Written by Bill Fishburne
Sales and prices are up, while inventory is down—it was Western North Carolina’s best year ever.
It’s official. The real estate recession is over. Results from 2016 show it was the best year ever for existing home sales in Western North Carolina, and prices have largely met and exceeded their pre-recession levels in every market and price range. [Ed. note: Scroll down for charts]
According to year-end data from the Mountain Regional Multiple Listing Service (MLS), total sales in the seven county region the reviewed reached 9,548 units last year (houses and condos) compared to the previous market peak of 9,486 recorded in July 2006.
The 2016 success is the result of steady growth that began in the summer of 2011. Along the way, excess inventory has been sold off, foreclosures have gone way down, and what was a buyer’s market has become one that more strongly favors sellers. Indeed, sales for the past two years have exceeded the rate of new listings by ever-growing amounts. The result is a total market reversal in a five-year period, with the highest volume and prices ever recorded in the Mountain Regional MLS system.
The outlook for 2017 is good, maybe better. But the caveats are worthy of consideration.
First, pending sales declined year over year in Buncombe County by a negative 1.4 percent at year’s end. Pending sales are homes that are under contract, but have not gone to closing. We believe this was primarily due to high prices in the Asheville area coupled with the reduced inventory. Support for this outlook comes from Haywood and Henderson counties, both feeder markets for Buncombe, that saw 4.4 and 4.9 percent pending sale increases, respectively, during the period when Buncombe’s pendings were on the decline. Both counties have relatively higher inventories (measured in months of inventory in the MLS at current sales rates) and significantly lower median and average prices throughout the spectrum.
Second, new listings declined overall in the MLS market area by 1.7 percent for the year, compounding the impact of record sales. Buncombe County listings dropped 2.0 percent, and Haywood listings declined 2.2 percent; while Henderson County residents astutely took advantage of increased demand by listing 3.5 percent more houses than in 2015.
Black Bear Cycle
Call it the Black Bear Cycle, hibernation, or natural seasonal variances. Whatever, but much like our esteemed black bears, our real estate market hibernates during the winter. Sales charts show peaks and valleys that coincide with the key months of June, October, and February. Almost without fail, the sales peak each year will come in June. The market will hold strong through the end of October then fall off to the February’s depths of despair. We continue to sell through the winter, of course, but at a significantly lower level. In 2016 the peak month was June, with 985 units sold throughout the region. The worst month was (wait for it…) February, with just 517 closings.
The key to the market is anticipation. You don’t list a house on Monday and go to closing Tuesday. Real estate transactions take between 10 days for a cash sale if all the inspections go well, and eight weeks for a complex mortgage loan on a house that may have problems, both with the property and getting the buyer’s paperwork in order. Federal mortgage loan requirements have put a plug in the real estate pipeline that everyone has had to deal with since 2013. But that’s another story.
In January 2014, when the market was at or near the seasonal bottom, this annual Capital at Play report began to advise readers to “Buy a house. Buy two houses. Buy houses for all of your kids.” That was picked up nearly verbatim from remarks made six months earlier by hedge fund manager John Paulson in his July 2013 luncheon remarks at the MSNBC Delivering Alpha conference in New York. We repeat that advice this year. Housing prices are still growing, and the inherent value is keeping pace as the construction and resale industries fail to keep pace with demand. There is no end in sight to this trend, as even rental housing is in desperately short supply in Asheville and the surrounding areas.
At the time of the “buy a house advice,” the average home in Buncombe County was selling for $222,102. Today, the average price is $311,298, a 31 percent increase and not a bad return on investment. Factor in rental income (less mortgages, taxes, repairs, etc.), and if you sold it today for last year’s average price, you would be pleased. And maybe even more pleased if you work with a good Realtor to get it ready for market now, list it in February, and plan to sell when the Black Bear hibernation ends in March.
As we see it, prices will continue to rise in 2017 and politics will be the primary impetus. Based on the promise of a new, pro-business Donald Trump administration and its already announced actions to roll back excessive economy-busting federal regulations, early indicators are that manufacturing jobs are coming back to the United States or not leaving in the first place. We obviously acknowledge there are two sides to the story, and this isn’t a political report. Bad things happen, but for now the upside is strong.
In this analysis, we’ll look at the 2016 data, give you comparisons to previous years, then look forward. The price of a house is set by many factors, but especially by its current competition. Closed sales in a specific neighborhood are powerful indicators, but you don’t win the Indy 500 by looking in your rear-view mirror. A little foresight is a good thing. That makes closed sales the starting point for anticipating where a property should be priced in a growing market.
Based on history, the Western North Carolina market outlook is normal and growing at a steady pace.
