News & Ttrends

Helping you to live well in the Triangle

A lot of people are looking for deals right now. It’s understandable.  We all like deals and when you read the news about home values dropping all over the place, you would think there are lots of deals to be had. But the truth is, the majority of the Triangle is still in a strong sellers market. The average months of inventory for the entire triangle is 1.8 months. That’s about the amount of inventory we had in June of 2020 and that was a pretty hot real estate market. So does that mean that there aren’t deals out there?  I’ve said before that real estate markets are local.  National numbers don’t tell you what’s happening in Raleigh, but we have to dive deeper because not all markets in Raleigh are the same either.  So, I went deal hunting for you.

At first when I started to dig into the individual towns, I was blown away.   I found a town with 10 months of inventory!  Just a month ago, that town had just over 2 months of inventory. I’ll be honest, I was just really confused, because that is BIG.  Are all those youtubers right?? Are there huge swaths of inventory just waiting to hit the market and crash all the prices? I’ve always been of the opinion, that builders’ memories are just not that short. Most of the people in the building industry literally lived through the 2008 crash. They’re not going to do that again, are they? But here is this data staring at me. What does it mean? 

Here was my first theory….. Maybe, these were all ghost listings that didn’t really exist. I’ve shown you that type of thing in the MLS before. It’s not unusual for builders to list properties that haven’t been built yet, just to test the market before investing in the construction. I’ve seen as much as 25% of new construction inventory be these ghost listings… they’re actually presales, but I like to call them ghost listings. Anyway, I’m telling you, these builders are not dumb. And then I remembered something I had read recently about a large production builder that has gotten itself into some trouble and I thought it might be using the Triangle market to get itself out of it.  

Did you see this headline recently? KB Homes says 68% of their contracts were canceled in the 4th quarter of 2022. It’s true.  And now I’m seeing a lot of inventory from KB Homes in this particular town.  Were the two connected?  I had a theory, but I had to put in some calls to test it out. 

Now I’m going to tell you what I discovered and how my theory was wrong, but first Let’s take a look at the four towns in the Triangle where inventory is spiking so you can see what I’m talking about. 

You’ve heard me say this before but a housing market is generally considered more favorable to buyers than sellers when inventory exceeds 6 months on the market. Right now there are 4 towns in the Triangle that meet the definition of a buyers market. You’re more likely to find your deals in a buyers market. If that’s what you’re looking for it makes sense to start your search where there is higher inventory. 

The first one we’re going to talk about is Louisburg. Louisburg is a town in Franklin County, which is just north of Wake Forest. Louisburg’s population is only 3000 people and it’s actually the county seat of Franklin County, which tells you how rural this area is. Even though it’s small, Louisburg is just adorable and it’s about a 50 minute drive to downtown Raleigh. And if you need a Target or other bigger shopping, Wake Forest is 25 minutes away. 

A couple things Louisburg has going for it is first, it’s a river town. The Tar river runs right through the town, very close to the downtown area, which creates lots of possibilities for future development. [River district anyone?] They should definitely do that. The Tar river actually empties into the Pamlico river at the coast. Presumably you could kayak all the way to the atlantic. Secondly, the median sale price of recently sold homes is 260 thousand dollars. Which is pretty darn cheap. Although there isn’t a ton of that type of older inventory available because currently under contract properties are averaging 327k. And there’s a lot more new construction in that mix. Louisburg also has the only two year residential college in the state.  A month ago, Louisburg had about 4 months of housing inventory, about twice as much as the greater triangle area. But this month, they jumped from 4 months of inventory to 6 months, which knocked them into a buyers market.  

The next town on our list is Angier. Angier is on the southern side of the metro area, sitting just southeast of Fuquay Varina in Harnett County. Angier has almost double the population of Louisburg at 5700 people. Angier is only 22 miles from downtown Raleigh, a 34 minute drive without traffic. One of the biggest things Angier is known for is Sunny Sky’s ice cream. This is not just an Angier thing. People drive from all over the place to go to Sunny Sky’s. Another thing you should know about Angier is….it’s country. When restaurant bathrooms look like this you know you’re in the country. The median home price in Angier for homes closed in January is 369,000. 83% of homes currently on the market are new construction. Angier has 6 months of inventory. 

