RALEIGH – Nationally, new home sales increased in September 2021, the latest data on sales of new home construction exhibits from the US Census Bureau. But in the Triangle, the ratio of potential buyers to available housing is still unbalanced.
Some 800,000 new homes were sold nationwide in September, according to the report. This exceeds economists’ expectations for new home sales during the month, as estimates were that 760,000 new home sales would occur nationwide. In August, 740,000 new homes were sold.
The mark also surpasses each of the previous six months, surpassing the 796,000 homes sold in April, the previous high.
However, the growing trend does not mean that new construction homes are available to home buyers looking to buy locally.
“Yes, the number of homes built in September has increased nationally, but in the Triangle it has remained fairly stable,” said Jim Allen, residential real estate developer, licensed real estate agent and founder of the Jim Allen Group, in an interview with WRAL TechWire.
Stability doesn’t mean new construction homes are available, however, Allen said. As of 5 p.m. on October 27, there were a total of 321 new construction homes available for sale in Wake County and 125 new construction homes available within Raleigh city limits.
For existing homes, there are only 599 active listings in Wake County, as of 5 p.m. on October 27, and 338 existing homes available in Raleigh City.
“This is the most extreme seller’s market I have ever seen,” Allen said. “Because buyers really don’t have options. “
Why? There is an extreme housing shortage in the Triangle, Allen noted.
And, while there are opportunities for new construction in Raleigh, as a recent report by the National Association of REALTORS found that Raleigh was among the top six markets in the country for home building opportunities, developers, builders and potential buyers face multiple challenges. .
Builders face multiple challenges in building new homes, said Wes Carroll, founder of Standing builders and the new chairman of the board North Carolina Home Builders Association, in an interview with WRAL TechWire.
“Sales continue to be as strong as they can get, but automakers are struggling to keep pace with existing demand,” Carroll said. “Part of this is the unpredictability of lumber, from a cost standpoint, and supply chain disruptions for other materials. “
From windows to dishwashers
Take windows, for example.
According to Carroll, home builders typically order windows for their new homes four weeks before they are installed.
But right now, suppliers are offering builders a 20-week wait period, and in reality windows are delivered between 24 and 28 weeks after ordering, Carroll said.
“For a house that I need windows for now, I should have ordered them in April,” Carroll said.
Builder Richard Gephart, who is president of the Home Builders Association of Raleigh-Wake County, said a team had to delay construction of a new home in Wake Forest while waiting for the windows to arrive.
“We have been sitting for about four weeks without being able to do anything else at home,” he said.
The wait for windows is the latest pain in the supply chain for new home construction.
“That was a lot of stuff in the building process,” Gephart said.
The house that was waiting for the windows should have been ready in November. Now it feels like the end of February.
“We’re probably going to be producing half the homes that we would normally do this year and we will actually be able to shut them down this year than we would because of supply chain issues,” Gephart said.
Take the garage door openers. Carroll said that for anything other than a standard garage door opener, they’re out of stock and shouldn’t be available for 50 weeks.
Or, take dishwashers. Carroll expects dishwashers from a supplier, he said. One supplier has 300 dishwashers out of stock and has no idea when they will be available, Carroll noted.
Taken together, all of these supply chain disruptions are impacting the new construction market, Carroll said.
But there’s another factor at play as well, Carroll noted. While the current demand for housing exceeds supply, there is simply not enough housing under construction in the area.
Report: Raleigh Ranks # 3 for Housing Growth for 2010-2020
Not enough homes
As noted above, the Raleigh Metropolitan Statistical Area is among the best markets in the country for home construction opportunities, according to an upcoming report from the National Association of REALTORS that was shared in advance with WRAL TechWire. The Home Construction Opportunities Index tracks over 300 housing markets nationwide based on several factors that impact housing supply.
Raleigh ranks 13th in upcoming October 2021 report, according to the National Association of Realtors. In the September report, Raleigh was 6th. Both rankings are due to strong employment growth, which the NAR estimates at 5.2%, and the share of the population making inbound trips from other regions, which NAR data has shown they represented 52% of movers between January and June 2021..
As the Triangle adds people and jobs, house building has not kept pace. The area is not allowing enough land quickly enough for the development of residential communities, according to Allen. Inventory, or the total number of available homes a buyer could choose from, is extremely low, Allen noted.
Even earlier this month, the stock of new homes was higher, said Allen, who told WRAL TechWire that the week before the last weekend of the annual conference Parade of triangular houses, there were 355 new homes available in Wake County and 140 in the city of Raleigh.
This event, Allen said, is an event where builders historically showcase their available inventory and is a major part of implementing a critical business strategy: showcase their best available products, inspire homebuyers to drop by. a pre-ordered sale and to enter into a contract. during the winter months, which Allen says tend to be slower, due to cyclical demand and weather conditions.
In 2021, Allen said, only 51 homes were completed and judged at the event. This is compared to 280 houses last year.
Worse, Allen said, “90% of these homes are already sold. “
Plus, demand is not going down, Allen said.
“Most of my builders, we were holding back, hoping to sell them during the parade, so that we could build the excitement,” Allen said. “But most builders don’t want to pre-sell because by the time they’re done they lose money.”
It’s not that houses aren’t built in the Triangle. The demand is there.
“Even though we are building more homes than the historical average, it is not enough to meet current housing demand,” the National Association of REALTORS report reads.
While fewer than 400 new homes under construction are currently available in Wake County, there should be many more, Allen said. In total, the number of new homes and existing homes in Wake County is expected to be around 19,000 available, in a balanced housing market that would keep builders, sellers and buyers aligned in their incentives, he said. -he declares.
Currently, there are less than 1,000 existing and new construction homes combined in inventory.
But even that total number that indicates a balanced housing market is changing, as the Triangle experiences population and employment growth, Allen noted.
Population and job growth keep housing market in Hot Triangle as other regions cool
According to Allen, the area is already short of 4,400 residential units right now, but demand is increasing due to continued immigration of new residents. Next year Allen expects demand for new residential units to double, meaning there is an estimated need for 8,880 residential units just to house the people who will move to the area over the next 12 months. next months.
In addition, the projections cited by Allen were based on the state of the market before factoring in the creation of around 22,000 well-paying jobs that expanding businesses in the Triangle will create in the years to come, he said. he declares.
With expected salaries from companies like Epic Games, Apple, Google and the many life science companies expanding or establishing themselves in the Triangle, Allen said, it’s actually more likely that the region will see the prices. increase, although mortgage rates increase as well.
This contrasts with what some economists and industry professionals are saying about the nationwide housing market. CNN reported this week that an increase in mortgage interest rates can cool down or reverse the rapid appreciation in prices seen in housing markets across the country or may lead to the bursting of a housing bubble.
Allen disagrees with this assessment and with the concept that the Triangle region is experiencing a real estate bubble.
“An increase in interest rates would in no way have an impact on the Triangle real estate market,” Allen said. “Even a doubling of the current interest rate of around 2.9% would have little or no impact on supply chain disruptions or cooling price appreciation.”
This is because, said Allen, “Our price appreciation is caused by a reality: we are experiencing a housing shortage. “
Take the economics of supply and demand and apply it to the Triangle housing market, Allen said. “When supply doesn’t meet demand, prices keep going up. This is the current condition in the Triangle and for the foreseeable future.
Gephart, the builder of Wake Forest, gave this advice: “Just be patient. Be patient with the builder. Be patient with the suppliers.