Anticipations for the Raleigh Housing Market in 2012
First, Inventory is down nearly 25% over the past year. This is the first time in 5 years we have had a drop in inventory. Even more significant, this is the lowest inventory since our peak in 2006. Resales are down near 25%. New construction is down near 20%–now down 60% from the market peak
Areas of far oversupply dropped from 50% to 33%–so less areas have far too many for sale signs up in their neighborhoods. Yet, this leaves 1/3 of our market needing a sizable price adjustment. Unfortunately, luxury homes are still in an oversupply. So we still expect prices to drop here as the abundance of sellers fight against each other to attract the lower amount of shoppers.
Overall, 2011 inventories were at a 6 month supply which was a step better than 2010 at a 7 month supply. 3 or less is a sellers market, 8 or higher is a buyers market, 5 or 6 is pretty stable. Right now, some areas like North Raleigh under 250k and Wake Forest under 150k are a seller’s market. Meanwhile, NE Raleigh over 150k is a buyer’s market
So we anticipate seeing firming or slightly rising prices in the more demanded locations and more progress toward stability in sliding areas.
Second, Demand is steady overall. The First part of our year was quite slow as we struggled through the recovery from disappearing tax credit incentives. But we had quite a lift in the final part of the year. Homes going under contract increased 16% during the fourth quarter and 30% so far this year—compared with the overly sluggish tax credit recovery a year ago. So this anticipates a stronger year.
At the same time, this pickup in demand is primarily focused on central areas and homes priced near and below the average home price; 250k and below. At the least, with the low prices and rates, people are trying to move as close to work and their favorite locations as possible. Possibly more, there appears to be a general migration from outlying areas to central locations close to the job epicenters. For example, buyers are often choosing N Raleigh over E Raleigh; Cary over Holly Springs; Wake Forest over Youngsville
Overall, we anticipate the strongest market since our peak in the most central locations near or below the average priced home
Third, there are a few wildcard issues to watch.
First, we expect rates to stay low for most of this election year. But a Big swing up may cause buyers to hesitate and cut back demand.
Second, where will rent rates go? Although rates and prices are down, rents at apartments increased 10% over past year, this should continue to be a great motivation for many to buy a house and lock the payment
Third, after repairing the foreclosure process, big banks rumor that they are now about ready to move forward on those delayed foreclosures. Our current foreclosure rate is near 10% of the market. If we have a big increase, they could compete more with ordinary resales; provoking sellers to drop prices
Fourth, our workforce and unemployment rate is pretty stable (not moving more than 1%). A big change in jobs would quickly impact demand for housing.
Finally, buyers are still pretty fragile with their high expectations. They are vulnerable to little changes and rumors here and there. So expect the unexpected.