Because of these sales, population growth, low interest rates, federal restrictions on banking and mortgage lending, the availability of land, ever-increasing regulatory burdens on builders, and multiple other factors (including the shortage of skilled tradesmen), the inventory of available homes continues to drop. There were 5,417 units offered in the MLS at the end of 2016 vs. 6,888 at the start of the year, a decrease of 21.55 percent. By contrast, when Paulson made his July 17, 2013 Delivering Alpha speech there were 7,755 units in the MLS. Compare that to today’s 5,417 units, and total inventory has dropped 30 percent in just 40 months.
Median prices went up 9.1 percent in 2016, from $204,000 to $222,500. The average price went from $249,246 to $267,124, which represents a 7.2 percent increase. (Median is half higher, half lower. The average is the total dollars divided by units sold.)
Based on history, the Western North Carolina market outlook is normal and growing at a steady pace. That is, the declines we have already seen in the winter look like they will be followed by the Black Bear Bounce in March. The local economies are improving and Punxsutawney can have Phil. He always goes back to sleep anyhow.
Donald Trump’s administration is literally the wildest of the wild cards. His cabinet choices (as of early January) indicate a cabinet with more business acumen than any other in recent memory. Other than shifting the deck chairs, where do we get new department heads with large organizational management backgrounds? This should bode for stability and growth across the economy at least through the end of the current real estate cycle, which would roughly coincide with the end of Trump’s (first) term.
We point this out as a probable continuation of the current national trend. Existing-home sales nationwide rose 0.7 percent to a seasonally adjusted annual rate of 5.61 million in November 2016, compared to 5.57 million in October. November’s sales pace is now the highest since February 2007 (5.79 million) and is 15.4 percent higher than a year ago (4.86 million), according to Lawrence Yun, chief economist for the National Association of Realtors (NAR).
Pending home sales dipped in November to their lowest level in nearly a year as the brisk upswing in mortgage rates and not enough inventory dispirited some would-be buyers, according to Yun’s year-ending announcement. Only the Northeast saw monthly and annual pending sales gains.
The Pending Home Sales Index (PHSI) for November 2016 (the last month available at the time of this writing), a forward-looking indicator based on new sales contracts, declined 2.5 percent to 107.3 in November from 110.0 in October. After last month’s decrease in activity, the index is now 0.4 percent below November 2015 (107.7) and is at its lowest reading since January (105.4).
Economist Yun says ongoing supply shortages and the surge in mortgage rates took a small bite out of pending sales in November. “The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” he said. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”
With 2017 at the doorstep, Yun says higher borrowing costs somewhat cloud the outlook for the housing market. This was evident in NAR’s most recent HOME (Housing Opportunities and Market Experience) survey, which found that confidence among renters about now being a good time to buy diminished as 2016 wore on. The good news, according to Yun, is that the impact of higher rates will be partly neutralized by stronger wage growth as a result of the two million net new job additions expected in 2017.
“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise. Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from,” said Yun. “Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”
Existing sales are still expected to close out 2016 at a pace of around 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million). In 2017 sales are forecast to grow roughly 2.0 percent to around 5.52 million. The national median existing-home price is expected to increase to around 5.0 percent this year and 4.0 percent in 2017.
“Much more robust new home construction is needed to relieve inventory shortages and lessen the affordability pressures present throughout the country,” added Yun.
The PHSI in the Northeast nudged forward 0.6 percent to 97.5 in November, and is now 5.7 percent above a year ago. In the Midwest, the index declined 2.5 percent to 103.5 in November, and is now 2.4 percent lower than November 2015.
Pending home sales in the South decreased 1.2 percent to an index of 118.7 in November, and are now 1.3 percent lower than last November. The index in the West fell 6.7 percent in November to 101.0, and is now 1.0 percent below a year ago.
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.2 million members involved in all aspects of the residential and commercial real estate industries.
———————COUNTY BY COUNTY———————–
In this, our year-end wrap-up article, we again look at each of our local counties with information on what makes it an attractive location, some local lore, and, of course, the real estate results and trends. Our data is for stand-alone houses, condos, and townhomes.
At year’s end, the median days-on-market in Buncombe County was an amazingly short 25 days versus the MLS average of 40. Higher prices seemed not to be a deterrent as the county boomed and many sales went to the surrounding areas.
Asheville home prices continue to be the highest, and inventory the tightest, in all of Western North Carolina. The causes are multiple, but the city’s strong and positive position as the cultural, economic, and social center of the region simply makes Asheville the most sought-after place to live. There is more to do there, as well as a huge cultural and social scene, and the average age is a youngish 38.2 years. It doesn’t hurt this attractiveness that there are more micro-breweries and pubs (between 50 and 100 in Asheville and the immediate area) than the average person can get to in a year.
