The Wilmington region has been in growth mode and our real estate market is adapting to the changes from rapid expansion. Business growth, infrastructure challenges and affordable housing are under discussion to find solutions to meet the needs of our growing community.
Demand for homes is high and interest rates are low, making the real estate market exceptionally strong. Local real estate experts shared their opinions on the current state of the market. Please note: The panelists shared their views before many of the coronavirus restrictions reached our area.
What are your predictions in real estate for our region this year?
TONY HARRINGTON: I think we’re going to have a continuance of what we’ve seen over the past couple years with sales and inventory. We’re still dealing with a lack of available housing and continue to have a shortage of inventory, which is of course going to affect housing prices. We’re probably going to see a little bit higher increase in value because of that lack of inventory. We also have new construction coming into the market which helps to shift the inventory, but we still know that for our metropolitan region we have a net deficit of 1,200 homes and that part has not changed. And while we don’t have a sense of where the new resident influx will come from, based on our trends, we do know that we have that deficit.
HEATH CLARK: I can only speak from our experience, but we don’t see much change other than the uncertainty of the political outcome this year. Interest rates seem to be stable and low. The buyers are still out looking at new homes. The availability of new homes in Wilmington under $300,000 is becoming scarce so I think we will see those buyers consider other areas in the future.
CRAIG SMITH: Nationally speaking, single-family home starts should continue a gradual, upward trajectory in 2020, fueled by solid job growth and historically low mortgage rates that will keep demand up. However, at the same time, builders are still underbuilding as they continue to struggle with rising construction costs stemming from excessive regulations, a chronic shortage of workers, and a lack of buildable lots. These same scenarios are playing out here in our region as well. Looking locally, we will continue to see some of the same constraints carry over from 2019, such as supply-side bottlenecks in the form of lack of labor, rising building material prices, and increased regulatory fees. These constraints will continue to hamper efforts by our builder members to meet the current housing demand, which in return will continue to manifest in affordability issues. The good news is we started the year off with unseasonably warm weather in December 2019 and January 2020. This has allowed more builders to get out on the ground thus helping to place more supply in the market. Coupling this with spring, which is typically our peak selling/buying season, we should see construction starts hold true and, in some markets, ramp up. The interesting “fly in the ointment,” so to speak, is the spread of the COVID-19. Markets dislike uncertainty, and uncertainty regarding the coronavirus is clearly reflected in recent stock market declines and reduced interest rates. In fact, the 10-year Treasury rate fell below 1.2 percent, effectively at an all-time low. This means low mortgage rates and lower rates for builder and developer borrowing, which is great for business. But at the same time, the construction industry is a global import/export market when it comes to materials. We could see some of our supply chains shrink which will drive prices up and ultimately these increases will have to be passed on to the consumer, which in return needlessly raises the cost of housing.
VANCE YOUNG: It’s too early to know what long-term affect the recent coronavirus and market volatility will have on the local real estate market. However, having been a financial consultant in my previous career, there’s a lot to be said about the safety of real property. The cost of borrowing is at an all-time low and I am extremely bullish on the growth of the Wilmington area going forward.
What changes are you seeing in people’s preferences and features in their homes?
CLARK: In the past five years, we’ve seen consistency in buyer requests. Our clients typically are asking for first floor living, smaller square footage, higher included features, and energy efficiency
YOUNG: Generally, we are seeing a strong preference for new or updated homes. In years past, some buyers liked the idea of a project or bringing sweat equity into play. It seems like now people’s lives are too busy and the buyers don’t want to deal with the hassle of bringing contractors in to address needed repairs or updates. We are also seeing a strong demand for enhanced outdoor living areas including pools, spas, outdoor kitchens, and fireplaces.
HARRINGTON: That’s an interesting question because much of the predominant construction that has been built in our region has been geared toward retirees. We’re finding a lot of one-level living homes with all the upgradable features in the house. I think that’s going to continue to be the majority of what’s being built in new construction in our region. I think if you look at the national average, the top home feature and highest rated item is a laundry room. People are looking for a large room that can be used for facilitating and working with laundry. Laundry rooms are something that people are saying is most important to them. Also, with all the new construction we’re seeing, builders are constructing open floor plans. The kitchen is always the core portion of the house, so any living areas around an open kitchen has been a trend that we have seen.