Zebulon is on the east side of the Triangle and it’s about 26 minutes to downtown Raleigh. This is the only town on our list that is in Wake County. Zebulon is kind of like a little sister town to Wendell. It’s about 4 miles from one to the other. Wendell’s downtown really started to develop with the growth of Wendell Falls. And Zebulon is a little further out but it’s almost a little cooler than Wendell. I started digging into the town for this video and realized there’s enough for a whole video, so I’m gonna work on that, because there is a story to tell about Zebulon.  They’ve got the only Bagpipe maker in the Triangle.  Right now, though, I’ll just say that the median home price is 375,000 for homes that closed in January and 73% of homes that are currently listed are new construction. Zebulon has 8.3 months of inventory. 

And finally the biggest question mark in the collection. Rolesville.  This is the town that currently has 10 months of inventory. Rolesville has been a mystery to me for awhile but I haven’t taken the time to really investigate it until now. Rolesville is currently only about 10,000 people. It’s about a quarter the size of Fuquay or Holly Springs. It’s less than half the size of Clayton. It’s even smaller than Wendell. But for some insane reason, Rolesville’s median home price is 625 thousand dollars??? That’s ranking up there with Cary, Holly Springs and Chapel Hill. I’m not super quick to call something a bubble, but those are some high prices for a community so far from everything. But then again, did you ever see my video about Saxapahaw? Talk about high prices in the middle of nowhere. When you see stuff like that, there’s always an explanation underneath. And so I started digging into the details. Rolesville’s inventory is almost all new construction. Why are builders building this very pricey inventory in such a rural town?

Back to my theory.  The theory was that all these listings were presales. [ghost listings] We’ve talked about this before. Builders list homes in the MLS that don’t really exist, so buyers know that this a home that COULD be built on this lot. Then the buyers come in, pick their finishes and construction begins. This allows builders to balance their inventory so they don’t build more than the market can bear. My thought was that KB Homes was trying to recoup those 4th quarter losses by offering lots in a high priced area, while not actually putting money on the ground.

But that’s not what this was. I called all the builders and all of these properties are going to be ready in the next 30-60 days. These homes actually do exist.

So why are KB Homes and DR Horton building in Rolesville? The reason prices are so high is because there is virtually NO older inventory. Rolesville, kind of like Holly Springs 20 years ago, was nothing and developers decided to create a suburb. They built up higher end communities like Granite Falls and developed the great amenities to go with them, and NOW, they’re working on building out the town, just like Holly Springs did. Unlike Holly Springs, I am not aware of any incoming tech or biotech companies that will provide the salary structure within the town to support this price point moving forward. It does seem from their economic development website that this is what they hope to do. Whether they will entice companies to the area remains to be seen, but we will keep our eyes on things.

Is the inventory in Rolesville indicative of a bubble?  There is reason to believe it isn’t. Follow me down this path as I set the stage. First, there were 4 closed sales in the last 30 days. Remember those sales went under contract in the previous month, December

.. Right now there are 37 homes active on the market. So that makes it look like it would take almost 10 months to sell off that inventory. But don’t forget, we haven’t looked at currently under contract homes. There are 16 under contract. All but two of those 16 went under contract in January. In other words, 4 times as many homes went under contract in January than in December. And this not unusual. The weeks from November first until Christmas are notoriously slow. They always are. And then it picks up in January and then spring time hits hard with people shopping. I think the builders are just stocking their shelves for the rush.  Apparently the builders believe there will be a rush, and they’re putting their money on the line believing these homes will sell. These were homes that were likely started in November and December during the slow times. They were certainly started well after interest rates hit 7%. These are not homes that builders got stuck with. They believe sales will continue to increase as spring wears on. And this plays out in all the other towns as well. 

12 homes went under contract in Zebulon in December. In January 50 went under contract.

In Louisburg, 3 went under contact in December, and 12 went under contract in January. 

In Angier 4 went under contract in December, 20 in January. 

And in Rolesville, it was 2 in December and 5 in January. 

So, on average, there were 4 times as many homes that went under contract in January as there were in December in all of these towns.  The builders believe that sales will continue to increase into the spring. That’s why they’re building.

Source link