The triangle has enjoyed years of growing home sales and new home construction, but third quarter numbers from a real estate data company provide further evidence that those trends could be slowing.
While the number of new homes that sold from August to October continued to surpass last year, new home construction, also known as home starts, was flat, according to Metrostudy. “The word of the day is ‘plateau,’” says Amanda Hoyle, Metrostudy’s Raleigh-Durham director.
The report adds to the evidence that the third quarter was a rough stretch for the Triangle housing market. Last month, a report from appraiser Stacey Anfindsen found that the number of homes listed on the market and the number of pending home sales actually dropped in the third quarter.
The reports differ because Metrostudy only looks at new homes, while Anfindsen includes sales of existing homes in his data. But combined, the third quarter numbers paint a picture of a housing market that could be showing the first signs of a slowdown that has taken hold in other parts of the country.
Housing analysts in the Triangle are quick to point out that Hurricane Florence disrupted the homebuying market for more than a week in September, likely contributing to the lower sales volume.
But the rising cost of homes, coupled with standard 30-year mortgage interest rates approaching 5 percent, could be dampening buyer enthusiasm, according to some analysts and homebuilders.
“Our third quarter was quite a bit off,” says Brant Chesson, president of Homes by Dickerson. “Even the buyers we are seeing, they are very reluctant buyers and it takes them a lot to get them over the finish line.” That has translated to buyers being more aggressive in negotiations and, in some cases, people backing out of contracts. That’s not something you usually see.
Rising prices also make it less likely for people to consider moving, because there is no guarantee that a homeowner will be able to cash out of an existing home and get a larger, nicer or better-located home by spending a little more. “There are just not good choices for people to move up,” Chesson says. “I think this pricing pressure has caught up with [the Triangle].”
To make up for potential losses, Hoyle expects homebuilders to start offering more incentives to prospective buyers, such as lower closing costs. Builders may also put more effort toward building at lower prices, but that has been a difficult task in the face of rising land costs and labor prices, builders and analysts say.
But the news isn’t all gloomy. New home closings, excluding resales, were still up nearly 12 percent in the third quarter, and job reports continue to be strong, Hoyle says. And builders continued to be attracted to the Triangle market.
By Ben Graham, Triangle Business Journal