SMITH: With respect to this question, not much has changed over the last couple of years. Buyers want functionality! Today’s buyer is savvy and very critical in terms of a home’s layout and the use of space. Consumers want a home that has flow and moves you from one space to the next without choppy design elements or orientation. They want to get the most out of the price of the home and are looking to utilize every nook and cranny with minimal waste. Open floor plans between the kitchen, living room, and more casual eating areas are still the top drivers. Buyers will also seek ways to keep their master bedroom downstairs as well. Even with our families, we see this as ‘future insurance’ either for our owner, or more likely, for resale. We are seeing real estate agents use techniques to tell more of a story about the home. First impressions are so important in our industry. Buyers want to see why it is worth it! With the area’s mild climate, more homes are embracing the outdoor space as extra living space that can be used year-round. When we step outside, we are seeing more emphasis put on the indoor-outdoor convergence. This trend is only going to become more pronounced as many of the area’s new communities are building on smaller home sites, which yields less yard. More buyers are embracing these smaller spaces and creating their own higher quality, personalized uses.
What’s the most significant trend you see in housing in our area – whether it’s in rentals, single family, multi-family, affordable, or luxury?
CLARK: In single family homes, we’re seeing very demanding clients. With the increased presence of online information, instantaneous responses, Amazon Prime, and HGTV, the expectation of completion dates, technology, and perfection has been a new trend that we haven’t faced before. We are still one of the few industries that relies on people with tools, outside in the elements, building homes one stage at time, it’s hard to set perfect expectations.
YOUNG: One trend that has been noticeable since the 2008 recession is the desire to have a smaller footprint. The buyer that used to want 5000 square feet now is more comfortable in 3000 to 4000 square feet. Very few buyers want the really large homes and it is not a money issue. They simply want less house to maintain and insure, and less taxes. It’s not so much a financial concern as they are demanding top-of-the-line finishes and appliances. Most want to simplify their lives and be less encumbered with a lot of extra house or property. We are definitely seeing people that put more emphasis on life experiences and the ability to travel. It will be interesting to see if the coronavirus and travel restrictions flip the dialogue back to being more home-oriented/domestic.
HARRINGTON: I personally see our region utilizing all types of housing. We’re seeing a significant amount of apartments being built and I think the market is trying to react to individuals who are not finding affordable housing, but yet we’re trying to offer some sort of housing that could fit a margin of people who may not be able to afford a single family home yet. We are finding that there is gravitation towards renting because of the lack of inventory and the high price point of a single-family home. We’ve got a market that can’t afford housing, so they’re moving into apartments and even apartments are becoming less affordable. For example, in our January statistic, the tri-county market that we report on most frequently in our releases had a 45.2 percent increase year-over-year from January one year ago in the townhouse condo segment alone. We had an overall close sales increase of 37 percent, which was a record. Developers are building more single-family home communities that will stay rentals because we have the impact of student loans on the first home-buying segment within the millennial generation and they’re still carrying a significant amount of debt. Wages have not kept up with preceded appreciation nationwide or in our region and, because of this, it’s a possibility that we will start seeing a trend toward communities built for rental.
Geographically, what are the population trends in our area? Are buyers looking at specific areas more than others?
YOUNG: We are really fortunate in the Wilmington area to be able to check all of those boxes with excellent options. I’m very excited about the trajectory of downtown Wilmington, the riverfront, and the historic district. We have world-class beaches, each with an entirely different vibe – from family friendly Topsail, private Figure Eight Island, vibrant Wrightsville Beach, Pleasure Island, a sub-tropical paradise accessible only by ferry Bald Head Island, and the many beaches of Brunswick county. Whether relocating, retiring, or looking for a second home, we have it all!
CLARK: Based on the buyers we tend to cater to, we have two main demographics: we have local family buyers who tend to stay closer to town and school districts, specifically, or we have retiree clientele that are either looking for the best value and quality with easy access to area beaches or they want a high amenities lifestyle. We’re fortunate to be able to serve all categories.
SMITH: Buyers may use some geographic features, but in the end location, location, location still reigns king when it comes to the local real estate market. When you look at what is selling quickly, much of it is due to its location within the area. Sellers who understand their product and their likely buyer, coupled with buyers who understand their own needs and have done their research, are efficiently connecting with one another. The other factor that we are seeing in the purchase decision is that buyers really want “convenience.” They want to be in or around easy-to-get-to neighborhood services like restaurants, shopping, movies, or just have convenient access to the places they spend the bulk of their time when they are not at home.
