Market Update - October 2021

WILMINGTON, NC - In this video Buddy Blake, the owner of Waypost Realty in Wilmington NC, shares the latest local and regional housing sales data and gives his outlook on what has happened, what is going on, and what may be to come.  

If you would like to view the report featured in this video CLICK HERE

Hi. This is Buddy Blake, here in Wilmington, North Carolina, coming to you from Waypost Realty. This is my latest and greatest market update as of today, which is October the fourth, 2021. It is crazy how quickly this year is going. It has just been the nuttiest year. After last year was of course a crazy year, but it was much slower, seemed like it was dragging on. This year's just flying by. Anyway, I want to give you an update on what's going on. I'm going to switch over to my screen share mode in just a second, but I also want to let you know that you're going to be hearing from myself and our team as we are going to be reaching out to everyone in our database, which if you're getting this email, that means you're in our database because we want to make sure we've got everybody's latest and greatest home address.

We're going to be mailing out our Pie Day invitations, which if you have never done it, that is for people that are locals, that live in the area, or going to be in the area around Thanksgiving. The Tuesday before Thanksgiving Thursdays, we always open our office up, all of our folks are here and we invite in our clients and our friends and folks in our database to come in and pick up a free, delicious pie that you can just throw in the oven and go. Just so you know that we're going to be doing that, so make sure if you just want to reply back to this email that we have your home address.

If you've not received anything from us in the past, in the mail, make sure you send that back if you want to participate and get a free apple pie. They are delicious, we love them. And anyway, we're going to go through hundreds and hundreds of pies this year and I just can't wait to see everybody in person this year. We will be wide open. We opened our new office right as COVID hit last year at the beginning of the year. And we really haven't had a chance to invite folks in and we're just looking forward to it because we really like our office and we've done some nice things and we've got a great team here. I think you'll really like us if you haven't met us in person yet.

Anyway, so I'm going to switch over to the screen mode so that I can go through these stats because there's a lot of interesting things going on and I've got my thoughts on kind of where we're at and a little bit of crystal ball gazing if you will if there is such a thing. But anyway, I'm going to go to it now. Okay. Let's get started with the latest market data that I was able to pull from our local systems, as well as a few insights from our own web systems. So first off, remarkably, the average price in our three-county area, and you'll notice up here, three counties, over the last five years, this shows a five-year trend, each data point is a month, and it's showing that we've gone from... We've almost doubled our average house price in the last five years.

Now, keep in mind, we had a really interesting market. We've had a very low number over the last six months of homes under 300 available. And we've had a lot higher price homes available in the luxury markets, waterfront stuff, and things that go for well into the seven figures. So that has skewed that a little bit because we just haven't had the inventory coming in the lower range. And there's a lot of other things I'll talk about as we get into this. I do think there's some phantom activity that's sitting out there that's not being registered that normally would be. But anyway, I'll just give you my perception.

Right now we're average price three-county area of a closed property as of September the 30th, September was $429,776. And I want you to pay attention to this run right here. This is the run, this was the initial COVID run off when the world just started shifting and everybody started displacing and moving and buying elsewhere from where they were. So we'll get into that in a few more minutes. Here we go, this is over the last year. This is the number of closed sales month by month by month. And you can see, in the three-county area again, in September, our market, we were down 16% in closed sales. Now that's for September, there was 1481, last year, 1239. The absolute peak during COVID was July of last year with closed transactions. And then in this year, it was in June. So keep in mind all of this, you'll see the normal trough during the holidays and first quarter.

So now, the next thing is pending sales. These are new contracts. These are properties that are going under contract. This is typically kind of the tip of the spear where things are. Now, here's where I'm going to start talking about a little bit of the phantom activity that I think is in the marketplace countrywide that we're not hearing. Keep in mind, sales were down 10% in new contracts. But keep in mind, we're in a new paradigm. About March, which was our peak in contracts for this year, last year, it was around May. This year it was around March, number of contracts. But what's happened here, I think that this fall right here is a little bit mix skewed, because March and April are when many of the new home builders in our region quit doing presales.

So what that means is they were doing catch-up on the stuff that was under contract and then they started building inventory homes that they were not going to release until they're almost ready. Whereas before you put them on as soon as they pull the permit, might be six months ahead of time. So we've been going through a window of time since March, April, May, where we normally would be seeing presales, where somebody selects a lot, they select their home plan and they go in and they start building it. They wait six to eight months or whatever the timeframe. Or in today's world, it can be as long as 18 months in some cases. What that means is we've gone through a period of time where we're not seeing those contracts in the market.

