Mid-price homes sell, inventory declines
September 3, 2013By J. Elias O'Neal
Howard A. Penton III, owner of Wilmington-based Penton Development, is a survivor.
With more than 25 years of building experience, Penton has witnessed plenty of housing booms and busts over the course of his career.
But like thousands of builders across the country, he was stunned by the 2008 economic upheaval that left much of greater Wilmington reeling with way too many lots, plenty of stalled housing developments and a large quantity of pending development deals that never came to fruition.
“The easy answer is everybody went broke,” Penton said. “There were no buyers, no lenders, no developer or builders that specialized in this industry…all the people capable of doing so stopped.”
The region’s overheated housing market stood frozen like tundra, with very little building, under-water mortgages and high foreclosure rates – leaving Penton and many other builders and Realtors who didn’t pull out of the area wondering when the tide would change.
Their answer would come in January 2012.
“Everything changed,” said Jeff Sweyer, owner of Wilmington-based Century 21 Sweyer & Associates, of new and existing home sales. “There was a noticeable shift in the market that seemed to be gaining momentum.”
That may be an understatement today. Greater Wilmington’s housing market is back.
Figures recently released by the Wilmington Regional Association
of Realtors (WRAR) showed an 18 percent hike in the number of homes sold in the greater Wilmington area in July, compared to July 2012.
In all, 628 homes were sold last month – up from 531 homes sold in July 2012. July also logged the highest volume of homes sold that month since 2004, when Realtors recorded a record 899 home sales.
And as area realty firms continue to post the kinds of solid housing sales not seen since the housing bust of 2008, the region’s inventory of new and existing homes is dwindling – fast.
“We have five to six months of existing inventory for the entire market,” Sweyer said.
But for homes priced from roughly $200,000 to $400,000, that inventory is even tighter for prospective buyers – with many area Realtors placing the absorption rate closer to one and two months’ worth of supply.
“It started at the bottom end,” Sweyer said, referring to homes priced in the $175,000 range and below. “Once we started to see the absorption rate of those homes reduce dramatically, it then shifted to homes priced in the $200,000 range.”
The result is a domino effect for area Realtors. As one price point recovers, another heats up –fueling a housing recovery that is helping buyers and sellers.
“It’s growing into other price points,” said Whitney Leonard, Century 21 Sweyer & Associates
sales manager and broker-in-charge, of the area’s housing recovery. “We’re a solid 18 months into the recovery, and all price points are moving.”
The average price of a home sold in July increased 4 percent to $244,130 — compared to $235,216 in July 2012 – although most Realtors say those numbers may be skewed by recent multimillion dollar home transactions occurring in the Figure Eight Island, Wrightsville Beach and Pleasure Island areas.
But those luxury properties aren’t moving at quite the clip homes priced between $200,000 and $400,000 are selling, Sweyer said, leaving the region with a critical shortage of available new and existing mid-priced homes.
“I have Realtors knocking on doors asking people who don’t have their homes listed if they are interested in selling,” Sweyer said. “We’re also encouraging buyers to write the seller of a home they want to purchase to convince them to choose their offer if there are multiple offers. That’s a fairly common practice, but it’s happening more often in this market because of how tight it has become.”
Builders are also experiencing similar demand – a pressure-cooker effect of a long suppressed home building market now ready to explode because of pent-up demand.
But development regulations at the state and local level, not to mention availability of affordable raw land suitable for development, could make building new homes a year-long process at best, Penton said.
With demand peaking, builders are now buying lots in formerly defunct subdivisions, and are attempting to tap into new developments that have been vetted and approved by area cities and counties.
Penton should know.
After announcing plans last summer with Will Leonard, co-developer and vice president and broker with Wilmington-based Cape Fear Commercial, to develop a 94-lot
subdivision called Shinnwood West along Greenville Loop Road, Penton has since been approached by two unnamed builders wanting to purchase the entire development.
Penton said he is not selling the home sites to any builders, and will construct the 1,800- to 2,400- square-foot residences in-house.
That’s possibly a smart move by Penton, who plans to start selling 14 home sites in the development at the $240,000 price point in the coming weeks.
“This is big ship,” Penton said of the area’s real estate market. “And it took a long time to right it. Very few people survived, and those that survived are very lucky.”