HARRINGTON: Well, you must segment this into different areas because we cover 70 different types of geographical locations. We’re dealing with different segments of the market who are coming in from other parts of the state to buy second family homes at the beach and yet you’ve got others that are looking for affordable housing. If you look at the affordable housing market, we’re having to go outside the city limits to be able to find anything affordable. We’re seeing a trend of people moving to areas like Castle Hayne, Rocky Point, Burgaw, and even Wallace. They’re making the extra 30-45-minute work commute to Wilmington in order to be able to find land or homes that are affordable. Midtown has grown and we are seeing a trend of people who are enjoying the midtown possibly because new recreation and restaurants. And then of course you’ve got the Brunswick County market, which is really gearing toward the retiree market. We’re seeing on a national average that Brunswick County is growing population-wise stronger than any market across the United States.
Do you think our region is addressing the availability of affordable housing? What steps do you think our area should take?
SMITH: Addressing affordability is not just a one-step approach; it has to be multi-pronged. Neither the public nor the private sector can meet the challenge alone. The cost of housing is determined by a complex equation involving labor and materials prices; interest rates and financing costs; federal, state and local regulations; and supply and demand. In today’s market, a limited supply of land, a shortage of skilled labor, and rising fees are all contributing to higher prices. Through the analysis of the National Association of Home Builders (NAHB) it shows that regulatory requirements alone account for 25 percent of the cost of constructing a single-family home and 30 percent of the coast of a multifamily unit. These are real costs that create financial barriers to potential homeowners or renters. In 2019, leadership from both the City and County created the Joint New Hanover County-City of Wilmington Workforce Housing Advisory Committee. This committee is one step in the right direction, but there is no single “silver bullet” solution to the challenge of making housing more affordable. The effort requires comprehensive public-private strategies and a variety of tools that can be used alone or in combination to reduce costs, boost supply, and empower aspiring home buyers. Over the last two years, the Wilmington Cape Fear Home Builders Association (WCFHBA) has strongly supported denser development along with relaxing height restrictions particularly on multifamily projects. The County heard our pleas and responded by adopting eight new zoning districts in 2019 that allow for smaller lot sizes and increased flexibility on setbacks and yard requirements. The City of Wilmington is currently working through a proposed Workforce Housing Mixed Use opt-in district. This district would allow for a developer to opt-in to include workforce housing units within a development or pay a fee-in-lieu of units in exchange for increased building height, lot coverage, and development density. We have been weighing in cautiously on this measure as it is untested and could prove to be overly cumbersome for the development community.
CLARK: Affordable housing is a “relative” term. Due to the large territory that our company covers, it can vary greatly from county to county. So what any one client considers affordable, we very likely have available. It just may not be in their first-choice location. Our business is driven by supply and demand. In a good real estate market, the supply goes down which drives prices up. Other than specific projects like Habitat for Humanity, our house “sales price” is truly driven by our costs. Every phase of construction has a cost associated to it. If the expectation is for the builder to reduce home prices, it would take the entire industry to assist in reducing costs. But, by doing so, the unintended consequences could outweigh the good because someone will be affected negatively. But who knows?
HARRINGTON: I think this has been something we locally have been very attuned to. This has been one of our strategic work plans and we make sure that we’re talking and staying a part of the ongoing discussion. We’re trying to promote the values within our community and trying to figure out how we can be a part of the conversations on a local, state, and national level. In fact, we have two dedicated Realtor® members, from our association, that are sitting on the Workforce Housing Advisory Committee in order to be representatives so that we can actively be a part of the discussion at the city and county level. This effort will help us make changes to increase opportunities for affordable housing.
YOUNG: Affordable housing will continue to be an issue in the Wilmington market simply because of supply and demand. I think the overall market growth over the next 10 years will make the last 10 years pale in comparison, putting more of a burden on affordable housing. The city and local board of realtors has a task force in place to address affordable housing. This is a problem across the country and Wilmington should learn from other areas that have successfully addressed this issue.
Are you seeing any changes in what’s driving people to move to our region?
HARRINGTON: I think that in years past, you’ll find that we really tried to advertise our “beach community,” but we’re so much more than that. From financial technology, pharmaceutical sales, aviation, and manufacturing we’re very diverse in the type of business opportunities that we have to offer.
YOUNG: The ability for people to work wherever they would like is hugely beneficial to places like Wilmington. We continue to see folks that want to get out of colder climates, higher tax, and overpopulated areas. Most want to be on or near the coast with the benefits of a sizable city that includes excellent medical, university, and airport. I often see folks that are looking at one of three areas – Wilmington, Charleston, or Savannah. Many have eliminated Florida, although Florida will always be a strong magnet for buyers especially those looking for no state income tax. We’ve also seen a sizable increase in folks relocating to Wilmington from other parts of North Carolina, especially the Triangle. We are also now the closest beach to Charlotte thanks to the recently completed Monroe bypass.
