With inventory so low and buyer demand so high, home prices are expected to continue to increase at least through the rest of this year and into 2022, said Michelle Clark-Bradley, a Realtor with Wilmington-based Intracoastal Realty Corp.
“At some point we will get back to a ‘normal’ market with an average annual increase of 3%-5%, but until then, it will continue to be a seller’s market,” she said.
Increasing prices for homes in the Wilmington area are having an impact on buyer and seller behavior, Realtors said.
For example: In May this year compared to the same month last year, the median sale price in New Hanover, Brunswick and Pender counties increased nearly 22% to $347,000 for single-family homes and 16.8% to $275,000 for townhouses and condos, according to a report from Cape Fear Realtors. The local numbers coincide with national statistics: 99% of the metro areas tracked by the National Association of Realtors recorded year-over-year price increases in the first quarter of 2021.
“Our current sale prices continue to amaze all of us,” said Realtor Gail Bailey of Intracoastal Realty Corp. “Are they fair? The buyers continue to buy with offers that are competitively above the list price and sometimes offer stipulations such as no appraisals and no repairs. That answers that question to me.”
Clark-Bradley, who heads the Michelle Clark Team, said it’s important to note why home prices are increasing, which is simply the law of supply and demand.
“Believe it or not, there’s plenty of supply; there’s just an overabundance of demand,” she said. “And the demand (i.e. more buyers in the marketplace than usual) is there for a variety of reasons including: 1) the pandemic is allowing people to work from home now, so people don’t have to live in snow states or urban areas; 2) the stock market has been doing well, so people are cashing out and putting their money into real estate – maybe they need something larger because they’re working from home now, or their family has grown, or they want a second home somewhere; 3) people are living longer, so baby boomers are competing with millennials in the marketplace, when really they hadn’t been before.”
She said ongoing low interest rates are also encouraging buyers to make a home purchase.
Competition among first-time homebuyers is especially fierce.
“We’ve had multiple first-time homebuyers make six or seven offers on properties that haven’t been accepted,” said Stephanie Lanier of the Lanier Property Group of Intracoastal Realty Corp. “And we hear that oftentimes they’re losing out to cash offers.”
The hunt for a home is also extremely time-consuming, made more so by multiple-offer situations.
“What we’ve done is to say, ‘Hey, let’s change your price point,’” Lanier said of first-time homebuyers who are becoming discouraged. “Basically, if you lower the price point, then at least you can get in the market, you can lock in at this interest rate, and it will get the ball rolling for you on home ownership.”
It also might mean bringing more to the table.
“You just have to have a lot of extra cash to participate in this market,” Lanier said. “It’s like a spotlight on the inequity of getting into the American dream of owning a home … It’s like they’ve worked so hard to get to this place and then it’s not enough, which is why lowering your price point can help in some ways.”
In some cases, family members are chipping in for new buyers.
“Instead of having a big wedding, some first-time homebuyers are using their own money and the money their parents may have contributed for a wedding towards a bigger down payment,” Lanier said. “It is hard to compete with cash offers in the first place, so having at least 20% to put down can make a big difference in a multiple-offer situation for those people who are at a really competitive price point.”
Sellers are also experiencing the effects of price increases and a low inventory, in certain cases leasing their homes back after closing to give them time to find a new place to live, Lanier and other Realtors said.
“Then the seller also doesn’t have to move three times,” Lanier said.
Clark-Bradley said she, too, has started “negotiating seller possession after closing at no, or a very minimal, cost to sellers to give them more time, and funds in hand, to find their next home or to just get movers lined up and move out of their home in a reasonable timeframe. There’s certainly value in being able to stay in your home for more time after closing. And it’s not going to impact the appraisal in any way.”
She gives the example of some clients of hers who were moving out of the area to a market “even crazier than ours. I negotiated them almost three additional months in their home to give them time to find a home they love and to have the funds in their bank account to show proof of down payment when the time came to compete with other offers, and their offer was stronger because they didn’t have to sell anything before they purchased – because that was already done. And it worked – they found the perfect home for their family and couldn’t be happier.”
Homebuyers are also competing with investors.
“They’re buying it to just turn around and rent it out,” Lanier said. Investors include those buying homes to turn them into short-term rentals via Airbnb and other platforms and those who are worried about the future of 1031 exchanges.
“You have to put that money somewhere by a certain point,” Lanier said. “That’s also driving some of the investors to pick up properties.”
Clients sitting on the fence waiting for a bubble to burst might be making a mistake, she said.
“I don’t think it exists,” Lanier said. “We think it might plateau, but if you waited from last year to this year, your prices just increased.”