When The New York Times publishes an editorial that encourages home ownership, you’ve just got to believe it’s time to buy a house. That milestone occurred on November 29, 2014, when the Times rolled out a few facts that were overwhelmingly supportive of buying homes rather than renting. Among them was the interesting claim that the median net worth of home owners was $195,400 versus just $5,400 for renters.
[dropcap]T[/dropcap]he Times is certainly a credible source for financial information, but even it is behind the curve. Investor guru John Paulus said the same thing four years ago when the real estate market showed no sign of recovery. Today, well, it’s nice to have the Times on the bandwagon.
Residential real estate sales have recovered remarkably since the dark days between 2007 and 2011. Depending on where you live the market may actually have fully recovered to the sales volume and prices of 2006.
Sales unit volume declined in the Zero to $100,000 category simply because of the shortage of inventory in this price range. Many of the homes that are available in this range are manufactured houses in the process of depreciating into the great abyss and have, therefore, been rejected by many buyers. Stick built houses, also known as site built, overlap the manufactured homes starting at about $50,000. From there on up most everything in the market today is site built or modular. If you have any doubt about a home’s construction, ask your Realtor.
The question Realtors hear today isn’t so much the fearful ‘How’s the market?’ that has been asked incessantly since 2008, but instead it is a more optimistic ‘How’s the recovery coming along?’ The answer depends on where you live. Folks in Michigan see some improvement, despite their home values still being down 15.6 percent from the peak. The near-Western states of Texas, Colorado, Nebraska, both Dakotas, and Kentucky are back to even. Same then as now. And so is New York, of all places. North Carolina prices are still down about four percent, while Florida is still suffering at a negative 33.5 percent, all according to CoreLogic.
Coming down the pike
What’s going to be coming always depends on outside factors that I call the known, the suspected, and the feared. We know the Affordable Care Act (Obamacare) taxes and costs are going to kick in later in the year. We know the geo-political situation is fragile with Muslim terrorism seeming to reach new levels of barbarism every day. We know Kim Jong-un doesn’t like our movies, and we know the price of oil reached $50 per barrel in early January with no bottom in sight. We suspect all these things will have some economic impact. We also suspect the President and Congress will have to reach some agreements in the next two years to keep the government running, and we suspect the Cubs won’t win the World Series. We fear there could be even more violence in the world, and we fear for the safety of our loved ones who are in the military.
What we shouldn’t fear in 2015 is the real estate market. It is solid because the housing supply is down, oil prices are down, and the population is growing. More people, more money in their pockets, and fewer existing and new homes are solid economic factors that typically control real estate markets.
Now that that’s out of the way, here’s what happened last year, as well as what to expect in each of the six counties that form the heart of the Western North Carolina Regional MLS system.
Chart 3 (below) shows the natural result of increased sales. Sales up, inventory down. Every market, from widgets to houses, is a balance between supply and demand. The housing market is said to be balanced when there is a six month supply of homes at the current absorption rate. In terms of overall numbers, Buncombe and Henderson counties reached that magic balance in 2014. The result is homes that are good values sell quickly and do so at or near the asking price.
Buyers and sellers should be aware, however, that the absorption rate doesn’t apply across every price range, not even in the hot Buncombe County market. Chart 3A (below) shows how Buncombe County sellers are in the cat-bird seat in most price ranges up to $500,000. After that the market begins to favor buyers. But even in the highest range, $1 million and up, there is good activity with 48 houses sold in 2014. In 2011 only 24 houses sold in that range.
In the primary six counties we included in this survey (Buncombe, Haywood, Henderson, Madison, Polk, and Transylvania), unit sales were just about equal to 2007 and dollar volume was down just 14 percent from the 2007 high. All in all, a good recovery except that the prices of individual homes are below the peak. Rutherford County is included in some of the figures for reference, but the numbers are not fully indicative of total sales in the county. Due to differing geography many Rutherford County homes are sold through other MLS systems.
In looking at the numbers, let’s first acknowledge that we are not back to where we were in 2007. Back at that time the average home price in our subject six counties was $283,186. In 2014 we were doing well, but the average price was just $244,816, or 86 percent of the peak value. Overall the total sales dollar volume in 2007 was $2.01 billion versus just $1.73 billion in 2014. That’s a decline of 14 percent. (See Chart 2 above and Chart 4 below for area changes.)
