Writer: Liz Palmer
2 min read June 2022 — A May report from the U.S. Department of Housing and Urban Development and the Census Bureau showed that single-family home sales in the United States declined 26.9% between April 2021 and April 2022. While the report gave no reasons for the drop, it is widely understood that hot markets are experiencing inventory shortages and construction delays.
In the Raleigh-Durham area, a similar scenario is playing out. Invest: discussed the dilemma with real estate leaders, who also talked about what the future of housing inventory looks like for the Triangle.
For Jim Allen, president and broker of The Jim Allen Group, it’s about land availability and caution among builders. “New home construction is in a slowdown because there are no lots available and it’s taking longer to get permits to develop subdivisions,” Allen said. “Builders are not pricing their homes until they’re almost 100% completed. It’s not that fewer homes are being built. More permits are being pulled now than ever. The reality is they’re not hitting the market as quickly and some never hit the market at all.”
According to Allen, that combination of off-market sales and exponential home appreciation are messing with the numbers a bit, while builders struggle with pricing homes under construction as interest rates continue to rise. “When your numbers are going up that high, you want to wait to take advantage of that appreciation for as long as you can,” he said.
John Wood, president of RE/MAX United, echoed those sentiments in an interview with Invest:. There are multiple factors at play creating interesting ecosystems for residential real estate in Raleigh-Durham.
Wood said part of the reason for the decrease in new construction is the inability to build as many homes as before. Unsurprisingly, the culprit is supply chain restraints.
“We’ve seen nationwide housing appreciation like we’ve never seen before, supply shortages creating obstacles for our buyers especially in new construction, and we have not only seen interest rates tick up, but jump up, dramatically,” he said. “The last thing (builders) want to do is commit to building 40 homes in a neighborhood without knowing if they can get enough materials and what those materials will cost. Construction cost is the other factor; we’ve watched most builders wait until they get their permit and framing underway before they release a home. Sometimes builders will wait until much later in the process before even pricing the home due to fluctuating prices. That is a completely different mindset.”
Part of the solution is to build a variety of housing, said Mahala Landin, managing partner and broker in charge of The Rachel Kendall Team. “I believe in the construction industry and I think they are bringing us back through housing starts, but they still can’t build fast enough. We need to grow differently to meet these challenges, including looking at multifamily housing, townhomes, condos and other more economic options for first-time buyers,” she told Invest:.
At a time where buying a home has proven to be, as Wood said, an “emotional roller coaster” for some clients, Landin’s team is zeroed in on relationships on top of diversifying housing options. “Sellers want to work with people they know, love and trust,” she said. “There is a lot of noise in the real estate market, so we can act as that consultant, helping them to manage the market to achieve their goals.”
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