CLARK: The ocean is always going to draw people here. Warm weather and lower taxes will always bring people south.
Is business growth in our region impacting demand for housing?
SMITH: Business growth is key, but it also must be coupled with wage growth. While home prices may in fact be stabilizing, we are still seeing economic uncertainly that could continue to make home prices rise. Wage growth is good for consumer spending within the housing market. It creates the multiplier effect needed to recirculate income earned in other sectors of the economy as a result of a home sale. These related housing expenditures help other sectors continue to remain strong and, in many cases, expand their overall business portfolio thus adding on more employees.
CLARK: Our area doesn’t seem to be driven by “industry or business growth.” It is and will continue to be a destination location. However, if we could bring some larger employers to our area, it could absolutely affect the demand for housing.
YOUNG: Yes, overall business growth is impacting the demand for housing locally. Existing businesses are growing organically. It’s amazing to look back and see the contributions that people like Fred Eshelman and Chip Mahan have made to Wilmington. PPD alone has been a huge catalyst for the growth downtown, while Live Oak Bank and nCino have brought a corporate culture to the area that was not here previously. The biggest employer in the area is now the medical community and the quality of medical care here is superb. We have many specialists that are world class and could live anywhere in the world but have chosen to raise their families here in Wilmington because of the quality of life.
HARRINGTON: We just released our 2019 Economic Impact and Housing Report. When you look at how our month’s supply of inventory is changing in New Hanover, Pender, and Brunswick counties – it’s obvious that home buyers are moving farther into other outlying counties such as Duplin and Sampson County. These are markets that have traditionally not had nearly the volume of sales in the past. What we’re seeing is significant price appreciation in these far outlying counties that really are starting to become a part of our metropolitan region.
Are unique/alternative housing trends becoming popular in our area – for example, tiny homes or houseboats? If so, how do you think these trends impact our housing market?
YOUNG: One of the biggest changes we are seeing is the proliferation of apartments across the region. Personally, I would like to see the city and county tap the brakes on high density development.
HARRINGTON: It’s been interesting to see these new types of housing pop up. There’s been a conversation for many years about tiny and sustainable housing. While we do have alternative housing being built here in our region, I don’t think that it has fully connected to buyers because it’s still a new concept. Time will tell as we get into the next couple of years to see what continues to be built and what the feedback will be. I think you need to have a nuanced approach to address growth in a community to maintain balance and a sense of place. We can’t go out and make more land, so we need smart policy on how to address the land that we do have available and, because of this, I think we’re starting to see some creative solutions. We’re watching these concepts because we understand that we must be creative and think a little differently in order to provide more options for housing.
Is our local infrastructure keeping up with our current real estate market growth?
CLARK: No, we struggle daily to get what we need from the required government offices in our four-county territory. It does vary significantly from county to county and town to town. Because every governing authority is different, it seems with any change in staff, it could swing our business efficiency in either direction. It is hard to be at the mercy of someone else controlling your productivity.
HARRINGTON: Throughout the past couple of years, our region has experienced growing pains and I think we’re going to continue to experience growing pains. Our roads, water, and sewer are all items that need improvements and maintenance to establish housing. These items have been impacted because of the growth we’ve experienced in our region and this isn’t something that’s going away. It’s going to be something we’re going to have to continue to evolve with and be smart about moving forward. Overall, I think that we’re doing the best we can to sustain our rapid growth.
YOUNG: No, not even close. The area is growing exponentially, but the city and county have done a poor job of encouraging the explosion in multifamily identity property. The roads and schools are overburdened as it is. The high schools are way overcapacity and you’ve got to have a good education to attract families to move here. I would like to see the board of education endorse a new high school for the area and work closer in tandem with the city and county with a growth plan going forward.
SMITH: The challenge with infrastructure is that there is no finish line. It requires constant investment and maintenance to work effectively. And that requires money, which is either brought in with new development and growth or put on the backs of current citizens/landowners. So the answer is yes, our infrastructure can keep up – as long as we are facilitating continued growth while at the same time receiving investment from NCDOT for projects in our region and supporting public investment through initiatives like the local transportation bonds passed by the City of Wilmington. Our competitive advantage is the desirability of our location. People want to come here to grow their business, enjoy the quality of place, and retire. How do we keep ahead of that projected growth? More accurately, what investments does the community need to focus on to ensure that we can continue to accommodate new and future growth? There are many different types of infrastructure in our community, but most people immediately think of roads, schools, and water/sewer. But we also have to think about other types of infrastructure critical to our community’s success: health care, the port, our educational system, our beaches, and waterways. All of those need to be top of mind as we grow as a region.
