our affordable threshold. All of this means we’ve hit a ceiling, this will keep prices higher longer for affordable homes. It also means it will be harder for many buyers to find a home they can afford.
This graph shows the number of “affordable” homes sold per month in the tri-county area of southeastern NC.
Let’s take a look at all of the different price segments together to get a clearer picture….
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 (pink line) are showing incredibly strong sales whereas homes under $250,000 are weak and flat (red and blue lines).
The number of homes sold between $250,000 and $350,000 (green line) are steadily increasing. This tells me that once affordably priced homes are rising in value and are progressively less affordable.
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 $100,000 (blue line) 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.
The Big Picture
We’ve had a record year with 14,501 homes sold
Much of the increase has been in homes over $350k
Coronavirus has caused incredible demand for home-ownership
Home sales will continue to be strong for awhile
Home prices will continue to rise in the short-term
High-end home sales are still driving the market
Affordable homes are becoming more expensive
What does this mean?
SHORT-TERM: Next 2-3 months
This winter, the market will continue to slow. Less homes will be for sale and fewer buyers will be looking.
The winter is a time when home sales naturally begin to decline. This winter 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 spring we can expect to see the real estate market start to speed up again and prices to remain high.
It is always difficult to predict what will happen. One thing is certain, the US economy is in a recession and will most likely this will continue for awhile. Many jobs have been lost but with the deployment of vaccines, some of these jobs will come back relatively quickly. Many of the jobs lost will be slow to return, even after the coronavirus is no longer a threat. The number of permanent jobs lost will depend on how long it takes to vaccinate a large number of people. This will be the number one driver of the US economy for the next several months.
One strong driver of the real estate market is low interest loans and their availability. Demand for homes will probably stay high as long as interest rates stay low. In uncertain financial times, banks may slow down or even stop lending which would cause a sharp decline in home sales and prices to fall.
What does this mean for you?!
SHORT-TERM: Next 2-3 months
Now is still 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 over the next few years.
This will be a good time to upgrade to a larger home at a discounted rate. It will also be a good time to invest 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!
