Each month, the Triangle MLS reports statistics on the Raleigh real estate market and the surrounding areas as well. I thought I’d write a quick post summarizing what December (and 2009) looks like vs the previous year. Most of you will not be interested in this, but for stats geeks like myself, you might find it interesting. If nothing else, it will give you reassurance that the Raleigh real estate market is slowly improving, and the trends show that although it has been a tough year, it certainly has not been nearly as bad as other markets around the nation.

In 2009, we saw 21,983 closed sales, an 11.5% decrease from 2008. However, we also saw a larger decrease (-15.6%) in the number of new listings that came on the market in 2009. What this means is that the inventory level, or supply of homes on the market has decreased to 8.6 months. This means that it would take just over 8 months to sell the current listings if no new listings came onto the market. The 8.6 inventory number is supposed to give us a way to determine the supply and demand levels that currently exist in our market.  There are particular places such as the downtown Raleigh real estate market, and parts of the North Raleigh real estate market that have seen a more dramatic reduction in supply, and some places such as certain Cameron Village neighborhoods have actually seen appreciation in the last year.

So, the inventory level really gives us an idea of how healthy our market is. The number has improved 6% from 2008. Most people consider a level of 6 months to be a very healthy market. So as we enter 2010, we see signs that supply and demand are shifting more back toward a seller’s market.

Other stats that are important: average days on market for listings is currently 104 days, and the median sales price is $178,000, down 4.7% from a year ago.

There are still plenty of hurdles ahead for our economy including a bleak job market outlook for the near term future, incredibly high government spending (which could cause interest rates to rise), and an ever growing national debt. These factors could cause high inflation (I see no way around it at this point), but there is a silver lining for real estate owners. If you look back over the last 100 years, hard assets like real estate, oil, and gold often appreciate significantly during times of high inflation. The reason for this is that these commodities are measured in US Dollars, and as the dollar goes down in value, real estate acts as a protection, or “hedge”, against inflation.

My current take: I am actively buying real estate and I would encourage you to do the same. I believe that with interest rates at an all-time low, and prices back to levels that are much more affordable, combined with the fact that Raleigh real estate has been an historically stable market, I think it’s a great time to buy. Whether you are a first time homebuyer or “move-up” buyer looking to take advantage of the tax credits, or an investor looking to create equity through real estate, I think there are a lot of opportunities out there….

My take on the market: Real estate is a segment of the market that follows the same rules as everything else in economics: supply and demand. Two things have happened in the last few months. First, supply has dramatically decreased. New construction has virtually come to a halt, which is good for the market right now as the last thing we need is more homes on the market. Second, demand has significantly increased thanks to low interest rates and lower home prices. Despite the negative media attention, the doom-and-gloom, and all the problems our government has gotten us into… been trying to deal with, the real estate market will, and is, recovering.

Raleigh real estate is one specific section of the national market that is extremely healthy compared to the rest of the nation. Here, sales are up 28% from a year ago and the amount of Raleigh homes for sale has dropped about 15% from this time last year. Our location continues to rank among the top 5 places for population growth and I believe that fundamentally, we live in one of the best real estate markets in the country.

See the video below on the world’s greatest investor commenting on the residential housing market recovering. I disagree with a lot of what Mr. Buffett believes politically,  but I agree that the residential market has reached bottom, and like any other market, it goes up, down and back up again.  One thing I agree with him is his go-to investment strategy of buying when everyone else is fearful. There are still hurdles to jump over, and this will not be the last recession we face, but I truly believe that this could be the best buying opportunity most of us will ever see. I’m actively looking for property to buy and I would encourage you to do the same.   

This home is listed at $247,900 and is in one of the most desired locations in Apex real estate and Cary real estate… just off Davis Drive, close to 64, convenient to Cary, Apex, or RTP. There are not many Apex homes for sale in this price range. Check out my featured listings page for more details and more pictures.

First time homebuyers will receive $8,000 as a pure credit (it does not need to be paid back) if they contract on a house by 4/30/09. As of right now (I will update you on any changes), the bill allows you to get under contract by 4/30/09 and close by 6/30/09. So, if you are a first time homebuyer, I would recommend aiming for an April closing date (at the latest) so you don’t have to rush at the last minute.

