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Whats Going To Shape The 2018 Triangle Housing Market
The Triangle housing economy is entering escape velocity as we set our sights on closing out the 2017 year. Pockets of the area are very robust with multiple bids and closing for a listing in one day or less. Note to reader: one of our Realtor’s had a contract within 8 minutes of her listing going active. But not all areas are created equal in Raleigh or even in the Triangle for that matter. Lines of demarcation are drawn, specific neighborhoods or houses just across the street are being passed by from the top selling. So, it begs the question, why did that house sell in just eight minutes on Cherry Lane and the one on So-so Road is now approaching forty days.
At its most basic definition, housing accounts nationally for 15% of GDP. The Triangle is right in the mix and the industry hasn't done much heavy lifting lately, however. That's because in the wake of the last real estate bubble pop, lending standards have tightened, property appraisers are conservative with appraisals and the cautious builders who did survive the crisis of 2008 are reluctant to dive headfirst back into expanding their operations again.
As the new year is insight, let’s look at the common trends for the market.
Yep, December 2016, the Fed raised interest rates for only the second time in ten years, and the current board members of the Fed's predict there will be future increases coming. These decisions will cause mortgage rates to rise, potentially making it more difficult for the prospective homebuyer to afford the home of their dreams. Expect mortgage interest rates to increase, but they are predicted to not go higher than 4.3 percent on the 30-year fixed rate." That's still a great deal compared to historical norms. Say’s Eric Trebain with Cornerstreet Lending
Eric Tavian also points out that though rates may rise, mortgage credit will likely be more widely available due to slightly looser lending standards. He points out that the Federal Housing Administration will likely lower fees it charges first-time homebuyers, a continuation of a trend that begun in the Obama administration, under which it lowered fees in 2015.
In addition, starting back in 2017, government-owned mortgage companies Fannie Mae and Freddie Mac will begin backing larger mortgages for the first time in over a decade, making it easier for buyers in expensive markets to finance their purchases.
More New Homes
Though the most recent data on new home construction showed that builders pulled back on new projects back in November 2016, the overall trend in home construction is clearly positive now, with the National average annual rate of new groundbreakings reaching a 1.163 million rate so far in 2017, up about 5% from 1.108 million in 2016.
Expect this to continue into 2018, as home builders are encouraged by higher wages, looser credit, and increased demand from buyers.
Locally we are seeing a housing shortage for starter homes, with typical 3 months of on hand inventory reported in Metro Study data analysis for homes 290,000 and less. Additionally, Triangle cities like Raleigh, Durham, Mooresville, Zebulon, Apex, Garner and Fuquay Varina and others are all targeting revitalization projects within their city limits. Coupled with I540 final expansion to close the outer loop it’s going to get very busy in the Triad area.
The Continued Rise of Medium-sized Cities
One of the dominant stories of the current economic recovery is that top-tier economic cities like New York, Seattle, and San Francisco have seen property values rise as workers flock to these locations to take advantage of high-paying jobs. But this trend has put a strain on those cities' real estate markets, because new construction is often unable to keep pace with demand due to geographic constraints, or restrictions imposed by local government regulations.
That's why younger folk’s aka: millennials are finding themselves attracted to medium-sized cities, which may not have the same professional opportunities as their larger counterparts, but provide affordability housing says Jack Robinson with MI Homes. Cities like Raleigh, N.C., and Clayton, NC., have seen building permit issuance soar over the past year as they attract younger adults seeking cheap rents and lower asking prices. Expect the trend to continue in 2018. But take note says Franco Multari with HHHHunt Mortgage, 2018 Q4 there will be added pressure to the market, he is forecasting an 8% increase for rent and as high as 9% increase for new houses because of low inventory and high demand. He also says that the first round of millennials will move out of the cozy downtown loft apartment and begin to invest in their version of the American Dream.
Foreign Buyers really in NC
Wealthy foreign buyers have always been attracted to New York and Los Angeles real estate says Bob Nickels at Petty Real Estate.
One trend that is helping drive prices beyond the realm of affordability in places like Morrisville and Wakeforest is an influx of foreign buyers for U.S. real estate. This has only increased of late within the Triangle, fueled by buyers from China and India who are looking for safe places to store their wealth, away from the slowing economy of their homeland, where repressive financial policies make it difficult to earn decent returns on savings. "U.S. and Europe continue to attract growing amounts of foreign capital, especially from Asian investors," writes Scott Brown, global head of real estate investment at Barr Real Estate Advisers. We can look at global companies like Cree, Inc, Redhat, Lord Corporation and our vibrant biotech industry that have placed the Carolina’s in the sights of new foreign investors, some who have never known the concept of land ownership.
In closing, the good news: “we have not seen a recession in ten years”. The bad news: “we have not seen a recession in ten years.” The current market is vibrant, healthy and on steady growth if there are no world crises to derail our economy, we should see continued growth into 2019. Affordable housing inventory starts will increase to close the demand gap. Specific housing markets based on people’s preferences and affordability will continue to heat up in new areas as the cooling of areas will happen for areas completing build outs. So, if you are ready to come into the real estate market 2017/2018 may be the best opportunity to get started.
Anyone who knows me will tell you I have never met a stranger. I enjoy getting to know people and helping them however I can. That’s what prompted me to change career paths and become a Licensed R....
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As a real estate agent, I subscribe to many newsletters and trade publications so I can analyze industry trends and compare them to our local market. As you have read many times before, The Triangle