RALEIGH – Nationwide, new home sales increased in September 2021, the latest data on new home construction sales from the U.S. Census Bureau shows. But in the Triangle, the ratio of would-be home buyers to available homes is still out of balance.
Some 800,000 new homes were sold nationwide in September, according to the report. That outpaces economist’s expectations for new home sales during the month, as estimates were that 760,000 new home sales would occur nationwide. In August, 740,000 new homes were sold.
The mark outpaces each of the prior six months, as well, surpassing the 796,000 homes sold in April, the prior high.
However, the growing trend doesn’t mean that new construction homes are available for homebuyers looking to buy locally.
“Yes the number of homes built in September nationally increased, but in the Triangle it stayed pretty steady,” said Jim Allen, a residential real estate developer, licensed real estate agent and founder of the Jim Allen Group, in an interview with WRAL TechWire.
Steady doesn’t mean that new construction homes are available, though, said Allen. As of 5 p.m. on Oct. 27, there were a total of 321 new construction homes available for sale in Wake County and 125 new construction homes available inside Raleigh city limits.
For existing homes, there are only 599 active listings in Wake County, as of 5 p.m. on Oct. 27, and 338 available existing homes in the City of Raleigh.
“It is the most extreme sellers market I’ve ever witnessed,” said Allen. “Because buyers really don’t have options.”
Why? There’s an extreme housing shortage in the Triangle, noted Allen.
And, though there is opportunity for new construction in Raleigh, as a recent report from the National Association of REALTORS found Raleigh was among the best six markets in the nation for homebuilding opportunity, there are multiple challenges facing developers, builders and would-be homebuyers.
Builders are facing multiple challenges in completing new construction homes, said Wes Carroll, founder of Upright Builders and the incoming board president of the North Carolina Home Builders Association, in an interview with WRAL TechWire.
“Sales continue to be as strong as they can, but builders are struggling to keep up pace with the existing demand,” said Carroll. “Some of that is unpredictability of lumber, from a cost perspective, and the supply chain disruptions for other materials.”
From windows to dishwashers
Take windows, for example.
According to Carroll, homebuilders typically order windows for their new construction homes four weeks prior to their installation.
But right now, suppliers are quoting builders a 20-week waiting period, and in reality, windows are getting delivered between 24 and 28 weeks after the order was made, said Carroll.
“For a house for which I need windows now, I would have needed to order them in April,” Carroll said.
Builder Richard Gephart, who is president of the Home Builders Association of Raleigh-Wake County, said a crew had to stall construction on a new home in Wake Forest waiting for windows to arrive.
“We’ve been sitting for about four weeks without being able to do anything else on the home,” he said.
The wait for windows is the latest pain in the supply chain for new home construction.
“It’s been many items in the construction process,” Gephart said.
The house that waited for windows should have been ready by November. Now, it’s looking like a February finish.
“We’re probably going to produce half the homes we normally would this year and actually be able to close on them this year than we would because of the supply chain issues,” Gephart said.
Take garage door openers. Carroll said that for anything other than a standard garage door opener, they’re backordered and aren’t projected to become available for 50 weeks.
Or, take dishwashers. Carroll is waiting for dishwashers from a supplier, he said. One supplier has 300 backordered dishwashers, and has no idea when they’ll become available, Carroll noted.
Considered together, all of these supply chain disruptions are impacting the new construction market, said Carroll.
But there’s also another factor at play, noted Carroll. While the current demand for housing is outstripping supply, there just aren’t enough homes being built in the region.
Report: Raleigh ranks #3 for housing growth for 2010-2020
Not enough homes
As noted above, the Raleigh metropolitan statistical area is among the nation’s best markets for homebuilding opportunity, according to a forthcoming report from the National Association of REALTORS that was shared in advance with WRAL TechWire. The homebuilding opportunity index tracks more than 300 housing markets nationwide along multiple factors that impact housing supply.
Raleigh ranks 13th in the forthcoming October 2021 report, according to the National Association of REALTORS. In the September report, Raleigh was 6th. Both rankings come due to strong employment growth, which the NAR tracks as 5.2%, and the share of population that are making inbound moves from other regions, which the NAR data showed to be 52% of movers in the period between January and June 2021.
As the Triangle adds people and jobs, home building has not kept pace. The region is not permitting enough land fast enough for development of residential housing communities, according to Allen. Inventory, or the total number of available homes that a buyer could select from, is extremely low, noted Allen.
Even earlier this month, inventory of new construction homes was higher, said Allen, who told WRAL TechWire that in the week prior to the final weekend of the annual Triangle Parade of Homes, there were 355 available new construction homes in Wake County and 140 in the City of Raleigh.
That event, said Allen, is one at which builders historically showcase their available inventory, and is a major part of implementing a critical business strategy: showcasing their best available products, to incentivize home buyers to place a pre-ordered sale and go under contract during the winter months, which Allen noted tend to be slower, due to cyclical demand and weather conditions.
In 2021, said Allen, only 51 homes were finished and judged at the event. That’s compared to 280 homes last year.
Worse, said Allen, “90% of those homes are already sold.”
Plus, demand isn’t moving any lower, said Allen.
“Most of my builders, we were holding back, hoping to sell them during the parade, so we could drive excitement,” said Allen. “But most builders don’t want to do presale, because by the time they’re finished, they’re losing money.”
It’s not that homes aren’t being built in the Triangle. The demand is there.
“Even though we are building more homes than the historical average, it’s not enough to accommodate current housing demand,” the report from the National Association of REALTORS reads.
While fewer than 400 new construction homes are available in Wake County right now, there ought to be much more, said Allen. In total, the number of new homes and existing homes in Wake County should be about 19,000 available, in a balanced housing market that would keep builders, sellers, and buyers aligned in their incentives, he said.
Currently, there are fewer than 1,000 combined existing and new construction homes in inventory.
But even that total number that indicates a balanced housing market is changing, as the Triangle experiences population and job growth, noted Allen.
Population, job growth keep Triangle housing market hot as other areas cool
According to Allen, the region is already short by 4,400 residential units right now, but demand is increasing due to the continued in-migration of new residents. Next year, Allen expects the demand for new residential units to double, meaning there’s an estimated need for 8,880 residential units just to house the people who will be moving to the area in the next 12 months.
Moreover, those projections Allen cited were based on the state of the market before accounting for the creation of about 22,000 high-paying jobs that companies expanding in the Triangle will create in the coming years, he said.
With the projected salaries of firms like Epic Games, Apple, Google and the many life science companies that are expanding or setting up operations in the Triangle, said Allen, it’s actually more likely the region will see prices increase, even if mortgage rates increase as well.
That’s in contrast to what some economists and industry professionals are saying about the housing market nationally. CNN reported this week that an increase in mortgage interest rates may cool or reverse the rapid price appreciation observed in housing markets across the nation or may lead to the popping of a housing bubble.
Allen disagrees with that assessment, and with the concept that the Triangle region is experiencing a housing bubble at all.
“An increase in interest rates wouldn’t impact the Triangle housing market in anyway whatsoever,” said Allen. “Even a doubling of the current interest rate of about 2.9% would have little to no impact on the supply chain interruptions or cooling price appreciation.”
That’s because, said Allen, “Our price appreciation is caused by real thing—we are experiencing a shortage of homes.”
Take the economic principle of supply and demand, and apply it to the Triangle’s housing market, said Allen. “When supply does not meet demand, prices continue to rise. That’s the current condition in the Triangle and for the foreseeable future.”
Gephart, the Wake Forest builder, offered this advice: “Just be patient. Be patient with the builder. Be patient with the suppliers.”
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