“Land Prices Tumble”: North Carolina
The Wilmington Star reports from North Carolina. “Amid national concerns of a deflating housing bubble, Wilmington remains a choice destination and prices in its core have stayed strong even as homes are taking longer to sell, demand at the beach has turned anemic and buyers have hopped in the driver’s seat.”
“Across the board, island markets in Pender, New Hanover and Brunswick counties have dried up. In October, the median price for an existing single-family home in Brunswick County was $221,000, down more than $50,000 from the same month in 2005 as beach traffic has slowed.”
“‘The beach has come almost to a halt,’ said Beth Suggs, president of the Brunswick County Association of Realtors. ‘I think buyers are kind of sitting back waiting to see if prices drop.’”
“In Carolina Beach and Kure Beach, where a surplus of new construction cooled one of the areas’s most overheated markets, the number of residential units sold was down about 70 percent through Nov. 4 from last year, said (realtor) Steve Bowwman.”
“Oceanfront lots that last year went for $1.3 million now sell for about $980,000, he said. ‘We’ve seen land prices just tumble,’ he said.”
“In the $300,000 to $600,000 range,there is little appreciation and long stays on the market, Realtor Jeff Lucas said. Likewise in New Hanover County, the $400,000 to $800,000 range is the most crowded, said Realtor Jim Spicuzza. Some sellers are throwing out ‘make my day’ numbers just to see what they can get, he said.”
“Real estate investor Rich Lehrer said he doesn’t see who’s going to buy the high-priced homes. Rents have not risen enough to make landlords interested in home prices; slow markets elsewhere mean that people wanting to relocate are pressed to get out of their current homes; and local salaries remain meager in comparison to the cost of real estate.”
“Last year, the per capita income in the Wilmington metropolitan area was $28,584, just less than that of Rome, Ga., and 222nd in the country, according to the U.S. Department of Commerce.”
“‘Prices are going to have to come down before the market starts moving again,’ Lehrer said. ‘If you bought last year, you better not need to sell this year.’”
‘October’s absorption rate was 43% (compared to 60% in 2005) indicating that less of the available inventory was purchased in October of this year than last. A 43% absorption rate means that for every sale closed in October, 2.3 more homes were listed. This puts the inventory level for New Hanover County at just over 9 months. New Hanover County excluding the beaches has 7.1 months of inventory available. As expected, this number has risen slightly since last month and may most likely continue to do so through the holiday season. Many sellers are starting to offer competitive pricing as they become more realistic about market conditions.’
Where did you get these numbers? Where can I find a source showing stastics on units sold in 2006 and 2007?
‘I think buyers are kind of sitting back waiting to see if prices drop.’”
I think there are no more buyers. Yes you have your have-to-sells and your occasional GF, but for the most part anybody who could buy has.
See the realtor told you so. “Buy now or forever be priced out”. It is the “forever be priced out” part now
I am happy to share with the realtors that I, as well as hundreds of thousands of others, are “priced out” at todays wishing prices. I also gleefully point out that unfortunately for them (the realtors), many of them are priced out of a lifestyle. It’s bye-bye commissions and hello new job search!
We aren’t priced out of the market, are we? Does this mean that nobody will want to loan any more money for homes too?
“Real estate investor Rich Lehrer said he doesn’t see who’s going to buy the high-priced homes. Rents have not risen enough to make landlords interested in home prices; slow markets elsewhere mean that people wanting to relocate are pressed to get out of their current homes; and local salaries remain meager in comparison to the cost of real estate.”
Ditto for bubble zones in the rest of the USA.
“Last year, the per capita income in the Wilmington metropolitan area was $28,584, just less than that of Rome, Ga., and 222nd in the country, according to the U.S. Department of Commerce. ‘Prices are going to have to come down before the market starts moving again,’ Lehrer said. ‘If you bought last year, you better not need to sell this year.’”
Per capita income in Wilmington is below $30K, but apparently that did not discouraging the big builders from putting up McMansion tract home developments with units priced from $300K to $800K. Does anyone else sense a disconnect here?
This disconnect equally applies to CA, AZ, NV, OR, WA, UT, FL, NY, VA.
Therefore, I just cannot imagine a scenario where we escape a massive and prolonged downturn in residential RE. Especially since the builders are still pounding out units. Over the weekend I watched the movie “Inside Man”, and Jodie Foster had a great line: “There is an old saying in America: When there is blood in the streets, buy property.” Needless to say, a smile crossed my face.
