Is real estate back? The Smoky Mountain News checked in with a panel of real estate experts this week to reflect on where the real estate market has been and where it’s heading.
Data contained in this article is derived from North Carolina Mountains Multiple Service.
Meet the pundits
“I don’t think we ever lost appeal. People just had to put their dreams on hold for a little while. They had to buckle down like all of us did for a few years and are now trying to revive that dream.”
— Amy Spivey, ERA Sunburst Realty
“There is no question the market has changed. If you need to sell your house, you can probably sell your house now. Whereas in the past you just didn’t know if you could.”
— Brian Cagle, Beverly-Hanks & Associates, president of N.C. Mountains Multiple Service
“It is not that everybody is yee-hawing around and waving flags. But everybody is finally able to catch their breath and see a way forward.”
— Lisa Brown, association executive for the Haywood County Board of Realtors
“I always tell my clients I hope you find the home of your dreams. Once you do, stop looking.”
— Patrick McDowell, Keller Williams, president of the Haywood County Board of Realtors
“I remember having conversations with other Realtors at open houses before the crash saying, ‘We can’t sustain this. We can’t sustain these price increases. Something is going to have to give.’”
— Tom Mallette, Realty World-Heritage Realty, president of Haywood County Multiple Listing Service
“The real estate market has certainly improved. We are seeing that domino effect.”
— Catherin Proben, RE/MAX Mountain Realty
“Everybody starts comparing everything to the boom and someone comes up to them and asks ‘How’s business?’ and they say ‘Well, it isn’t as good as it was.’ But I think it is a very positive market.”
— Bruce McGovern, McGovern Property Management
Realtors in the ranks
Everyone wanted to be a Realtor in the mid-2000s.
“The market was crazy you just showed up and you got business,” Mallette said.
The number of Realtors operating in Haywood County rose exponentially through the mid-2000s.
“I couldn’t process them fast enough, they were joining so fast,” said Brown with the Haywood Board of Realtors.
But when the bust hit and sales dried up, scores of Realtors were forced to exit the industry.
“You can follow the boom and bust of the real estate market just by looking at the number of Realtors in the industry,” Brown said. “If you didn’t know we had a recession and just looked at those numbers it would tell you ‘Wow, something good was happening in 2006 and something bad happened after that.’”
Many who got out were Johnny-come-latelys to the party anyway, those who were moonlighting or dappling in real estate for the easy pickings.
“The long-time Realtors were glad those were gone because they were just nibbling at the edges and reducing the size of the pie,” Brown said.
But for other Realtors, the recession posed a heart-wrenching crossroads in their chosen career.
“It was like a psychiatrist office in here,” Brown said. “They were having conversations about ‘Do I stay in this business?’” Brown said. “It was a long slog for those who survived and are still making a living at what they are doing.”
For those who stuck it out during the downturn, it took grit.
“When you aren’t working you go out and work harder to find more business, not sit back and cry the blues,” McGovern said.
Number of Realtors belonging to the Haywood County Board of Realtors
- 2006: 460
- 2013: 227
- 2016: 275
Realtors don’t keep demographic data on their buyers and sellers, so it’s impossible to say for sure what sector is fueling the real estate comeback.
“There is no way to statistically capture that,” McDowell said.
But based on anecdotal evidence, the market is seeing an uptick across the whole gamut — first-time buyers, families moving up to a larger house, retirees from out-of-state, and second-home buyers.
“I personally have a lot of clients buying their first home or moving up. I can list any number of clients under 30 who are getting married, buying a house and starting families here,” McDowell said.
Many are seeing a return of second-home buyers.
“We’ve had a lot of retirees,” Mallette said. “We are seeing folks who are have always had a dream of living in the mountains and are moving here.”
“We are seeing people looking for that magical mountain retirement home again,” Cagle agreed.
Another factor driving demand is the dearth of affordable rental homes.
“We have buyers who are paying $800 to $900 a month for rent who realize they can buy something and pay less in mortgage payments,” Mallette said.
McDowell citied the “unreal” low mortgage rates as another factor spurring first-time buyers.
“You think about how many millennials are living in their parents’ basement still waiting tables somewhere because they couldn’t get a job,” Mallette said.
As the job outlook improves, “The millennial population is our next segment to buy homes,” he said.
The go-to saying in real estate has been turned on its head in Haywood County over the past year.
It’s no longer “all about location.” Instead, it’s all about price.
Homes priced under $200,000 are going like hotcakes and Realtors can’t get enough of them to meet the demand.
Over the past six months, 64 homes in the $125,000 to $150,000 range have sold — compare to only four homes over $750,000 in the same period.
“Anything before $250,000 is pretty much gone if it is decent as soon as it goes out there because that’s the price point,” Proben said. “If you look at the average wages of two common jobs in this county, a mill worker and a school teacher, that’s all they can afford.”
Proben said there is getting to be a serious shortage of homes in that range.
“The demand in those lower price ranges is so high we are selling stuff above asking,” Cagle said.
