2021 Fourth Quarter Report
October, November, & December
“Solid or Sliding?”
Find out what happened this fall and what’s next
Last quarter we predicted the market would start slowing down and prices would slow too, 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.
As shown in the Closed Sales Month by Month graph, March home sales took off and stayed consistent all the way through August. After August though, the number of home sold declined fairly sharply. When comparing 2020 to 2021, it seems like perhaps the market is finally starting to slow down. But for how long…
The selling season started earlier in 2021 than in 2020. The lockdowns early on in 2020 hurt home sales and compressed demand. Home sales rebounded with a vengeance once we were allowed to go outside again.
2021 started off red hot, but doesn’t look nearly as impressive as 2020 was. Things aren’t always as they appear to be though…
New Listings
The New Listings graph above shows the recent trend of fewer homes being listed for sale. The next graph, New Listings- By Price Range 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. Even they have begun to level off.
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. They make more from sellering more expensive houses.
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 after June of 2021.
Why are we seeing this change in number of homes sold?
Supply chain issues, inflation, and COVID variants have caused consumer caution. Plus there still aren’t enough homes being sold to satisfy all the available buyers, which drives prices up. These high prices and a 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 their next home. Buyers also don’t want to overpay for a home and many are 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.
Something interesting is happening here…
Annual Home Sales Year by Year
The first graph, Closed Sales Year Over Year, shows home sales on the decline, but the one just above, Annual Home Sales Year by Year, shows more homes were sold in 2021 than in the last 5 years.
So what’s going on?!
Both graphs are accurate and tell different stories. The first is useful to help spot trends in data. Each point represents the previous 12 months of total sales. The closed sales line was going up gradually from 2016 until 2020. Then all of the sudden the market took off! Which the second bar graph also shows.
In 2020, home sales stalled in the early days of COVID and then exploded. Buyers flocked to the market and bought up everything in sight. Demand stayed high for the remainder of the year. 2021 was more like a regular year in real estate where sales fall off in the Winter, heat up in Spring, catch fire in Summer, and begin cooling again in the Fall. The way the first graph shows data, this isn’t represented well and it looks as though homes sales fell off a cliff after June of 2021. In actuality, the market just went back to normal.
So is the market Solid or Sliding?
Right now the market is solid but it is slowly sliding down and cooling off. The chief economist for the National Association of Realtors says that he believes the real estate market will stabilize in 2022 along with prices. This means the market will go from our previously unsustainable WHITE HOT craziness to a more reasonable Red hot level. More and more Millennials are entering the housing market as they understand the value of owning a home vs not. COVID and the response to COVID has opened a lot of people’s eyes to the benefits of home ownership. As long as the supply chain, inflation, and COVID issues are quickly corrected by the government, I agree with the chief economist’s assessment. But if inflation isn’t controlled and COVID runs rampant with seemingly little government effectiveness, the national economy could turn. Which would cause all markets to contract, especially the real estate market. Typically the federal government has little impact on our day to day lives. But if we don’t right this ship in time, we are all going down with it…
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 by Month 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 as the market begins to slow and balance.
Days On Market by Month
Average Sales Price
The average price of homes sold in the Tri-county area has been steadily climbing over the last five years, which reflect the high demand for homes in this area. As you can see, the average sales price hit a peak in May and has remained relatively the same for the rest of the year.
This tells me that demand may be starting to soften, that buyers aren’t as willing to pay these new, higher prices for homes as they have been.
This trend will likely continue throughout 2022. With inflation rising, consumer purchasing power has gone down as wages remain relatively unchanged. This financial strain will likely keep many from buying a home that might want to otherwise. As the supply chain goes back to normal, so will the prices of goods and services, which will help buyers.
Unfortunately, if the government don’t correct these inflation issues fast enough the Fed will have to raise interest rates. This will slow inflation but it will make it impossible for some buyers to purchase a home. This in turn will cause demand for homes to fall, causing home prices to fall and the market to correct. As of this moment, we still don’t know which way things will go…
The Big Picture
The market seems to be levelling off
Demand for home-ownership is still very high
Home sales numbers will fall in the next few months
Home prices may stay about the same or continue to rise slowly
Higher-end home sales are still driving the market
Affordable homes sales are on the decline
What does this mean?
SHORT-TERM: Next 2-3 months
This Winter 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 and Winter 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.
LONGER-TERM: Next 3-6 months
This Spring and Summer we can expect to see the real estate market rebound as it normally does. Prices will remain high and relatively stable.
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 much.
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
Demand will rise in the Spring and in the Summer. More homes will come on the market and prices may rise slowly. We are getting closer to a crossroads where the economy and real estate markets will be deeply affected. If the economy improves, this will carry the real estate market on a little further. If the economy worsens, then demand will fall. We may have just seen the peak of this real estate market. Then again, we may not. It’s hard to say yet, but we should know soon.
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 low mortgage rates.
Ty Shaw
Realtor/Broker/Owner
SWELL home & living
If you have questions about this report or anything real estate related, please let us know!
