Home sales surged dramatically in the Cape Fear region during 2020, resulting in challenges brought about by the residential real estate market’s own success, including a low inventory.
But are the region and nation in the midst of a housing bubble? Lawrence Yun, chief economist for the National Association of Realtors, addressed the issue Thursday during the 2021 Housing and Construction Forecast presented by Cape Fear Realtors and the Wilmington-Cape Fear Home Builders Association.
“Today we do have some feel of a bubble, multiple offers, frenzied environment, prices rising so fast,” Yun said. “So the natural question is, ‘Are we in a bubble?’ and the first response to that is, well, actually, we don't have those funny [subprime] mortgages that overstretch people's budgets, adjustable rate mortgages, resetting at high rates. Today, it is soundly underwritten mortgages, 30-year fixed, and people cannot overstretch.
“The other part that happened back then [leading up to the Great Recession more than 10 years ago] was oversupply. Builders were building right and left ... Well, today, as you know, we are short on inventory.”
Yun and Robert Dietz, chief economist for the National Association of Home Builders, shared their perspectives on the national and local economy and housing market Thursday morning to a virtual audience via Zoom of more than 100 people.
“The way we’re looking at 2021 ... is ongoing growth but at lower growth rates,” Dietz said.
He said 30-year fixed mortgage interest rates are expected to creep up but still remain below 4%.
Material prices continue to affect overall prices, resulting in an increase of $24,000 on a typical new home in some cases, Dietz said.
Overall, median prices in the Wilmington area (New Hanover, Brunswick and Pender counties) saw an increase of about 11% in 2020 compared to 2019.
“That is the highest measured growth of any period,” said Anne Gardner, CEO of Cape Fear Realtors, “with $285,000 as our median regional sales price in 2020. Since 2012, the median sales price has increased year over year with notable bumps in certain years, and market increases and moderate gains in others.”
For Brunswick County, where the strongest price gain occurred, the median sales price rose in one year by $30,000, to $275,000, a 12% increase, but the county remains under the national average of nearly $310,000.
The number of homes sold in Brunswick County in 2020 soared, up 29% with 6,339 closed sales. New Hanover 2020 sales, according to the housing report Gardner presented Thursday, posted a "substantial" 15% increase over 2019 with 6,365 closed sales, the largest increase in sales since 2015.
According to the report for New Hanover, “January 2021 pending sales are 621, up 32.1% indicating a strong year ahead for the county.”
Pender County sales were “astonishing” in 2020, the report stated, with a nearly 26% increase over 2019 with 380 additional closed sales.
“This is a record-breaking gain in sales for Pender County and more than made up for the 3.4% decline in 2018,” the report stated. “Pending sales for this year are also showing an impressive 64.2% increase over January 2020 ... up 72 homes in the first month of the year.”
The state of home construction in the Wilmington area in 2020 was one of opposing circumstances, said Cameron Moore, executive officer of the WCFHBA.
“On one hand we had this robust thriving market, where houses were selling, essentially, before they could even be finished. Builders and Realtors were moving as fast as they could juggling more contracts than they really knew what to do with and were busier than ever,” Moore said.
That was on the sales side.
“On the other side of the equation, we had an industry that was plagued with huge price increases, material shortages and time delays that quite frankly, really hindered the market from reaching its full potential,” he said.
And inventory continues to be slim.
"The market demand for housing right now is pretty much far outpacing the available supply on the ground." Moore said. "That has been playing out now for the last 18 months and I think will continue to play out in our market."
Still, local and national experts expect the housing market to continue to grow, with a potential slowdown, Yun said, in the fourth quarter of this year because of rising mortgage rates but an overall increase over 2020 by the end of the year.
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