April 's Stephens Blog


5 Reasons NOT to Panic over Local Home Prices

Responding to the News & Observer:

Stacey Anfindsen Shares More Accurate Depiction of Market and Five Reasons Not to Panic Over Local Home Prices


In response to the main headline in the 10/27/08 N&O, I am presenting facts to contradict

the headline, which is yet another attempt to scare local readers by using data from selected national

sources. The writer states five reasons; crashing home prices, investor speculation, complex

investments, job losses and repeat delinquencies. I will respond to each of these to provide some local



1)  When analyzing our market, I look at data from the counties of Wake, Durham, Orange and Johnston.

Within this market, the average closed price of all housing is up 8% and the average closed price of

resale housing is up 6%. House price appreciation, which compares the two most recent sales prices of

the same house , is an area where the Triangle outperforms the national market. Our current rate of house

price appreciation in the Triangle is just over 4%. This rate beats the state (+3.6%) and national rates



2)  The Wake County Revenue Department reported +/- 21,000 closed sales within the past 13

months. Roughly 5% of these sales were purchased by buyers from out of town, a huge difference

compared to the 20% rate nationally.


3)  It is almost impossible to track what percentage of local purchases were made via the subprime loan

mechanism. Per the FHFA mortgage metrics survey for the second quarter of 2008, 17% of all

outstanding mortgages in the U.S. are rated as subprime. Therefore it would be hard to argue that a

majority of house purchases were made via this mechanism.


4)  Job losses are real both nationally and locally. The Raleigh/Cary/Durham MSA did not have a

workforce increase comparing 8/08 with 8/07 for the first time since the 8/01 versus 8/00 period.


5)  The mortgage metrics survey reveals some additional information regarding the national mortgage

market. They surveyed over 30 million outstanding loans in the Fannie Mae and Freddie Mac system and

found that 98.6% of these loans were rated as current. They also state that foreclosure proceedings

were initiated on 432 homeowners per day during the second quarter, a big difference from the 2,700

per day figure stated in the lead paragraph.  There are currently +/- 14,000 listings within the four county

area in TMLS. Roughly 3% of these listings are classified as foreclosure, bank or corporate owned. I have

been tracking the residential market within the Triangle for over 20 years. The foreclosure market has

always accounted for a very small percentage of activity.

Our current market can be summed up with my version of the good, the bad and the ugly;

The Good

  • Third quarter closings were the 6th highest in history
  • Current supply of 8 months is lower than national current supply of 11 months
  • Average house price appreciation is superior to state and national rates
  • Average re-sale sales price +6%, average overall sales price +8%, average list price +2%
  • Houses priced correctly have sold in an average of 55 days

The Bad

  • Overall inventory grew 7%, making 2 consecutive months of less than 10% growth
  • Withdrawn listings increased 2% compared to 9/07

The Ugly

  • 29 consecutive months of inventory growth, 20 consecutive months of lower pending sales
  • 63% of all price points have an oversupply of housing product
  • 9/08 expired listings were 227% higher than 9/07 expired listings


A survey of Wake County house purchases where the house was purchased and then re-sold within

the past 12 months reveals a median percent per gain of 0%. I think that is pretty impressive

compared to what is happening in the national market.


As we have seen during 2008, our local market is not immune from happenings in the national

market. Our biggest challenges during the fourth quarter of this year and into next year are to grow

the workforce and cut down on the number of price points with an oversupply of housing.


Information provided by Raleigh Regional Association of Realtors and Birch Appraisal Group of Cary.

Comment balloon 0 commentsApril Stephens • October 27 2008 12:26PM