In a recent article, I discussed whether it is a good idea to continue renting a home or make the leap and become a homeowner.
One of the underlying assumptions in favor of the case for home ownership is the idea that home prices will appreciate by a factor of two percent per year. History has shown that two percent is a conservative estimate for annual price appreciation, and the fact is that home prices have increased by a significantly higher amount than that in some cases.
Taking price appreciation as a given in our area means accepting the idea that Wilmington is a solid and stable long-term investment. How much do you believe in the long-term viability of our area? Do you think Wilmington will remain a popular destination for tourists and a great place to call home? These are questions you should ask yourself if you are considering buying a home.
Buying a home right now is a much better investment than renting. The population of Wilmington is expected to rise substantially over the next five to 10 years. When the population of a city increases, the inventory of available properties tends to shrink. As the inventory of available properties becomes more and more scarce, the costs that people pay for rent tend to rise and so do home prices.
Of course, it’s a basic law of supply and demand. Any local Realtor will be happy to provide you with some anecdotal evidence - there simply isn’t much inventory right now.
The numbers don’t lie: there was only a little over three months’ worth of inventory available in Wilmington in June 2017 compared to more than four and a half months’ worth of inventory in June 2016. This may not sound like much of a difference, until you consider that this represents more than a 32 percent decline in inventory!
All of this is according to the North Carolina Association of Realtors, which tracks the number of months it would take to exhaust active listings at the current rate of sales.
To give you some perspective, a historical average is around six months. Six months of inventory is often recognized as a benchmark of a healthy, balanced real estate market.
In an article that was published by the Star News, referencing a study by Metro Forecasting Models, the population in New Hanover County is expected to rise by more than eight percent by 2020. By 2025, the population is expected to grow by more than 16 percent.
The growth of the population here is widely accepted as a fact among the locals. The word on the street could serve as proof the population is growing rapidly, since it’s not uncommon to hear a friend or neighbor say, “Where are these people going to live?”
Not to belabor the point, but as the population rises, the housing inventory becomes scarcer. This makes an increase in monthly rental costs and a strong appreciation of home prices seem almost like a certainty.
For a no-obligation consultation about your options for purchasing a home, give me a call at the number below.
Patrick Stoy (NMLS Numbers 39527 and 39166) has 18 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.
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