Alan Brock, construction manager for Trusst Builder Group’s The Forks at Barclay, shown at the midtown Wilmington neighborhood under development. The area housing market has spent the past decade in recovery mode. (Photo by Chris Brehmer)
Local industry professionals don’t have any doubts about the current state of the real estate market in Wilmington.
The number of homes sold in the Wilmington area jumped to an all-time January high of 41 percent compared to the same month last year in New Hanover, Pender and northern Brunswick counties. A January comparison for all of Brunswick County also produced a 29 percent rise.
At The Forks at Barclay, a neighborhood of single-family and townhomes in midtown Wilmington developed by Trusst Builder Group and Cameron Management, 90 percent of the properties are sold out. That makes Trusst owner Shawn Horton feel optimistic about the future.
“Last year, what I felt like I was seeing was not just a resurgence but a substantial resurgence with the confidence that folks have in the market, not just the folks that are moving to town, but the folks that are moving around within the area. It’s just a general confidence in the economy and the real estate market here,” Horton said.
But despite a strong start to the year and last year’s big finish – with more than $2 billion in homes sold in the Wilmington area for the first time since 2006 – the remaining scars of the recession and factors unique to the Cape Fear region introduce an element of caution to discussions about the real estate industry’s future.
Experts predict a potential national blip around 2019 or 2020 – nothing like the disaster of the trillion-dollar bubble burst of 2007 – but a blip nonetheless. That possibility, combined with other potential economic shifts, seems to always be on the minds of those who make a living in the local real estate industry.
“There are many factors that drive home sales. I believe the lack of inventory and possible interest rate increases are two big factors that could change the positive momentum of our area’s housing sales,” said Neal Johnson, president of Cape Fear Realtors and one of the owning partners of Wilmington-based Network Real Estate, in an email this month. “The inventory of residential homes is extremely low at this time, and if the homebuyer does not have many options when looking for a home, they may decide to wait a little longer until there is more inventory. Also, if interest rates do go higher, the housing market could be negatively impacted. Higher mortgage rates can decrease housing affordability and thus have the potential to lower the demand for home purchases.”
The lack of inventory and lack of available lots for new homes has been of particular concern in the city of Wilmington and New Hanover County, where developable land is becoming scarcer.
“Land and home sites are just not plentiful in our area and won’t be for the foreseeable future,” Horton said.
That has led homebuilders and real estate agencies to look beyond Wilmington and New Hanover for future growth and establish design centers and offices in Brunswick and Pender counties.
Blake Farm, a development planned by Trask Land Co. that will be located in Scotts Hill, could include 1,800 homes at full build-out.
In Surf City, a planned community called Waterside on N.C. 50 and the Intracoastal Waterway that is permitted for up to 2,200 homes, will likely have at least 1,000, said Livian Jones, a development consultant who represents the owner and developer of the land, Coterra.
Although interest rates might rise somewhat this year, they’ll likely remain at historic lows – the interest rate on a 30-year fixed mortgage in October 1981, for example, was nearly 18.5 percent, according to FreddieMac.
Market analyst Jay Colvin, regional director for the Carolinas for Metrostudy, a Hanley Wood company that maintains a database of housing market information, said Metrostudy expects interest rates to be in the 4.75-4.9 percent range by the end of this year and not have a significant impact on the market.
The Apartment Factor
Blake Farm is expected to involve a mix of housing types, including apartments, and Jones said Waterside also could have a multi-family component, depending on whether that demand exists.
In the Wilmington area, more than 4,000 apartments are either under construction or in planning stages, but experts see that amount as typical of economic and life cycles – high occupancy rates lead to more development, and more young people ready to be out on their own often start by renting apartments.
Additionally, some older residents prefer apartments, either to be free of the hassles of home ownership, because they were traumatized during the recession or they want to wait and get to know the area before they buy, developers say.
Colvin said financing for multifamily projects appears to be slowing down nationally.
“What we hear and what we see from most of our lender clients is that their multi-family exposure has sort of hit the limit, maybe not the regulatory limit but just a self-imposed limit, and they are definitely backing away … It’s not that we’re not going to see more apartments getting built, but we think it’s going to get down to a more moderate level, probably where it should be,” Colvin said Feb. 23, during the Wilmington- Cape Fear Homebuilders’ and Cape Fear Realtors’ 2017 Housing Forecast event.
D. Logan, a homebuilder who is also developing apartment communities, Harrington Village in Leland and Sparrows Bend in Hampstead, said he believes demand for apartments will continue.
“People say there’s an apartment boom and perhaps a bust coming, and I tend to disagree with that, personally, primarily because when you look at the demographic of the American people, you’ve got all these millennials now that stay in college until they’re 30 years old and when they get out they’re in debt up to their eyeballs,” Logan said.
But with new apartments come higher rents, which Realtors say could persuade more apartment dwellers to become homebuyers, including millennials.
Millennials and baby boomers are the generations numerous industries target, including real estate and homebuilding.
“Last year, more millennials bought new homes than boomers [according to national statistics], which is wild considering how young that cohort is and how late they’re buying homes,” Colvin said.
Horton said the main buyer of homes his company builds “is still the active adult, empty nester and retiree, and they want a certain type of home with certain features.
That’s our buyer today; that will be our buyer next year and for some years to come.
However, the millennial buyer is an opportunity that’s out there, and I think it’s something that we just need to be aware of and to plan for.”
In Brunswick County, a lot of older buyers and people leaving colder climates continue to invest in retirement and vacation properties, said Ben Styers, president of the Brunswick County Association of Realtors.
“There’s a tremendous boom here, and people are just taking advantage of the prices before they really start going upwards,” Styers said. “Right now we’re at about a 2- to 3-percent steady increase in prices.”
Although homebuilding locally and nationally is still behind demand in some cases, the future could bring more inventory, Realtors said.
“I would expect that as people see how much of a demand there is for housing in the Wilmington area, sellers who may have been holding out to list or waiting because of various other reasons may decide to pull the trigger now while the market is hot,” Johnson said. “The residential home absorption rate ending January 2017 was 3.6 months. This is very low.” For the overall market locally, Horton said, “it looks like we’re going to have a few years of steady growth.”
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