Six years after the housing market slumped into historically low prices, signs of healing are becoming more and more common: longstanding for-sale signs are emblazoned with “sale pending” while construction crews transform empty lots.
The anecdotal evidence is there, and a report released July 18 by the Wilmington Regional Association of Realtors corroborates these signs of recovery.
The report compiles industry activity in 10 local zip codes during second quarter 2014, from April 1 to June 30, showing a 5.7 percent increase in average selling price and a 6.3 percent increase in average list price compared to second quarter 2013. The gap between what sellers want and what they receive is slimming with nine zip codes reporting a listing price to sales price ratio above 95 percent.
Jody Wainio, 2014 president of the Wilmington Regional Association of Realtors, said she was not surprised by the story the data reveals.
“Members are busy, not just showing properties but selling them. ‘Under contract’ signs are all over the region,” she said. “The industry continues to improve in a slower but steady rate, which is a healthy way to turn things around and not be in fear of another bubble.”
The report shows exceptional performance in the Wrightsville Beach market, with the 28480 zip code performing best of all zip codes in three areas of analysis. Compared to second quarter 2013, the average selling price in Wrightsville Beach increased by 22.9 percent, the average listing price increased by 27.1 percent and only 6 percent of sellers paid a concession.
The factors contributing to recovery exhibited by all zip codes hold true in Wrightsville’s market. Banks are willing to lend, interest rates have remained low and property values are increasing, creating an ideal environment for investment. Local real estate professionals are unsurprised by the numbers, too. They offered a few theories behind Wrightsville’s impressive performance.
“Interest rates staying as low as they are is a huge enticement to act now: buying a second home or a primary home, at all price points,” said Chris Livengood, vice president of sales at Intracoastal Realty and broker-in-charge of the Intracoastal office in Lumina Station.
Livengood said a 1 percent hike in interest rates, which seems modest, can translate to a 25 percent increase in monthly mortgage payments.
“So of all the homes you can afford this year, you’ll be able to afford less next year unless there is a reduction in price, and that’s the opposite direction from where the trends are moving,” Livengood said, explaining how low interest rates and rising property values overlap to create the perfect time for investment.
The dynamic for investment is different in luxury real estate markets like Wrightsville Beach’s, where buyers are looking for second homes instead of primary homes. Wainio said investors are more comfortable spending money on real estate when it is a second home or an investment property.
Randy Williams, Broker at Hardee, Hunt & Williams, suspects significant gains in the stock market have freed investors to pull from stocks to invest in property.
“Certainly the recovery of the general economy is playing a role in the rebound of the real estate market, so is the rise in value of our clients’ stock portfolios, some of whom are now shifting that money into real estate,” Williams said.
“I think that’s the desire, the dream, to have a second home. When people can feel comfortable and confident about the economy and their own personal portfolios of liquidities, they are comfortable investing in a second home. That’s the way a lot of people see it, both as a dream and an investment,” Livengood said.
“It’s more fun to have a beach home than a stock,” he added.
Livengood, Wainio and Williams all said they anticipate the market to continue to slowly but surely improve.
Before the economic recession set in, Williams said the Wrightsville Beach market experienced modest but steady appreciation over a long stretch of time. He expects to see that trend again, especially since growth persisted in the area despite the recession.
“The inventory of available properties has declined, so naturally that sets the stage for appreciation. We have been involved in several transactions where there were multiple offers. That is a good sign for sellers who have been waiting this market out for some sign of a rebound in values before they decide to put their properties on the market,” Williams said.
Livengood suggested new construction sites dotting the island despite limited space also set the stage for appreciation in prices.
“New construction is one factor. We’re seeing less supply than demand so prices are starting to trickle up,” Livengood said. “Anytime you’ve got finite space, like on an island, where there’s only so much land and property, it builds that effect, and quickly.”
Williams argued the theories about interest rates and stock markets give way to the unpredictable algorithm of human preference.
“The intangibles that always drive this market are the personal reasons people buy and sell real estate at the beach. This is a fun place to be,” he said.