The Wilmington housing market is expected to remain strong this year and the next, although those in the real estate industry can expect to face some current and future challenges.
One of the main hurdles will be the area’s shrinking inventory and the inability of supply to keep up with demand.
“By our estimation, the Wilmington market will have a shortage of homes by as much as 1,500 units by 2019 based on the job growth rate that we’ve been having,” said Amanda Hoyle, regional director for Metrostudy whose territory also includes Raleigh/Durham and the Triad.
Hoyle presented on Jan. 31 this year’s annual housing forecast hosted by the Wilmington-Cape Fear Home Builders Association and Cape Fear Realtors.
Wilmington employers are adding jobs at a strong rate, which has led to the demand for housing to grow “slightly faster than the housing supply that we’ve got coming online. It’s really starting to chip away at inventory levels,” Hoyle said.
She said the N.C. Regional Multiple Listing Service statistics showed only a four-month supply of homes, while a six- to seven-month supply is considered the point of equilibrium.
“At four months, we’re now under supplied. That’s likely to get tighter. We’re expecting this to stay low in 2018, making it a seller’s market finally,” Hoyle said. “By comparison, both Raleigh and Charlotte were at about a two-months’ supply of existing inventory, which is really pushing builders to start making up some of that difference.”
Jeff Sweyer, owner of Century 21 Sweyer & Associates, said he’s seeing that nationally, according to the information presented by Hoyle and from Century 21 companies throughout the country, and locally, 2018 is expected to be another very strong year for the housing market, but “I think our biggest challenge will be the affordable housing that there’s such a lack of inventory under $250,000.”
The dwindling number of lots that will work in New Hanover County is another factor.
“We all have to get into the mindset that moving outside [of New Hanover] is OK because that’s where affordable housing is going to come from. But we’re very bullish on not just this year but the next couple years. We’re very optimistic,” Sweyer said after Hoyle’s presentation.
On the topic of expanding outside of New Hanover County, Sweyer said, “We’re seeing it on the border of Pender County and Onslow County. There’s an enormous amount of growth, and we think places like Burgaw, certainly Brunswick County, those areas are going to see tremendous growth over the next year to three years.”
While 4,100 jobs were added in Wilmington over the past 12 months, according to Hoyle’s numbers from the Bureau of Labor Statistics, potential homebuyers who are no longer in the workforce will remain a major demographic among those moving to the state and area.
“We are a very attractive state for the retirement communities,” Hoyle said during her presentation. “That’s why age-targeted communities are doing so great and selling so well.”
Hoyle brought up the topic of retirees when looking at the number of people who are not participating in the labor force. The challenge for an area that has a low unemployment number is that the labor pool is smaller, and with numerous retirees in the Cape Fear region, it can impact potential economic development.
It’s a trend “that employers who are looking to come into North Carolina, they’ll be paying attention to this, wondering if there is a workforce large enough for them to pull from.”
At the same time, the age group of people who are 70 and older is greatly outpacing growth in some of the other age brackets, making it critical for homebuilders to add housing options for that demographic to respond to demand, Hoyle said.
The team of experts at Metrostudy predicts that by the end of 2018, the 30-year interest rate will be closer to 4.7 percent.
“Hopefully, it’s gradual enough not to derail the progress we’ve been making, but 4.7 percent is historically pretty low. We’ve all gotten spoiled,” Hoyle said.
That could lead to some people deciding to stay put rather than buy a new home because they’ve refinanced at an even lower interest rate, she said.
A low supply of homes also means more people are turning to the resale market, and, in turn, more are turning to the remodeling market.
For remodeling, “demand is going to remain high in the foreseeable future,” Hoyle said.
The average home sales price for a new home in Wilmington was up about 9 percent in 2017 over the previous year, to $281,603, while the average price for an existing home rose nearly 9 percent to $247,854. Median home sale prices in both categories rose about 7 percent to $265,700 for a new home and $191,500 for an existing home, according to Metrostudy numbers.
Prices will plateau at some point in the years to come, making it important for homebuilders to choose carefully when selecting land now for building in the years 2020 and 2021, Hoyle said, because they won’t be able to factor in raising the price of the new home on the back end.