RALEIGH – “How is the real estate market?” It’s the question I get asked daily and it always gets my blood pumping with excitement to openly chat about real estate. Seasoned Realtors used to have their “elevator speech” ready to go but those days of a standard reply are officially long gone. “The market” is no longer one unified subject. We now live in A Tale of Two Cities in one city.
While the majority of homes under $450,000 are flying off the market within hours/days/weeks, often with multiple offers, homes over $450,000 don’t always have the same luck. Headlines read that in North Carolina, we have so much demand and not enough supply, but telling a seller of a $950,000 house how fast-paced the market is when their home has been on the market for 60 days is enough to drive them crazy.
Home sales under $450,000 are greatly fueled by many components, but mainly by the buying demands of millennials. This generation is the largest group of homebuyers (36% of home buyers by generation, according to The National Association of Realtors) so there’s a large demand for homes they can afford at this point in their lives. Besides reviewing generational trends, add in the fact that there is a greater chance of a buyer being able to afford a $300,000 house than a $600,000 house since North Carolina’s average household income is in the $50,000 range. Mortgage rates are still considered low and approachable so to millennials that’s “the norm”, and to Baby Boomers “money is on sale”.
All of these factors are colliding into a melting pot of $450,000 and under buyers. There are so many buyers competing over these homes that sometimes multiple Realtors are showing the same home at the same time, juggling which room they are in while trying to pretend that they have privacy with their client. Many houses in this category that are appropriately priced are selling for over list price which is causing values to rise (and appraise) quickly in this segment.
Homes over $450,000 tend to have a different set of challenges. Not only are they up against fewer buyers but these buyers have earned the right to not make an impulsive decision. These buyers take their time, which, in my personal experience, results in less buyer’s remorse and a more solid contract-to-close timeline. The result is more days on market – the true metaphorical line between the $450,000 over/under price point.
To build, budget or be patient?
These $450,000+ homeowners tend to break into two groups: up-sizing or down-sizing. The sellers who will then be up-sizing buyers are frustrated by the lack of homes from which to choose for their next home. Why is that? Most likely because the down-sizing home owners are having sticker shock by what they can get for the dollar since the last time they purchased.
This anticipation is causing the bottle-neck of limited inventory while the sellers decide their next-step. One of my favorite parts of my job is when I get to meet with a homeowner that has been in their home for 15+ years and sharing with them how much proceeds they would walk away with at closing. Home builders and investors alike have quickly observed this trend and are building beautiful luxury homes with high end finishes to accommodate the desires of these buyers.
Then there’s the Belle of the Ball: the affordable home in the unaffordable location. Perhaps it’s much smaller than the other houses or it’s a complete tear-down; either way, it merges the two markets. The under $450,000 buyer can afford to live in the over $450,000 world. There is a cyclone of buyers clamoring for profit and/or lifestyle. I recently listed a home with trees growing from the gutters in one of the hottest parts of a historic neighborhood in Raleigh. The buyers looking at the house were everything from first time home buyers to investors to millionaires. After multiple offers over list price, the buyers were a young family that is going to renovate it room by room on their budget while the houses around them sell for more and more, improving its land value. The American dream.
Heidi Harris is a Realtor in Raleigh with the Allen Tate Company, and is the leader of the Home Sweet Heidi team. For more information go to homesweetheidi.com.