Many homeowners who bought at the 2007 peak did so with loans of 90 percent or more of the purchase price. Then the bottom fell out and, despite the passage of time, many of these buyers are still upside-down. A $200,000 house bought at the peak with a 90 percent loan might sell today for $172,000. The mortgage balance would be in the range of $167,000 (30 years, six percent). With real estate fees and other closing and moving expenses the seller would net about $160,000. That would make it a short sale, where the proceeds of the sale fall short of what is owed. Fortunately, we are seeing fewer and fewer of these as prices increase. And we should be out of the woods there completely by 2019. The 4th Quarter Home Price Expectation Survey compares the forecasts from Bulls, Bears, and traditional trends to say we should have a 23.5 percent cumulative house appreciation by 2019.
But if you are under water and need to sell quickly there are some federal programs that might help. Readers are advised to talk to their Realtor and a mortgage broker, or one of the nonprofit financial counseling services, such as On Track Financial. It’s one thing to know there is a federal Home Affordable Refinance Program (HARP), but it’s quite another thing to get the paperwork done to actually use it.
Our above-example of the underwater loan is also unlikely to occur in the very, very hot $200,000 price range. Decent houses in that range are literally selling like hotcakes. If your house is clean and priced right, depending on location and other factors, it should sell.
When pricing houses today most Realtors are not looking just at comparable houses that have sold, but also at the similar houses currently on the market. As I noted in my 2013 wrap-up column, you don’t win the Indy 500 by looking in the rear view mirror. Sellers should keep history in mind, but the competition is what’s on the market now and what’s coming. If it’s behind you, it’s just not your problem.
Buncombe County has the largest and hottest real estate market in all of Western North Carolina. It is the most populous county in the region (250,000) and has the highest sales, with more than 3,475 units changing ownership in 2014. The average selling price was a region-leading $270,426, up from $259,564 in 2013. The market is so hot and the housing supply so low (only a 4.6 month supply) that the Asheville Citizen-Times recently ran a feature article on the alleged growing popularity of tiny 500-square-foot houses. There is even a local organization, the Asheville Tiny Home Association, that provides plans and encouragement to folks who want their own tiny little space. You won’t find any of them in the MLS as of yet, and few builders can afford to build them. We also suspect the fad will end when the first baby is born, but that’s yet to be seen.
Asheville has more of everything real estate related. More houses, more neighborhoods, more retail stores and restaurants, more culture, more roads, and even more pet supply stores for FiFi, FoFo, and Spike. There are more hiking trails, more bicycle paths, more YMCAs for your health, more doctors and hospitals to insure your health, and more lawyers and cardiologists. Asheville is the home of the Biltmore House and the Grove Park Inn. It has close-in $1 million+ housing in The Ramble and Reynolds Mountain, and many economical areas such as West Asheville. Asheville is a dynamic city that really opens the gateway to the Western North Carolina mountains. It provides a hub around which many of the neighboring counties spin and, in a nutshell, is a truly interesting—fascinating—place to live and work.
Haywood County offers Realtors and buyers one of the biggest visual treats and challenges in all of Western North Carolina.
On the one hand, it is one of the most beautiful and attractive locations in the state. It has unspoiled scenic mountain vistas, excellent highways (except for I-40 through the Pigeon River Gorge which is a story all its own), excellent schools, and terrific neighborhoods in all price ranges. Downtown Waynesville is just 30 miles from the heart of Asheville and 35 miles from the Asheville airport. Business people can enjoy the best mountain lifestyle imaginable, by being able to be in Manhattan for an afternoon meeting and still making it home in time for dinner.
On the other hand, that very convenience has often made buyers choose from the broader selection of homes in the larger Buncombe County market. They can drive to Waynesville any time they want to without the perceived inconvenience of a 30 minute commute.
[quote float=”right”]Business people can enjoy the best mountain lifestyle imaginable, by being able to be in Manhattan for an afternoon meeting and still making it home in time for dinner.[/quote]But it’s not the same. Life in Haywood County is special. It isn’t Asheville. It doesn’t have that up and at ’em feel every single morning. It doesn’t challenge your appreciation of the latest fad every single day. Want some culture? The traditional mountain arts and crafts are displayed in Mom and Pop stores all up and down Waynesville’s Main Street, or you can drive over to Lowe’s or even to the Wal-Mart Supercenter. If your cultural tastes beg for diversity, you’re in the right place. Waynesville also hosts the international Folkmoot Festival each summer. This brings in performing artists from around the world for two weeks of music, dancing, parties, and cultural excitement. The 2015 event is set for July 16-26th.
