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Winston-Salem real estate agent Jason Bragg can’t remember the last time he saw a home market as hot as North Carolina’s is right now.
“I had a listing two weeks ago where we had over a hundred showings —everybody lined up for a few days,” he said. “The average home sells in a week or less — it’s pretty common for people to put their house on the market and receive multiple offers.”
One of the most unexpected effects of the COVID-19 pandemic has been its impact on housing in the United States. Shortages of homebuilding materials due to factory shutdowns and other supply chain disruptions have made the price of lumber and other supplies soar to record highs — if they’re available at all.
According to a May survey from the National Association of Home Builders and the Wells Fargo Housing Market Index, 90% of builders reported shortages of framing lumber, plywood and oriented strand board, and 87% reported a shortage of windows and doors. These material shortages and delays have halted, or at best delayed and driven up the price of, many new home builds.
And a shortage of available housing coupled with high demand means it’s a seller’s market, with homes staying on the market for a short period and often going for more than the asking price.
Effects of reopening and vaccines
Given the dramatic shift in inventory because of the pandemic, some buyers are left wondering if the rollout of the COVID-19 vaccine and people moving about more freely with many of the pandemic safety protocols being rescinded could mean another shift in the North Carolina real estate market.
The short answer: It looks unlikely to change anytime soon. While COVID certainly has made an impact, the current market is the product of a long-brewing stew of factors, real estate agents say.
“I think the housing market is hot because of issues that have been growing for years,” said Bragg, who is an agent with Leonard Ryden Burr Real Estate.
“We haven’t been building enough housing in recent years, they didn’t build enough housing during the recession, and it’s going to take a long time to build up enough homes to meet the demand.”
What’s driving that demand? One factor is the growing popularity of North Carolina as a relocation destination. Cities like Charlotte and Raleigh routinely show up on lists like U.S. News & World Report’s Best Places to Live, ranking No. 6 and No. 11, respectively, for 2021. And while those lists can be arbitrary, data from moving companies backs up the hype.
According to United Van Lines’ 2020 National Migration Study, Wilmington ranked No. 1 for inbound moves among U.S. cities, with the Charlotte-Gastonia metro coming in at No. 13 and the Greensboro-Winston-Salem area at No. 25. North Carolina ranked No. 6 among the top states for inbound moves, according to the study. A similar study conducted by Atlas Van Lines ranked North Carolina at No. 2 for inbound moves.
Announcements about companies like Apple and Google moving some operations to the Triangle are expected to drive up housing costs in markets where affordable housing is already limited.
And in the wake of COVID, the flight of people from densely populated cities in states like New York and New Jersey has been fueled by fear of virus transmission, as well as newfound flexibility thanks to work-from-home policies.
For those who’ve transitioned to permanent work-from-home status, the freedom to ditch high rents or mortgage costs in major cities for more affordable locales like North Carolina has proved tempting.
“For a lot of people, the idea of retiring to the beach was something they’d have to wait on, but if you have the right job, you can still retire 20 years down the road, but you can live where you want to be right now,” said Mark Bushnell, senior vice president of external affairs for the N.C. Realtors Association. “And Wilmington, not coincidentally, is one of the hot spots for that.”
While the pandemic triggered spikes in unemployment and financial ruin for some, those whose jobs weren’t negatively impacted are finding themselves with more cash to spend after a year off from travel, dining out and spending money on concerts and other events.
“It’s been a tale of two economies,” said Brett Bushnell, Realtor and owner, Tri Local Realty LLC in Chapel Hill.
“Folks who work in the service industry got decimated in the last 15 months, and those who didn’t work in service, their personal balance sheets seem to be in better shape. So even if they start to spend money again on travel, they may have been able to pay down some debt during the pandemic.”
For those who’ve been able to reduce debt or save during the pandemic, that means more available funds for down payments and above-asking offers — a good determinant of the stability of a hot real estate market.
“The amount of the average down payment we’re seeing is 22%-23%, which is one of the strongest in the country,” Bushnell said. “That makes the market here less susceptible to downturning because of the equity position.”
And the still-inflated cost of raw materials like lumber and shortages of other building items mean that the supply of available homes isn’t likely to increase significantly anytime soon.
“Normally if you have this big imbalance of supply and demand, the market will move to fill it,” Bushnell said.
“But it doesn’t turn on a dime when you have supply interruptions. The material costs and shortages are really causing builders to pause a bit — for instance, a lot of the builders in the Triangle area won’t do pre-sale contracts because they don’t know where their pricing is going to be.”
While builders can’t anticipate their costs, homebuyers know they can secure mortgage loans for some of the lowest rates in recent history. But with the threat of rate increases later this year, it’s possible buyers will be less likely to take the plunge at a higher interest rate.
“The market is yearly cyclical by season, and then there’s supercycle cyclical,” said Bushnell. “We’ve been in the hottest time for home sales, which is the spring, and hopefully we’ll see more normal flow into the fall. And that will be driven by increased inventory and also driven by interest rates because they’ve been extremely low, and it costs less to borrow.”
With the fall and winter generally bringing a slowdown in home listings and sales, that, combined with a mostly vaccinated population ready to travel and see loved ones, could spell a cooling of the real estate market as the year wears on.
But until material shortages are worked out and homebuilding can return to a more normal rate, real estate agents said don’t expect to see a significant change in the home market in North Carolina.
“In the short term, this fall and winter we might see some people being distracted with getting back to holiday activities and going to see grandma and stuff like that,” Bragg said.
“There may be a little bit of a slowdown this fall, but nothing that would slow the market down enough to keep prices from staying in the range they’re in now. I think we’re going to be like this for a while because there are so few homes on the market.”