Permits for new single-family homes are increasing, former zombie developments are seeing new life and the sales of existing homes are going up.

But before area Realtors and builders can break out the Champagne, some warn that greater Wilmington’s housing market is not totally out of the clear.

Bright spots

The Wilmington area’s housing market continues to post steady gains.

While January figures have not yet been released, in December 2012, 478 homes were sold, according to data from the Wilmington Regional Association of Realtors (WRAR).

The recently released figure represented a 98-home increase over December 2011, when 380 homes were sold throughout New Hanover, northern Brunswick and Pender counties.

In all, 5,644 homes were sold in greater Wilmington in 2012. That’s up 23 percent, or 1,040 homes, from 2011, and is the highest number of homes sold annually in the areasince 2007.

New single-family construction also appears to be on the rebound.

The county issued 601 permits for new single-family construction in 2012 – exceeding 2011’s total of 421 permits for new single-family construction and signaling a possible housing rebound for the county.

According a report recently released on construction permits by the New Hanover County Development Services Department, 75 new single-family permits were issued in December.

It was the most new single-family housing permits issued in December by the county department for new home construction since December 2006 when 80 permits were vetted.

Pender and Brunswick counties also posted impressive gains in new single-family construction last year.

The number of short sale and foreclosure homes is also dwindling across the region, area Realtors and appraisers said.

“For a while, about 33 percent of home sales were short sales or foreclosures,” said Tim Milam, president of Coldwell Banker Sea Coast Advantage.

“Now that’s down to 25-27 percent, which shows the market is getting better.”

Other factors that bode well for the area’s housing outlook include low mortgage rates, strong housing affordability and the fact that two-thirds of U.S. housing markets can now be considered improving, according to the National Association of Home Builders/First American Improving Markets Index – including the Wilmington MSA.

“More people are optimistic about the market,” Milam said. “That momentum we saw at the start of 2012 appears to be carrying over into 2013.”

Milam, who oversees 10 area offices through Brunswick, New Hanover, Onslow and Pender counties, said his office, for example, executed more than 158 sale contracts with homebuyers in a single week in mid-January for an overall volume of more than $29 million.

“When you take into account our growth, you can see why we, and so many others, are so optimistic about the year,” Milam said.

Continued challenges

One of the major challenges occurring within the market – especially in Pender and New Hanover counties – is the rapid disappearance of buildable lots for new single-family homes.

“New Hanover County, in particular, is rapidly running out of large tracts of buildable lots,” said Donna Girardot, executive officer of the Wilmington-Cape Fear Home Builders Association.

Builders and Realtors roughly place the region’s inventory of new residences between one and two months, with critical shortages expected in the low $300,000 and mid $130,000 price ranges by March.

As of January, greater Wilmington had a seven-month supply of existing townhome, condominium and single-family residences. That’s down from eight months in December 2012, according to WRAR statistics.

Area Realtors consider a normal market – when existing housing inventory approaches five to six months of supply – a sign of absolute recovery.

“We are nearing a normal market,” said WRAR board member and Intracoastal Realty Realtor Ashley Garner. “But new home inventory is pretty low, and that’s going to become a problem as the market starts to stabilize because we’re going to need new inventory.”

The lack of new inventory is such a issue in the region that for the first time in the Wilmington Parade of Homes’ 26-year history, builders participating in the event can this year include occupied homes completed in the last 12 months – granted they can entice the new owners to vacate the space for two weekends.

Another issue continuing to face area Realtors is the length of short sale completions, which in some cases exceed six months to complete depending on the lender.

“People are ready to buy something, and short sales put so many hurdles in front of them,” said Ryan Crecelius, owner and Realtor of Wilmington-based Do Good Real Estate and new WRAR board member.

“I had a short sale property I was working on for nine months, and after nine months it fell apart … the buyers were heartbroken.”

Applying for a mortgage is also becoming an issue, thanks to more stringent oversight from banks and federal regulators.

“They want everything and your third-grade report card,” Crecelius said jokingly of the application process.

Builder blues

Meanwhile, some local homebuilders are being squeezed out of purchasing new lots – particularly in Brunswick County – because of the area’s growing appeal with national and regional homebuilders like Texas-based D.R. Horton and Raleigh-based American Homesmith.

“The large developments are being absorbed by larger developers, and smaller builders are seeing a challenge in competing with that,” said Craig Johnson, co-owner of Wilmington-based Herrington Classic Homes.

The problem amounts to having more capital on hand to cash in on defunct housing developments now ripe for growth, which Johnson said a number of small builders simply don’t have.

“These larger builders have deeper pockets than us smaller guys,” Johnson said. “They are able to gobble inventory that’s been dormant for some years that the banks placed in their portfolio, and they can now wholly purchase … a lot of small guys can’t do that.”

And in many cases, banks simply aren’t lending capital to fresh, new single-family housing developments.

“There is still no interest in financing raw land,” Girardot said. “And even if there was, with today’s regulatory environment, it would take two years or more to prepare those lots.”

Finding qualified skilled plumbers and electricians is also growing more difficult as building begins to increase in the area.

Tony Ivey, owner and president of Wilmington-based Tony Ivey Custom Homes Inc., said that prior to the housing bust there were plenty of subcontractors on hand to complete new projects more timely.

But after the bottom fell out of the market, workers were laid-off, and subcontractors either packed up shop and left the region for sunnier housing markets or changed professions – now leaving a void during a period of increased housing construction.

“They’re getting busy again and running a little behind schedule,” Ivey said. “I think many don’t want to commit to additional full-time employees until the market further improves … which I understand.”

The growing price of building material is also making it difficult to keep new home prices low.

According to the National Association of Home Builders, the cost of lumber is up more than 35 percent from this time last year. Prices for dry wall, shingles, siding and copper are also up between 7 and 30 percent.

“You almost have to become a part-time stock broker or commodities broker before you build a house,” Johnson said. “Framing has gone through the roof … but the worse is lumber, and that’s absolutely a problem.”

But despite some challenges, both builders and Realtors seem optimistic about the direction greater Wilmington’s housing market is currently headed.

“It’s about time,” Johnson said. “I think builders and everybody in the real estate industry has had it real tough for a long period of time.”