The median selling price of a home in 2015 was $191,000, compared to a high of $209,000 in 2007 — back when there were more high-end home sales in the mix. But as demand for homes has increased, the median sale price has crept up as a result. Median sale price bottomed out at $151,000 in 2012-2013 and has been climbing ever since.
Percentage of home sales by price range, 2015
- under $150,000 41%
- $150,000-$250,000 37%
- $250,000-$350,000 15%
- $350,000-$450,000 3%
- over $450,000 4%
In•ven•to•ry: in real estate terminology, how long it would take to sell every home on the market at the current sales pace, if no more homes were listed.
The number Realtors watch more than any other is known as inventory: how many homes are on the market and how quickly are they selling?
Inventory is a critical indicator of supply-and-demand, which in turn is a harbinger of how the market will do over the coming year. It essentially means how quickly you would run out of homes, based on the current pace of sales, if no more were put on the market.
Inventory is one number Realtors actually like to see go down — and indeed inventory has been steadily falling, meaning houses aren’t sitting on the market as long and demand is increasing.
“Homes that are prepared for the market properly and are priced for the market will sell very rapidly,” said Cagle.
The average length a home sat on the market has dropped from 207 days in 2014 to 189 days in 2015 — an 8 percent improvement in one year.
During the downturn, a glut of inventory kept home prices depressed. Buyers had so many options and so little competition, they had their pick of the litter and could name their price.
“I was showing buyers 15 to 20 homes that all met their requirements because the inventory was so high,” said Proben. “Now you are probably showing them anywhere from six to eight.”
As inventory is cleared out, supply declines, and home values start to inch back up.
“If there’s not as much out there, it is telling me that home prices might be going up,” said Brown.
With eight months of inventory, the real estate market is still slightly in buyers’ favor, but is more balanced than it’s been in years, with six months’ inventory being considered a “balanced market” between buyers and sellers according to the National Association of Realtors.
Inventory of homes on the market:
- April 2015: 15-month inventory
- April 2016: 8-month inventory
Slow and steady wins the race
Volume isn’t the only thing going up. Values are going up, too. The definition of “up” is markedly different from what it once was, however.
“Granted the real estate market is never going to return to 2006 levels. We hope not. It didn’t need to be that high,” Brown said.
Values aren’t doubling and tripling overnight like they seemed to in the mid-2000s — but Realtors say that’s a good thing.
“We are growing at a steady pace, instead of a rapid run up, which gives me comfort that this is something that can continue for a while,” McDowell said. “The average price is not spiking like it was previously. It got out of whack and we were appreciating very high. We had a reset because of this bubble — and now homes are appreciating again.”
The wild appreciation of home and land values a decade ago were largely driven by the out-of-state second home market, particularly from Florida, where real estate had gone through the roof, giving them plenty of dough to plow into that mountain house they always wanted.
“There was a euphoria in the early 2000s from people in other parts of the country making so much from the sale of their homes there, they drove the prices up rapidly,” McDowell said.
One thing keeping the breaks on home values is lenders insisting on solid appraisals. Appraisers base values on historical sale prices over the past year, and banks in turn lend only the amount an appraiser says it’s worth — at least now that everyone’s playing by the rules.
“It takes a while for the values to push up, because they are held captive to the past 12 months of comparable sales,” Proben said.
On Haywood’s doorstep, Asheville is defying this trend with run-away prices and unprecedented demand from people wanting to move to Asheville.
“We aren’t seeing the huge price increases that Buncombe County is seeing which is fine with me because I think that is unsustainable,” said Spivey, who admits she still lives in fear of the last recession.
Total dollar value of homes sold in Haywood by year, in millions
- 2004: $166.1
- 2005: $237
- 2006: $254
- 2011: $92.93
- 2012: $124.9
- 2013: $134.8
- 2014: $139.2
- 2015: $171
The Asheville factor
Perhaps the biggest story playing out in the Haywood real estate market today is the Asheville factor. The real estate market is so red-hot in Asheville, homes are selling above asking price the day they hit the market.
Due to steep inflation in home prices, Asheville was recently ranked the sixth most unhealthy real estate market in the country.
That’s good news for Haywood, however.
“The people who are getting out-priced to live in Asheville are going to come here,” Proben said. “Asheville is getting a lot of exposure, and it has started moving this way.”
Indeed, Asheville’s status as the new Austin is attracting people in droves.
“Every time you look, Asheville’s won some kind of award. Eventually some of that will bleed over to Haywood County. It is impossible that it would not,” Brown said. “The law of averages says we are going to pick up some of it.”
Mallette said the majority of showings for his listings are coming from Asheville real estate agents.
“They can’t find their buyers what they are looking for in Asheville,” Mallette said. “All the accolades that Asheville has gotten are a great draw for the region, but you can buy in the outlying counties and it is much cheaper and much prettier.”
Canton’s proximity to Asheville has made it ground zero for spillover.
“In Canton you can sell a house just like that right now,” Cagle said. So much so, inventory of moderately prices homes in Canton has begun to dry up, Cagle said.
