2021 Third Quarter Report
July, August, & September
“The Beginning of the End?”
Find out what happened this summer and what’s next
Last quarter we predicted the market would start levelling off and prices would continue to rise, which happened.
So what’s next for our market?
This report is about the real estate market of Southeastern North Carolina, specifically the Wilmington Metro Area/Tri-county 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, & Pender Counties
Closed Sales Month by Month
Interactive Graph
This graph shows the number of homes sold per month in the tri-county area of Southeastern NC.
After March, the number of homes sold started to level off. Pretty clearly after June, the number of home sold started to decline fairly sharply. We are finally starting to see a slow down in the market. But for how long…
The number of homes sold to date, when compared to 2020, are still very strong. 11,660 homes have sold since January compared to 10,533 sold in the same period of 2020. That’s a 10.7% increase for those who love numbers!
The selling season started earlier this year than in 2020. The lockdowns early on in 2020 hurt home sales. But sales rebounded with a vengeance once we were allowed to go outside again! 2021 started off red hot, but has begun to stall. Now, in the third quarter we can see the market has started to soften but the real question is what’s next and how long will it last?
New Listings
The New Listings graph above shows the recent trend of fewer homes being listed for sale. The next graph shows a breakdown of the newly listed homes by price range. As you can clearly see, fewer and fewer homes being listed in all segments except the higher end homes.
The number of truly affordable homes (RED) being added to the market over the last 5 years has fallen by more than half. This is due in part because entry level homes are getting more expensive and most builders don’t want to build affordable homes.
The reason being the profit margins aren’t as big as they are for the more expensive homes. Much of what is considered affordable or entry level is selling for between $200,000 and $350,000 (GREEN), which is why this price segment was leading for new listings. As of July though, the higher end homes (PINK) have overtaken all affordable homes segments. As I’ve said before, higher end homes are really driving the market right now.
Many of these buyers are older and coming from out of state, which is why they can afford the more expensive homes.
The next Closed Sales Year Over Year graph shows all homes, in all price points and is representative of our real estate market as a whole. The trendline of the graph has started to come back down since last quarter.
So why are we seeing this change in number of homes sold?
There aren’t enough homes being sold to satisfy all the available buyers. This drives prices up. These high prices and lack of inventory means people who might have considered selling their homes and buying another are now waiting. These people are afraid they will sell and then become homeless while trying to find a home to buy. Buyers are also tired of overpaying for homes so many are probably waiting until the market cools to buy.
Closed Sales Year Over Year
Interactive Graph
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.
Wilmington and Southeastern NC is a popular place for people to move to, especially from places like the Northeast and the West Coast. They are selling their homes elsewhere but that doesn’t help our inventory locally. Renters are also starting to understand the benefits of homeownership, so they are looking for homes to buy. Because they don’t have a home to sell, this doesn’t help our inventory either. Mortgage interest rates are still at historic lows but the economy appears to be in stand-by along.
All of these factors have contributed to the housing inventory reaching historic lows and prices reaching historic highs.
Days On Market
In the Tri-County area
The next graph shows how the average Days On Market for a listed home by month. Over the last 5 years, the time a home is listed for sale before going under contract has been falling. Since early 2021 the time has fallen off of a cliff. In September, the days on market hit the bottom and bounced.
Things have started to change.
This trend could reverse course but I think Days On Market will keep going up over the next few months.
Days On Market by Month
Median Sales Price
The median sales price of homes sold in the Tri-county area have been climbing over the last five years, which reflect the high demand for homes in this area. As you can see, the median price in July hit a peak and then plateaued for the rest of the quarter.
This tells me that demand for homes may be starting to soften, that buyers aren’t as willing to pay as much for homes as they have been.
This could be temporary, like August 2020 to April of 2021. During this time the median sales price basically stayed the same. It fluctuated up and down but ultimately the price stagnated until May when it began to take off again. This time frame coincides with the election and spikes in Covid cases as well as falling sales numbers.
The Big Picture
The market is levelling off, possibly reversing
Demand for home-ownership is still very high
Home sales numbers will fall in the short term
Home prices may continue to rise slowly or may stay about the same
High-end home sales are driving the market
Affordable homes sales are on the decline
What does this mean?
SHORT-TERM: Next 2-3 months
This Fall the market will begin to see the number of homes sold fall even more. High end homes will probably continue to drive the market.
Every Fall home sales begin to slip. The weather cools and children settle into the new school year. Fewer people want to move so fewer homes are sold this time of year. The data is already showing this.
The question is, is the reason sales are slumping because of the seasons or because things are changing?
LONGER-TERM: Next 3-6 months
This Winter we can expect to see the real estate market remain slow until the Spring. Prices will remain high but may start to fall.
It is always difficult to predict what will happen in the future. There are so many factors that can affect the real estate market and the economy at large. The economy and the world are in flux. Changes are happening slowly, which means it takes awhile to figure out what’s actually going on. Jobs seem to be returning but unemployment is on the rise again. U.S. politicians are fighting and China might be in danger financially. In spite of vaccines, Covid is still raging and doesn’t seem to be improving.
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, which drives the market. The federal government doesn’t want to raise rates because it could shock the overall economy while it’s still vulnerable. The Federal Reserve has indicated they want to raise interest rates in 2023, which still sent shocks through Wall Street.
Interest rates may still rise as 10 year Treasury Bond yields rise. They rose sharply in the first quarter of 2021, causing interest rates to go up as well. Bonds yields have slowly fallen over the second and third quarter until mid-August. They have been on the rise ever since with interest rates following behind. If we see a strengthening America economy over the next few months, interest rates will continue to rise…
What does this mean for you?!
SHORT-TERM: Next 2-3 months
Now is still a great 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. The fall and winter are the best time to find “deals” for buyers.
LONGER-TERM: Next 3-6 months
We may be seeing the peak of this real estate market. Then again, we may not be. Demand is still strong and interest rates are still at historic lows. Generally, we are at a crossroads. If the economy improves, this will carry the real estate market on a little further. If the economy worsens, then this is probably the peak of the market. We need more time to know for sure…
Longer-term will still be a great time to sell a home and an “alright” time to buy one. Sellers will still get top-dollar for their homes and buyers will still have historically low mortgage rates. The winter is the best time to find “deals” for buyers.
Ty Shaw
Realtor/Broker/Owner
SWELL home & living
If you have questions about this report or anything real estate related, please let us know!