So that is skewing things dramatically and we usually see 20% to 25% of the activity in our area is new construction. So we're just not seeing those presales like we were. We are starting to see some builders come back online and start doing presales as they're able to catch up and move through their inventory. And then you're going to see that whenever the market does kind of shift over and the world realizes it, I happen to believe the market's already started shifting a few months ago. We're definitely not seeing the craziness that we were seeing back in the spring and deep summer. Certainly, we're busier than normal, but it's nothing like it was back then. It is just so different. We're not seeing totally crazy stuff like it was before. Still some crazy, but not as crazy.

But you're going to see some of that shift around a little bit because what's going to happen is you've got a lot of developers that feed the builders lots that they've been building these things. They've been getting the neighborhoods ready, getting the lots ready. And the one thing that they're going to want to do is they're going to... Builders are going to want to push through and get contracts with non-refundable money, locking people in, because what they do not want to do is get stuck with a bunch of dirt. We learned that in '06 and '07, that builders, developers do not want to get stuck with the land. Because even when you sleep, that interest clock keeps on ticking. You can't slow down production when you've already got the lots and the infrastructure and all of that done.

So you're going to see people start moving back to that model at some point soon. And we're already seeing some of the builders doing it, especially the larger national builders. New contracts are down, but here's the real trick, and this is the same thing countrywide. This is a three-year run and this shows the peak of our inventory, which typically runs somewhere between 3 and 5,000 units in our three-county area was in August. But just year over year, this September versus last September, last September there were about 2,600 homes available. Okay. For sale, that means not under contract. This September, we're down to 1,368 in all three counties. So what that means is it's off 48%. And when you look at these numbers back here, it's just staggering how far it's off.

So that's also a big part of the problem. When you start overlaying this, there's no question you're going to see closed sales down, contracts down. But a good amount of these homes available, keep in mind, I think there are two things that are really holding back our market from making more sales. One is we don't have the new construction sitting out there to do presales. I think that's a bigger factor than people want to talk about. And then the other thing is there's a lot of sellers that would like to sell, they just don't know where they're going and they don't feel comfortable going out there and playing in this crazy market that they've been hearing about, their friends have told them about and everything else.

So what's really going on? Are there new properties being listed? Are properties just not being listed like normal? That's the interesting thing, is this is a five-year run. This is the number of new listings each month. And if you look, okay, we always see our peak listing months in the spring. Okay. People start listing in January and then kind of the apex of that is going to be in the spring, the March and April world typically. And of course, the bottom is going to be the fourth quarter when you see people that for holidays, they don't bring them out, they're not putting them out. Look at this. We're still seeing about the same number of listings hit the market that we normally do. This looks like a heartbeat, a good, healthy heartbeat. Up down, up-down, up-down. This is pretty consistent.

Yeah, it's off a little bit, but it's not off crazy bad. Right now it's down 12% versus September versus this time last year, which is not horrible, especially when you consider we're off 48% in total inventory. Here's the issue. And I was going over a meeting with our team this morning and I'm going to equate it to a really nice rib-eye steak. A really nice rib-eye steak is what the market is usually made up of. And what that means, you've got years of marbling on it, of fat and things like that, that's part of that helps make the taste up. In a normal market, most of the buyers don't buy and don't eat the fat. Okay. Most consumers don't. They just eat the lean meat that's inside with the good tasting and things like that and they cut off the fat and they just ignore it.

What that means is usually 30% of the houses that are on the market in our normal world just don't sell. They expire, then they come back and the seller gets real about their price or the condition. They get it right and then they put it back out there and then it finally sells. It takes times, four to eight months of inventory. Well, what's happened is we've gone through a really, really time crunch where we've probably taken five years or more of demand and jammed it into one to two years. Okay. Probably about an eight-month window of absolute fanatic buying where people just felt like there was going to be no more steak at all, no more rib eyes ever. So they were consuming the fat, they were consuming everything. Kind of like when you go and you buy toilet paper that's as thin... You buy the store brand that's so thin you can see through it. You buy it because you're scared nothing else is going to be out there and you're going to run out of some kind of toilet paper and going to be using leaves or something.

Well, now the world realizes, yeah, there's not as much toilet paper, but here's the deal. I'm going to buy the Cottonelle, I'm going to buy the Charmin, I'm going to buy something that's more comfortable, not just to have something. So I think that's where we're at. My combination of rib eye and toilet paper is probably not a good analogy, but for me, it works. But just understand, it's going to take some time for that fat and that marbling to develop again. We're starting to see it. We are seeing inventory, even though inventory's low, we're starting to see a larger segment that's sitting on the market a little longer. We're talking days longer, not months longer right now, and weeks longer, but it's putting out there.

Because the sellers think, they come in on the market, they heard that their friend or their neighbor down the street or their relative, they just absolutely have 50,000 over asking or something like that. And they think they're going to do it too without doing anything to the house. And well, guess what? That's not really the same world we were in back in the spring of this year. It's changed. Now, who knows where it'll be next year, but right now it is definitely not what it was in spring of this year. They're coming out, they're having to do price reductions. We're seeing as many price reductions as we are seeing listings now. We didn't see any price reductions for a long time, but now we're seeing them.