“We have been saying for years that one day Canton will be discovered and it seems to be happening,” Spivey said.
McDowell said Haywood County isn’t necessarily picking up Asheville’s scraps, but is being discovered as a desirable alternative.
“People who thought they wanted to live in Asheville realize they like the lifestyle in Haywood County. It is not a compromise to chose Haywood County but they decide Haywood County better suits their lifestyle and demands,” McDowell said. “I don’t see people settling. I have never had a client say ‘I want to be in Asheville, but because I can’t I am coming to talk to you about Waynesville.’”
Closing the sale
The number of homes sold in Haywood County has increased steadily after hitting bottom in 2010, and as sales increase, a self-fulfilling prophecy plays out. When someone is able to sell their home — whether they want a larger house, better view, closer to town, bigger yard — that seller becomes a buyer themselves. Whoever they buy from goes from a seller to a buyer, and it creates a chain reaction — the very essence of why it’s called a market.
Stagnating home prices have hampered that movement over the past few years, however. Homeowners could once count on their home appreciating, and periodically plowed the equity they’d built up in their existing home to purchase something better.
That wasn’t happening during the downturn. Home values were flat, so even if someone could sell their home, they had no equity in it. Rather than rebuy something else in the same price range they already had, they stayed put, Cagle explained.
“What we are seeing now is that people once again have equity in their house, and it has dawned on them they can do something different,” Cagle said. “That is a big deal. That starts to create mobility in the market where there wasn’t any.”
Cagle said Beverly-Hanks has seen a 40 percent increase in their sales volume this year — the firm has closed 134 deals in Haywood so far this year compared to 95 during the same period last year. A similar 40 percent increase in volume was witnessed between 2014 and 2015.
Number of homes sold by year
- 2004: 905
- 2005: 1,133
- 2006: 1,089
- 2007: 814
- 2008: 544
- 2009: 510
- 2010: 496
- 2011: 531
- 2012: 722
- 2013: 779
- 2014: 781
- 2015: 892
The second-homers and high rollers
Another positive trend in the real estate market is the slow return of second-home buyers.
“Before the downturn, probably 95 percent of the buyers we had at our firm were from Florida and were buying a second home,” said Tom Mallette with Realty World-Heritage Realty. “That’s probably 20 percent now.”
It’s lower than what it was during the boom, but better than it was during the bust, when second-home buyers seemed to evaporate.
“As Florida has recovered, they are buying again, so we are seeing that domino effect,” Proben said.
Realtors report a lot of activity coming from Texas. Realtor Bruce McGovern just sold a mountaintop home to couple from Texas.
“They just absolutely love the area. They fell in love with it,” McGovern said.
While the second-home market was on hold for a while, Haywood County’s appeal is timeless.
“We live in such a wonderful, beautiful place,” said ERA Sunburst Realtor Amy Spivey.
Those second-home buyers aren’t making major forays into the high-end, luxury home market, however.
“The luxury market was hard hit,” Proben said. “Those homes have been harder to move, because there isn’t enough demand for houses over $400,000.”
One problem is buyers in that price point can afford to be particular.
“They have cash and they are very picky and they look at a house and say ‘Hmm that’s not really what I want. I’ll just build me a house,’” Cagle said.
There are some signs of movement, however.
“We went a couple years without a sale over a million dollars,” Mallette said.
But last year, four homes in the million-dollar range sold.
Sales of million dollar homes by year
- 2004: 4
- 2005: 5
- 2006: 10
- 2007: 7
- 2008: 4
- 2009: 3
- 2010: 2
- 2011: 1
- 2012: 0
- 2013: 0
- 2014: 2
- 2015: 4
The real estate frenzy that captivated the mountains during the mid-2000s was driven in part by speculators trying to get rich on the wildly inflating home and land prices.
“People were treating the housing market like day trading,” McDowell said.
When the new normal hit, Realtors had to rethink their business model. Mallette reflects on the rise and fall every time he looks at the row of plaques hanging on his wall, chronicling his total sales by year since 2004.
“I still look at that number and say, ‘How the heck did we survive?’” Mallette said, pointing to 2009.
Mallette, who runs his real estate firm with his wife, Christine, spent hours agonizing over how to trim overhead. They started cleaning the office themselves instead of paying someone to do it, and canceled their water cooler service.
“I thought ‘Why am I paying $40 a month for water when I have great artesian spring water at my house?’” Mallette recalled.
He also spent a lot of time praying.
“After work, we would take the family and go to church and ask God for guidance,” Mallette said.
Realtors weren’t the only ones who struggled. Attorneys and appraisers had to readjust as well.
“In 2006, you could tell the market was hot because you would call to get an appraiser and it was 3 to 4 weeks down the road before you could get one. Home inspectors were the same way. You would call and ask for a home inspection and they would be two weeks out,” McGovern said. During the downturn, home inspectors were waiting around for calls and attorneys’ calendars were wide open. Now, as testiment to the turning real estate tide, they are getting harder to schedule.