As for real estate in Haywood County, Waynesville is the county seat, but the ski slopes of the Cataloochee Ski Resort in Maggie Valley are open an average of four months each year. Maggie, Lake Junaluska, and the year-round wooded mountains make Haywood a serious choice when big-city retirees decide to get away from it all without spending a fortune in the process. The average house price in Haywood County last year was just $187,585, with 781 houses being sold. The prices are low because Haywood ended the year with a 15.5 month supply of homes. The $200,000 to $300,000 range had 261 listings at year’s end, an 18.9 month supply. If you’re looking for the beautiful life and reasonable prices, Haywood County has it, and it’s just waiting for you.
If you aren’t from around here (as they say) and should you choose to compare Henderson County to Buncombe County, you might think you were going to look at fraternal twin brothers.
Well, not quite. It’s more like Esau and Jacob, and you pick the hairy one. Henderson County, with Hendersonville as the county seat and largest city, is renowned for its relaxed lifestyle and excellent local government. At all levels and in all the little towns, the town councils are small, responsive, and totally in touch with their constituents. Taxes are low, the roads and schools rank from very good to excellent, and it is a joy to live there. Residents can live in neighborhoods ranging from “didn’t know it was a neighborhood” to those with resort-level amenities and with or without gates.
Henderson County real estate sales in 2014 were excellent. The overall supply of homes dropped to a near-record 5.3 months inventory, with sales reaching nearly $410 million. The average home price at the end of 2014 was a relatively modest $216,842, an increase of just $5,000 from the year prior. The county might logically be divided into two or even three spheres of influence. Northern Henderson, in the Fletcher and Avery’s Creek areas, is largely focused on Asheville and Buncombe County. The difference in house prices and availability of relatively flat land in the French Broad River basin has given ample opportunity for the creation of moderate-sized housing developments. Builders are building houses in the $200,000 range and buyers are gobbling them up.
In the center of Hendersonville county, the winding pedestrian-oriented Main Street is a terrific attraction. People of all ages enjoy downtown Hendersonville shops, jewelry stores, and restaurants. The Flat Rock Playhouse even has a playhouse on Main Street presenting live, professional plays four months each year. The golden domed historic Courthouse dominates the landscape with a mixture of real-life government offices and a fascinating courthouse museum. It’s worth the trip and, yes, there are condos available that overlook all this splendid, low-key activity.
Other nearby communities include the towns of Flat Rock, Horse Shoe, Etowah, and Mills River. Each has a special flavor. The pioneers who carved out Henderson County didn’t use cookie cutters.
With a population of just over 21,000 souls, Madison is the smallest of the six counties covered in this survey. The county seat is Marshall, but the largest town is Mars Hill, home of Mars Hill
College University. (Officially it’s a university, but the natives now and forever will call it college). The terrain consists of rolling hills up to Mars Hill if you follow I-26W from Asheville, with progressively more rugged terrain up through Hot Springs to the Tennessee border.
With a small population, close proximity to Asheville, and lots of development in the Buncombe-Madison border area, home buyers just might find that Madison County is the right place for their new home. Mars Hill is just 19 miles from Asheville and is directly connected by both I-26 and the older main road, US 19/25. Traffic on these roads can be heavy during rush hour, but at other times it’s just a 20 minute drive.
Madison County’s average home price in 2014 was $221,875, an increase of $12,000 from 2013. Unlike the counties previously mentioned, Madison County Realtors don’t have their own Board of Realtors organization but are part of the Asheville Board of Realtors. That association insures that Realtors serving Madison County have access to the same training and support services as do Asheville-based Realtors.
Being so small also means that tiny numerical changes can create huge statistical swings. Only 173 houses were sold in the county in 2014, up from 153 the prior year. With 236 units on the market at year’s end the numbers indicate there is a 73 percent chance that any house with a for sale sign stands a decent chance of selling within 12 months. The absorption rate, 18.3 months, pretty much verifies that, but within 18 months. The downside is that the Madison County market really is part of the Asheville-Buncombe market and most people would rather not drive up to Madison if they can find something similar in the North Buncombe area. Madison therefore is a tertiary market following Asheville, with Henderson and Haywood holding the secondary positions.