There is one other interesting aspect of the new bill. There is a $6500 credit for “move up” buyers. The bill stipulates that anyone who has lived in their home for 5 years will be eligible to take advantage of this $6500 if they buy a new primary residence.

I’ll have more details as they develop… Call me or email me with questions.

The Raleigh real estate market will see some benefit to this bill as there continues to be an excess inventory of foreclosure properties available. About half of the properties that are selling right now are either short sale or REO (bank owned foreclosures). This tax credit will allow the market to absorb some of this inventory, as many first time homebuyers choose to buy foreclosures. Most of the national market continues to see signs of improvement as well. I am excited about the prospect of real estate in 2010, as it remains a buyers market and people who take advantage of buying property now, will reap huge rewards when the cycle shifts back toward a seller’s market. I anticipate the Raleigh real estate market to lead the way in many categories during the next few years, especially certain locations such as downtown Raleigh real estate, and North Raleigh real estate.

Luckily, for those of us who live in Raleigh and make a living working with Raleigh real estate, our lives have been much less affected than some of our fellow professionals in Florida, Nevada, California, and the Northeast. Downtown Raleigh real estate and North Raleigh real estate remain two market places that have remained very stable and numerous neighborhoods have actually appreciated. Cameron Village, for instance, has seen it’s median home price appreciate 8.1%! Most people don’t believe that… either trust me, or look it up, it’s true! Of course, there are certain neighborhoods in our downtown Raleigh real estate market that have gone down in value as well, like certain condo projects or certain new construction neighborhoods where supply vastly outweighs demand…. but me being the optimist that I am makes me want to focus on the positive. Also, by understanding these statistics and trends, I’m better able to educate my clients on the Raleigh real estate markets so that they can make an informed decision on the home purchase or investment.

But amidst all of the recent foreclosure chaos, there has been an interesting phenonenom occuring. Banks are so backed up with foreclosures that they are too busy to grant requests for loan modifications to borrowers who are currently paying their mortgages on time (those select few)… Many borrowers need to refinance, or modify, their loan into a fixed rate that they can afford so they don’t go into foreclosure. So these “loan mods” (mortgage lingo) are in many cases granted first to the borrowers who are in default.  So here is the interesting trend that is beginning to occur: Many borrowers around the country are “under water” meaning their mortgage balance is more than the house is worth. These borrowers can afford their payments, but they desire to complete this loan modification. But the only way they can do this is to quit paying their mortgage for a few months. This way, they have the attention of their bank, and the bank is forced to either modify the loan, or take back yet another property into foreclosure. Given the two choices, the bank will likely modify the loan because they know that the foreclosure process is expensive, and if it forecloses they will take back an asset (the house) that will be worth less than the new balance on the new loan. So they modify the borrowers loan and the borrower gets to lower his payment and/or balance in some cases.

The question that was brought up by CNBC on this video is this: Is intentionally quitting on your mortgage, even when you can still afford it, immoral? In other words, many borrowers truly can’t pay… they’ve lost their jobs, etc… and they have to foreclose. But there are certain people, like the investor in this video that stop paying their mortgage in order to get some negotiating power with his bank so he can lower his payment. Take a look….

http://www.cnbc.com/id/15840232?video=1182586806&play=1 (I couldn’t figure out how to embed the CNBC video so this link will take you to CNBC’s site)

Again, many of these people are in locations where home prices have dropped 10%, 20%, or even more. Luckily, we live in an area where demand for Raleigh real estate has been stable and the supply has not grown completely out of control. Nevertheless, it’s still a buyers market out there and will be for a while to come. Rates are low, there’s still time to collect the $8000 if you are a first time buyer, and prices are very affordable…. what a great combination!

John Huber works with downtown Raleigh real estate, North Raleigh real estate, Raleigh investment real estate and other surrounding areas of Wake and Johnston County. He studies statistics, knows the neighborhood trends, and helps his buyers and investors make good decisions and helps sellers maximize their profits. He also works with other real estate professionals to help increase their residual income.