All this has made Buncombe County a seller’s market in just about every price range. That is, with no new listings, all the houses currently listed would sell within six months. The median number of days-on-market before a contract is reached is just 24 days, the lowest in the region. The county also has a very low number of months of inventory, a 3.8-month supply at annualized sales rates. There are still plenty of homes available in the higher price ranges starting at about $600,000. The shortage means Realtors are looking at new listings in the wee hours of the morning and texting clients to move quickly lest another buyer get there first.
At the end of December, there were just 1,374 houses and condos for sale in all of Buncombe County, a 26.4 percent inventory reduction in just 12 months. The median price for a home in Buncombe is $253,400, and it rises to $270,000 inside the Asheville city limits.
The market peak in Buncombe County was 4,211 houses and condos sold in October 2006. Ten years later, sales hit 4,124 units for all of 2016. The time in between was like the Dark Ages, with too many houses to sell and not enough buyers—and many of the sellers who found a buyer were faced with being upside down on their mortgages. Those times, hopefully, are behind us for the next several years. As former Governor Terry Sanford said in his 1961 inaugural address, “Welcome to the New Day.”
Whether you were born here or were lucky enough to find Western North Carolina later in life, it is a unique and wonderful place. We are blessed with beauty in every direction.
Buncombe’s inventory shortages and trends are reflected in virtually every category of Henderson County’s 2016 results. The county seats, Asheville and Hendersonville, are just 22 miles apart, and for many buyers that’s not too far to drive to get a slightly larger home for less money.
The median price of a house, condo, or town home was just $215,000 in Henderson versus $253,400 in Buncombe, making it the fourth most expensive county out of the seven in this region. There are other factors to consider that only the individual buyers can properly evaluate with the advice of their Realtor, but on price alone, Henderson County appears to have a winning proposition. Henderson sales reached 2,120 units in 2016, up from 1,973 units in 2015. The supply was a very tight 4.2 months’ average for all price ranges. At year’s end there were 765 properties on the market, a 27.6 percent reduction from the 2015 year’s end figure.
The annual auction of large, highly decorative ornamental Black Bears (called the Bearfootin’ Bears), incidentally, is one of Henderson County’s most prominent charitable fundraising activities. The bears are purchased each spring by local businesses and benefactors, decorated by local artists, and then displayed on virtually all street corners throughout the summer. The auctions each October provide winter funding for local charities and make way for the new bear designs each spring.
Haywood County includes four unique mountain towns, Canton, Clyde, Maggie Valley, and Waynesville, plus an assortment of gorgeous mountains filled with an array of places and events that are significant, fun, or both. From historic world-famous musical events such as the International Folkmoot USA festival to numerous art exhibits, Haywood County has a unique appreciation of both its own culture and those of hundreds of other countries worldwide. Haywood County geographically joins Buncombe County to Tennessee, but with its international outlook it is a very special place to live. Certainly, with its up-close mountain vistas in every direction, it is one of the most beautiful places in all of Western North Carolina.
Another advantage of Haywood County is that it offers real bargains in real estate. The median home price at the end of 2016 was $180,375, an increase of 9.66 percent over the year prior, but it is still just fourth out of the seven mountain counties covered in this article. Sales in Haywood reached 1,021 units in 2016 versus 941 the year before (http://hcbor.org/contact.html). Sales inventory dropped by 21.8 percent during the year from 990 units in January to just 774 at year’s end. The combination of still-decent inventory levels and low prices make Haywood a good choice for those who need to be close to Asheville.
Madison County is the northern neighbor of Buncombe County and is sparsely populated, with just 21,000 people (2010 census), a density of only 47 people per square mile. Named for President James Madison, the original author of the Bill of Rights, Madison County is rugged and independent, with beautiful mountain vistas and great opportunities for building mountain retreats. One geographic feature that surprises most visitors is that the region’s largest river, the French Broad, flows north-northwest through Madison County into the Ohio River Basin rather than flowing southeastward towards the Atlantic.
Madison County has good transportation from Asheville on I-26, US 25, and US 70, and also by eastward via US 321. Marshall is the county seat, Mars Hill University is widely renowned for its focus on complete education, and the county is growing around a resurgence in the southernly areas between Hot Springs and the ski resort at Wolf Laurel.
Madison also offers really good deals on home prices. The median price for an existing home in the county was just $200,000 in 2016, an increase of 7.62 percent over 2015. Sales reached a total of 207 units, up a modest 5.06 percent from 197. Year’s end saw just 239 units for sale throughout the county, down more than 16 percent from 287 the prior year. At the current rate, all of Madison County has just 12.9 months supply on the market, with the greatest shortages in the very low and very high prices ranges.