Oh, and did we mention that Madison County is a lovely place to live? The small community of Hot Springs is a national tourist attraction with a long history as a worldwide health spa. Unfortunately, the darker side of the region is the Shelton Laurel Massacre that occurred during the Civil War. This was partially recounted in the book and movie Cold Mountain. The massacre of 13 or more Union sympathizers and the terrorizing of many of the local women makes a gruesome story. To his credit, when wartime North Carolina Governor Zebulon B. Vance heard about it he ordered that the perpetrators, Confederate officers and soldiers, be arrested. They were and trials were held. But in the turmoil of the war’s final years a great fog of confusion and poor decisions let the perpetrators off with minimal punishment. It is a dark but fascinating chapter of Western North Carolina history. And fortunately, we have moved on.
Five years ago there wasn’t much to talk about in Polk County, whose county seat is in the small town of Columbus. Other major communities include the county’s largest city, Tryon. For railroad buffs, the stretch from Tryon to Saluda is hallowed ground. The Saluda Grade railroad starts near Tryon at Melrose Mountain and runs up to Saluda on the steepest standard gauge mainline tracks in the United States.
Polk County lies primarily in the foothills of the Blue Ridge mountain chain and has, through the years, become something of a golf and equestrian community. In 2009 when real estate was in the absolute pits, there came some folks with ideas that have done miracles for the local markets.
The change was the vision of creating a world-class International Equestrian Center in a community that already had a deep and abiding love for horses and all things equine. The vision opened in 2014, featuring five competition arenas and an initial build of 500 horse stalls. It will be complemented by a major hotel that is being built by the Salamander Hotels and Resorts. Other major developments in the area are being announced in the near future. Polk County’s investment and love of horses is beginning to pay off in significant economic activity.
[quote float=”right”]The change was the vision of creating a world-class International Equestrian Center in a community that already had a deep and abiding love for horses and all things equine.[/quote]Polk County recently merged its strong and active Board of Realtors in with the Hendersonville Board of Realtors. The combination gives the Polk-Tryon membership all the resources of the larger board while still retaining local management and control.
Since the Equestrian Center opened in July 2014, home prices have increased significantly. In 2013 the average house was sold for $212,449. At the end of 2014, the average price was $238,397 and climbing. The Equestrian Center has placed significant demand on the region for second homes, seasonal rentals, and short-term occupancy during the competition season. The inventory of all homes on the market at year’s end was just 214 units, while sales last year were 230 units. Clearly something big is happening in Polk County.
Transylvania County isn’t the home of some dark and foreboding castle in Victorian Europe. Rather it is the home of the Brevard Music Center, white squirrels, and a nascent craft brewing industry that is capturing the hearts, minds, and wallets of beer aficionados nationwide. The population of Transylvania County is just 33,000, but it is a highly desirable retirement area, with houses ranging from modest to incredible.
Home sales in 2014 were 486 units, at an average price of $264,325. So why is the average price so high in such a small county? Because ten of the houses that sold (two percent) brought a price of more than $1 million. Buncombe County didn’t do nearly so well in that regard, having just 1.3 percent at over $1 million. The point to this is not to say no to the Brevard area because of the perception of high prices. The absorption rate tells the true story: It’s not high enough. There was a 13 month supply of modest $200,000 homes in the county at the end of 2014, with 126 houses on the market. Buyers can find some real deals there in the early spring before summer breaks out and buyers return to find their cabin by a trout stream.
We mentioned the craft beers, but must first issue a disclaimer: Asheville is the brew city of the East and maybe the entire nation. That being said, Brevard is coming along with the Oskar Blues Brewery and the even newer Brevard Brewing Company. You can buy tickets to ride the Brew Bus to sample the wares of these two breweries as well as other delights in the downtown area. One of the nation’s largest craft brewers, Sierra Nevada, has also built a brewery just eight miles away, near the Asheville Airport.
Going back to the NY Times editorial, there has never been a better time in this century (at least) to invest in mountain real estate. No one has a crystal ball, of course, and any prediction should be recognized as just a prediction, but the outlook is terrific and for all the right reasons. More people, a shortage of new homes, some anticipated economic stimulus due to lower energy costs, and people who are desperate to get away from the (apparent) global cooling and lack of jobs (factual) in the North and Northeast.
If you’re not here already, y’all come.
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