Horse's mouth: Wilmington, NC broker sees prices at '02 levels

by CB Johnson

This is the first in a series of occasional articles by real estate professionals I know in the southern U.S.    

    In the Wilmington area market, it's difficult to tell the true difference between list price and sale price.  The reason for this is that many houses are reduced significantly from their original list price until an offer is finally

made and the property closes.  Most calculations of "properties selling at XX% of list price" are made from the last price at which the property was listed prior to negotiating a contract.  As a general rule, I'm seeing selling prices resetting back to the level they were about two to three years ago.  I expect them to reset further, perhaps back to the 2002/2003 levels.  This presents an incredible opportunity to purchase a home (primary, second or otherwise) at a deep discount.
    While many buyers are balking at purchasing and taking a position in this market, I believe that it is in their best interest to do so for the following reasons:
    1) If they wait until they know that the market has "hit bottom," it will already have done so and be on the way to recovery.  They will have missed out on any deals available.
    2) Interest rates (that have been at all time historic lows for nearly 8 years now) are destined to rise.  A year ago, it was feasible to get a 30-year, conventional mortgage for approximately 5.75%.  This has now risen to approximately 6.5% at least.  Any potential "savings" has been eroded by a higher monthly payment.
    The truth is that this real estate market is probably here to stay for 20 to 30 years.  The main problem we face right now is that the average American family can no longer afford the average American home (click on the graph below).  This happened because lending guidelines were loosened in response to the idea that "every American should own a home," ultimately creating an excess of buyers for which the market wasn't prepared.  When you increase demand, supply goes down and prices go up.  Of course, in markets, what goes up must come down, so we're in the process of moving back towards equilibrium.
Obviously this affordability issue effects the entire housing market as it limits the supply of buyers.  The biggest problem with the local market is that the normal "buyers" can't sell their homes in your area and thus purchase homes here in Wilmington.  
    Ultimately it's a large chain reaction.  Between the lending institutions reaction to the market conditions (making qualification more difficult), the pricing and affordability issues, and the lack of real understanding about the market (many agents/sellers think that this problem will be corrected by next spring), the market is a bit mired.
    It remains a great time to buy a home.  The irony of this situation is that all the people in pain are now saying "this too shall pass."  Why weren't they saying it when times were good?  All time passes, whether good or bad.
A great lesson for the future is to store up in times of plenty knowing that "this too shall pass."  Another interesting point is that a few years ago, the market was GREAT for sellers and HORRIBLE for buyers.  Now the market is GREAT for buyers.   
    Why don't people refer to this as a great real estate market?

CB Johnson is a licensed real estate broker in Wilmington, North Carolina and the Operating Principle of the Keller Williams office in Wilmington.  His comments, and those of other real estate professionals here at Golf Community Reviews, do not necessarily reflect the opinions of the editor.  I would be happy to put you in touch with CB.  Just send me a note.