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State of the Housing Market in 2016: Part One

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Categories: Home Trends, Buy A Home

Despite coming off a solid sales year, Chapel Hill Realtor Kim Dawson isn’t quite certain what to expect in 2016.

On the bright side, she anticipates demand for housing in the Raleigh/Durham/Chapel Hill or “Triangle” area to remain strong. Employment continues to grow as the region recovers from the recession, and mortgage interest rates, while projected to rise slightly, remain very low by historical standards.

Forecast: Demand Outstrips Supply

The biggest challenge Dawson sees, and it’s a significant one, is finding enough homes on the market to meet demand. Like the rest of the nation, residential real estate in North Carolina has become a seller’s market.

“We had an agent the other day that had 18 offers in one day, which is just crazy,” says Dawson, who also serves as president of the North Carolina Association of Realtors.

Over the past decade, buyers grew accustomed to negotiating the best price possible, and if a home didn’t have what they wanted, they simply moved on to the next one. But Dawson is trying to convince her buyer clients that they’re in a different world now.

“If they find a home they like, they need to make an offer and it needs to be a strong one,” she said.

Homes in the Triangle are on the market for an average of 52 days, down from 60 to 70 days in 2014 and 2015. And that average is inflated by homes that aren’t in good condition, Dawson noted.

“They’ll sell their house fast if it’s decorated right, staged right and priced right,” she said.

Several trends have converged to tighten inventory across much of the state. Home builders, after drastically reducing output following the mortgage crisis, have ramped back up but are having trouble meeting demand.

Following the recession, many homeowners, unable to sell their homes, fixed them up instead and now are content to stay where they are.

Finally, the state has become a sort of victim of its own success. People migrate to the area for its mild weather, strong economy, top-notch health care and cultural amenities. Once they arrive, they want to stay.

Simply put, there just aren’t enough people wanting to sell. “If inventory improves, (sales) will be equal to or better than 2015,” Dawson said. “If we don’t get more inventory, it’s going to be a tough year.”

Forecast: Modest Sales Uptick

Nationwide, home sales grew 7% last year from 2014, the best year in nearly a decade, but are projected to rise by only 1 to 3% this year, says Lawrence Yun, chief economist with the National Association of Realtors.

Yun attributed the slower sales growth to home prices he predicts will start rising for the spring buying season, along with shaky global economic conditions, rising mortgage rates and sluggish GDP growth in the United States.

Stay tuned for Part Two in this series next week where we look at the graying of the market and mortgage origination trends.

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