Is The Raleigh Real Estate Market a Buyer
February 14th, 2008 Categories: Real Estate Market Trends
So you’re planning to buy or sell a home in the greater Raleigh area and you want to know who it favors. Are we in a buyer’s market, or a seller’s market? Let’s examine the facts.
Pricing Trends
I recently reported on the change in average sell price for homes sold in Wake County. In 2007 the average sell price increased by 5.4%. This is in line with what we experience historically here is the Raleigh area. As a matter of fact, it’s at the high end of the 3-5% range that we have seen over the years.
Builders did cut prices on inventory during the last half of 2007. This was on inventory only and did not include pre-construction sales. The 5.4% increase in average sell price takes this discounting into account.
So far, based on just this statistic, it looks like a seller’s market. Certainly were not in a buyer’s market from what we’ve learned so far. Prices are continuing to increase over time at rates that are consistent with our past experiences.
Days on Market
I just checked the Triangle MLS and found that the average days on market are currently 105 days. This is up from an average of 67 days. That’s a 57% increase. Sounds like a big increase, doesn’t it?
What this number really means is that rather than a professionally priced and marketed home taking 2 months to sell, it is now taking 3 months. Remember this is an average and some homes sell sooner and some take longer.
Based on the previously mentioned data that shows prices increased in 2007, it appears that sellers are simply waiting the additional 30-40 days, rather than cutting their price. We still don’t have any hard evidence that we are in a buyer’s market, but sellers are being inconvenienced by having to wait longer.
Inventory
There are currently 8,404 homes listed for sale in Wake County. This is up from about 6,300 homes listed for sale in Wake County last year at this time. That’s a 33% increase in inventory.
This is clearly a result of slowed sales. Sales were almost 7% lower in 2007. Approximately the same number of sellers are putting their homes on the market, while sales have slowed, and the result is an increase in inventory.
I believe that the difference is in the relocation business. People wanting to relocate to the Raleigh area from other markets are still continuing to have difficulty selling their homes. I think it is very safe to say that the excess inventory is a result of a reduction in the number of relocation buyers.
OK already… is it a seller’s market or a buyer’s market?
I’d say that it is neither. In my opinion, we have a balanced market on our hands. The Raleigh real estate market is within a normal range of appreciation. Sales have slowed and inventory has increased, but the market is continuing to absorb the inventory within a time frame that has not put downward pressure on price. At least not to the point of actually causing prices to go down.
The current absorption rate is 5.4 months. In other words, if sales continued at the same pace as in the last 12 months, and no more homes were listed, it would take 5.4 months for everything to sell. Back in 2006, when our inventory was lower and sales were higher, we had an absorption rate of about 3.5 months.
The thing to take away from all this is that buying real estate in the greater Raleigh area is still a reasonably sound investment.
We never had the abnormal run up in prices that many other markets across the country experienced. In the absence of over-inflated home prices, there is no correction that needs to occur in our market.
Seek professional advice when buying or selling a home, buy or sell at market value, and over time you will be just fine. Inventory levels are good and multiple bids are rare. It’s a good time to move if you need to be in a different home for any of the usual reasons.