The other thing is when we get a seller that calls in, a good agent, before, there's an awful lot of things over the last six months to a year that we'd tell a seller, you don't really need to do that. Do you need to paint? Maybe not now because somebody's going to buy it because they're buying all the fat. They don't really care. They're buying even the thin toilet paper. They don't really care. Well, what's going to happen is you're going to see more times now where you're going to have to do a few things to get your number, especially if you're trying to stretch the number. We're going to see more arguments with sellers... Just frustrations I should say, not arguments, where they're frustrated because their house hasn't sold in two days. They didn't get 10 offers. We're already seeing that.

We're seeing more contracts fall out. We're seeing more problems with buyers wanting things on home inspections more. There for a while, it was like, you're going to ask for something, are you crazy? We're not doing anything. I got nine other people that'll buy this house. Well, that's shifting around and so we're starting to see the tension on both sides now. Before all the tension was on the buyer's side. Some of the tension's starting to play back on the seller side. So you got a combination of desperation, greed, you got all of it coming together, and then the normal things that we all deal with, the human emotions. We still have people, unfortunately, passing away, you've got estate situations, we got divorce situations, we got health situations. Those things still are out there.

So you got a lot of things starting to play into the marketplace that really has been overshadowed because of the velocity of the buyers. With all that said, here is... You're saying, okay, what's going on? One of my agents, Tyler, asked me, he said, "Buddy, be really nice to know, let's go really to the tip of the spear, where is buyer's activity? What is their... Are they still looking as much or whatever?" So I said, "Hey, you know what? Let's run an analytics report."

This is our website. I'm going to show you what our website data is. From January 2020, right before COVID to the end of this last month. This is sessions visitors. This is people going online, looking at real estate on our website. So what we're going to do is you can see in January, this is kind of normal. February is fine. March, the world fell off. They quit looking. Well then, the whole world went nuts and they're just hammering the websites. And listen, I can only speak to my website, but I suspect that any real estate website is going to be somewhat similar in the overlay.

Slowed down, here's where we had, if you think about it, this is where we had the holidays came in. And also you had the... There was a huge COVID run right back in here. All right, then you got back into here. It started going crazy again, typical seasonality. It went really crazy in January, February. We had delta variant hit and some of that slowed some things down, but now we're starting to see a seasonality of slow down. Okay. We didn't really get it as much last year, the normal one, because the school didn't go back in the same way it normally does. People could travel and still send their kids to school. So we had that, but now we got a lot more traditional things going on from the season. So you've got more of that. We definitely see overall buyer activity and traffic and showings are slowing. Some of that is because of the inventory level because we don't have enough to really generate some showings and activity.

But do keep in mind, go back to this. We're still seeing very similar new listing activity for reselling listings. So once the new homes start working back into it and sellers start feeling some comfort, I think we'll see that ease up after the first of the year. I think there'll be more people, sellers coming to the market before spring this year, trying to beat the spring rush, because I think there's going to be a massive spring rush probably. So which is going to start letting some things up. But the fat will build back in. And listen, I want to give a big shout-out to Paul Bowers in our office. We have a mortgage company in the house that we have, and Paul is wonderful to work with. Even if you're already working with a lender and you're thinking about preapproval, call Paul for free. He'll give you another opinion.

One thing you do want to do with your mortgage and your home insurance is, in our area, are you want to shop it. And I know that you may like your lender from where you are. I highly recommend that you use a local lender that understands all of our different coastal issues, insurance issues, just things like that. Because somebody not from a coastal area does not understand it and they may line you up with an insurance policy that's paying two, three, four, five times more than what you should. Highly recommend you speak with Paul. If not Paul, I've got a list of a whole bunch of other local mortgage lenders that I really like and have used for many, many years.

Okay. I hope the information was helpful. And if you would like more information on this or a report in PDF format so you can look at and share with anybody that you might know that might need the information and would like the information, just click the button down below and it'll take you over to where you can download it at no charge and use it as you will. Anyhow, thanks a lot. Have a great week. Have a great October ahead and I can't wait to see you next time.

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#1 By Rose Renner at 10/4/2021 1:19 PM

Thank you, Buddy Blake, for your incredibly informative coffee chats. I plan to relocate to the Wilmington area in 2022 (Leland, specifically) and will certainly heed your advice to connect with Paul Bowers as I look for info on how to best finance my transaction. By the way, I loved your analogy about the beef/fat and the paper-thin toilet paper. Made me laugh and it definitely clarified the situation.

#2 By Buddy Blake at 10/4/2021 5:23 PM

Thanks, Rose for your comment. Paul will follow up with you to ensure you get all the info you need. I look forward to meeting you!

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