How is the tight labor market impacting the real estate industry?
YOUNG: The biggest impact of the tight labor market is evident with regard to the various subcontractors and trades needed for home construction and home improvement. Demand for the services has never been greater and a subcontractor who is fair, timely, and honest has all the work they can handle.
CLARK: I have never seen the availability of qualified labor this tight before. It is extremely tough to operate a growing business with the lack of labor right now. We all have the same problem. Anyone trying to build a significant amount of homes is experiencing this struggle right now. The only solution I see is a recession, so pick your poison. I’ll choose the labor issue all day.
SMITH: The housing industry is critical to the American economy, and a skilled and capable workforce that is adequate to meet demand is vital to the nation’s home builders. Despite competitive pay, the home building industry continues to experience labor shortages. Without growth in the size of the labor force, it will be difficult for the building industry to meet the current and future demand for housing. This translates into higher housing costs, increased home prices, difficulties completing projects on time, and lower economic growth. The WCFHBA continues to work with our partners at New Hanover County Schools, Career Pathway Programs, SEA-Tech, and CFCC to increase opportunities for job training programs to help prepare individuals for careers in the home building industry. One of the biggest accomplishments of 2019 was the purchase of the Association’s new Mobile Educational Construction Trailer. In early 2019, the WCFHBA was one of 42 local HBAs across the country awarded a grant through the Skilled Labor Fund within the National Housing Endowment 2019-20 funding cycle. The Fund is a direct partnership of NAHB, the National Association of the Remodeling Industry, the National Kitchen & Bath Association, SGC Horizon, and Hydrogen Advertising. This new vision is now a reality and you will see the Association take an educational focus “on the road” to many locations and different venues. One of the key audiences will be our local middle schools and high schools to work
How do you think that availability of public transportation in our area will affect housing trends?
YOUNG: Public transportation is a key component like affordable housing for the area to grow and be able to support the entire population. For those less fortunate, who cannot afford private transportation or don’t have the ability to drive, public transportation is a make or break issue. For these people to be productive, get to their jobs, or to a doctor appointment, they’ve got to have public transportation. As a family with a special needs daughter who cannot drive, we have seen the real-life benefits of public transportation in Conway, SC.
HARRINGTON: Many cities plan housing around public transportation. Our area, being such a wide geographic disbursement, needs special planning. When you define public transportation for a geographic area as far reaching as ours, our local government needs to be heavily involved, and they are discussing this regularly.
What role should the local real estate industry play in environmental preservation?
HARRINGTON: One of our work plans within the Realtors® association is to make sure that we’re keeping environmental stewardship in mind. It’s imperative that we as realtors, who are living and working in our communities, take responsibility to be champions of our communities. It’s something that we’re always working toward. Participating in our communities in order to enhance them is of top importance to us. It isn’t just the physical brick and mortar structure that someone buys when they purchase a home; they’re purchasing a lifestyle, they’re purchasing a place of community that they plan on contributing to, and we’re no different and we work to highlight that. We want to make sure that we have safe schools, great educational systems, and everyone has a sense of placemaking when they purchase their first, second, or last home.
SMITH: This is a very timely question and one that can be answered very definitively with respect to how our members view the built environment and the community they also call home. Due to a recent case in Ogden which threatened several large live oaks, the Association was one of the first organizations to step in and work closely with the County Commissioners and tree preservation advocates to help preserve these large live oak specimens. After a few months of debate, the Planning Board and the County Commissioners unanimously adopted protective measures and standards for the overall preservation of large live oaks within the unincorporated parts of the County. These steps are significant in the sense that the WCFHBA was the only organization out front on this issue lobbying to protect these large live oaks. No other organization attended or spoke in favor at the public hearing stages once the amendment reached the Planning Board and the County Commissioners. At the same time, the development in question had to achieve five important variances from the New Hanover County Board of Adjustment to situate the building and meet other required zoning measures to help preserve the large live oaks on site. Every one of these variances were approved, and yet again the WCFHBA was there to provide needed support to see that happen.
CLARK: As a developer, it is important for us to follow the laws that are in place and take extra care of our natural resources.
YOUNG: Having served on the local board of realtors, I can tell you that we as a group are keenly aware of the role that our natural environment plays. None of us want to see the quality of life hurt and the environmental beauty of our area is really the basis for why people want to live here. I would like to see stricter regulations and enforcement by city planning. Survey after survey notes the need and benefits of things like additional parks, trails, and divided medians that are attractively landscaped. Wilmington needs to do a better job with things like signage and installation of sidewalks. Walkability is huge and will only get bigger as we get more developed.
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