If you haven’t been to Tryon’s new International Equestrian Center (IEC) in Polk County, then we suggest you mosey on down there because it’s terrific; it’s unlike anything else in the region; and it’s about to become huge when the 2018 World Equestrian Games come to a county with a total population of less than 21,000 souls. The event is expected to have a $400 million economic impact when it arrives, and a large part of that will be in real estate, from rentals to sales, construction, remodeling, and services.
That is the promise, and the IEC developers have the reputation and record of making just such communities and events actually happen. Mark Bellissimo, the founder and managing partner, started his equestrian career when the Boston-based investment banker and his family visited Wellington and the Palm Beach Polo and Country Club. He moved there in 2004 and began an involvement that resulted in his acquisition of much of the polo facilities in 2007, with the intention of broadening public awareness and participation in the love of horses. Wellington has succeeded wildly since Bellissimo and his partners became involved, and the Tryon/Mill Spring facilities are benefitting from the same expertise and love of all things equestrian.
Possibly as a result of IEC, Polk county sales grew in 2016 from just 208 units to 254, for a net increase of 22.12 percent. Median prices for these homes went from $210,000 to $216,500, a modest 3.1 percent increase. There were 264 homes for sale at year’s end both years, a positive indication that growth has not made the average house too expensive for the average family to afford.
Rutherford County’s county seat is in Rutherfordton, and sales are up 10.77 percent over 2015. The county is home to about 62,000 people. Some of its major features are the resort areas of Lake Lure and Chimney Rock, including Chimney Rock State Park. These communities are internationally known, not just for their inherent beauty, but perhaps primarily as the scenes of many major motion pictures, including Dirty Dancing in 1987, with Patrick Swayze and Jennifer Grey; The Last of the Mohicans in 1992, with Daniel Day-Lewis; and the classic of all mountain moonshine films, Thunder Road in 1958, with Robert Mitchum.
The Lake Lure area is just part of the Rutherford County story. Forest City is the home since 2011 of a major Facebook Corporation data center that has created a significant economic boon to the area. Rutherfordton itself is a remarkable town that in 2016 was named Small Town of the Year by the North Carolina Rural Center (www.rutherfordtourism.com).
At 2016 year’s end, 463 homes had sold in Rutherford County, an increase of 10.8 percent over the prior year. The median selling price at year’s end was $162,000, up 4.5 percent, and there were exactly 463 homes on the market.
The average days on market for an MLS listing dropped like an acorn from a tree last year in Transylvania County. From an average of 111 days in January, the year-end figure was just 70 days. Sales went from 565 to 588 units, a 4.1 percent increase. The median price rose 7.7 percent from $205,065 to $220,950. All this is very good news for a county that has struggled since several major manufacturing plants closed their doors several years ago. The county has been reborn as an eco-friendly outdoor adventure wonderland that builds on the DuPont State Forest and provides a great outdoor destination for visitors and residents of the greater Asheville area.
Transylvania County, with Brevard as the county seat and only significant town, is located about 30 miles southwest of Asheville. It is close enough for a daily commute, yet has its own distinctive lifestyle. Many residents and tourists are drawn by the Brevard Music Center, a world-renowned teaching and performing center for classically-trained musicians.
Weather patterns vary significantly between Transylvania and Buncombe counties. Transylvania is the wettest county in the state, with 99 inches of precipitation each year, while Buncombe is the driest, with just 47 inches. The result is a lush forest and hundreds of natural waterfalls throughout the county, including those in the Pisgah National Forest. Whitewater Falls, among them, is the highest waterfall in the Eastern United States.
A year-end wrap-up article doesn’t do the region justice. We’ll give it just a few more words. Whether you were born here or were lucky enough to find Western North Carolina later in life, it is a unique and wonderful place. We are blessed with beauty in every direction. Every day our mountains give our eyes something gentle to rest upon, and our seasons give us both vigor for the outdoors, as well as variety and a year-round closeness with nature.
Seriously, this is the best place in the world to live.
Bill Fishburne is a real estate broker with Beverly-Hanks & Associates
and is a former Henderson County Realtor of the Year.
Contact email@example.com if you would like to reach him.
All charts date sourced by: CarolinaMLS. Report provided by Charlotte Regional Realtor® Association. Data deemed reliable, but not guaranteed. Powered by 10K Research and Marketing. Provided by Bill Fishburne of Beverly-Hanks & Assoc. Note the phrase: “charlotte.stats…” indicates that the WNC MLS service pays a fee to Charlotte to operate our MLS. The data, however, is extracted for the Mountain Regional MLS. There is no data in it outside of our seven county region. (Buncombe, Haywood, Henderson, Madison, Polk, Rutherford and Transylvania).
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