Tara!
I’ve always thought that median income and per-capita income were of only modest use in looking at housing. One third of the population will not be able to buy. Therefore, only the income of the ‘pool of house buyers’ is of interest. If you have a large population with a diverse job pool, then you should get something close to a standard distribution curve and the median income is of some use. But in smaller cities, where you often have a set of ‘good paying jobs’ and a set of ‘lower paying’ jobs, the income distribution is highly distorted. I don’t know Wilmington per se, but if there are a lot of pharm. jobs there, that would drive demand for $250k houses where as the rest of the economy may be driving demand for $100k homes, with little in between.
I would expect builders to over estimate the demand at all income levels, though.
Cincy dad,
Good honest appraisal. I’d never really thought of it that way. Truth is you just gave it more thought just typing your post than the average builder does building a spec. house!
Truth is, when money is cheap we’re running out of land! When money is expensive there’s plenty of it. All throughout the boom end of the cycle builders/developers etc. worked off a business model of assumed demand (built it and they will come). This is most clearly evidenced by the nearly abandoned “Dark Towers of Financial Doom” we see in every city!
Wilmington NC has many golf courses, great weather, and is a very clean city. Many retirees are the ones buying these houses, when they sell their 2500 sqft house in Jersey for $600K and move down there to retire, driving up housing prices. The population of Wilmington is shifting as people retire there which is why the average income is less than 30K because most of the job creation is in the service industry. Deeping the class divide between the haves and the have nots.
“Many retirees are the ones buying these houses, when they sell their 2500 sqft house in Jersey for $600K and move down there to retire, driving up housing prices.”
Should have read “if they sell” rather than “when.” And it is now a BIG if. The proverbial “bucket of money and box of stupid” has dried up. The scheme has run it’s course. The future is pain.
I don’t see how 28k in NC, where homes can still be had for under 100k in many areas is near as bad as the avg income in CA, which hovers at around 45-50k with homes 500k and up. I think residents in Wilimington NC still have better options even if you worked at Wal-Mart for a living.
Almost 2 1/2 years ago spent about a week in the Wilmington area looking to relocate and purchase a home. After many looks,prospecting and doing just about everything else an endeavor like that entails, decided to stay away.
Impressions; even back then found housing stock overated and a bit overpriced based on area amenities and lifestyle. Sleepy small city, visible signs of old South racism and class divide, hidden but shocking pockets of poverty,moribund business climate and lots and lots of Nothern transients hiding in pseudo-upscale gated communities. Conclusion: Wilmington, a bland destination for mediocrities whose search for a life is primarily based on the lower costs offered by the geography of nowhere.
raven,
Truly solid observations, be they in Wilmington or wherever! All during the boom I kept wondering “How can there be SO many “exclusive gated communities?”
As we suspected, they were built (as were all other aspects of the bubble) on fluff and hot air. I’ve found myself in that very mindset on a number of occasions over the last several years. RE perma-bull/trolls will no doubt point out that you “could” have made a lot of money and that your hesitation cost you dearly! But look how precise your timing (not to mention your luck) would have to be to make that work! Had you not been one of the lucky “out at the peak” crowd you’d be stuck with a real dog and of course all the higher taxes and fees that go along with it!
Don’t forget that Wilmington also gets occasional visits by hurricanes.
Well, I guess because YOU wouldn’t live there everyone who does is a complete and total loser.
I don’t think he is saying that at all. Raven is simply stating a fact about many of the areas in the South, that being a marginal local economy and poverty mixed with class divide. I believe that any honest, objective person would conclude the same. The same can be said for bubbly parts of CA. And yes, many of these areas have been swarmed by bland, white bread Americans who think they have the good life living in their McMansion. Financially speaking, I believe the US is living on borrowed time, and all these “exclusive” communities are evidence of our misaligned priorities.
Agreed. Oakland CA and parts of Wilmington are similiar. Rich and poor exist on every corner and is not specific by region or historical indications.
I don’t want to speak for raven but that’s certainly not the impression “I” got! The housing boom held the promise that every man could become a king. Now…… some will be kings in Manhattan, West Palm Springs etc. but rest assured we have a “little kingdom” for all of you! So all of these communites that felt they had any appeal at all put on their Sunday best in an effort to attract retiree dollars.
Be it Wilmington, NC (or Bend, Oregon) when you strip away the granite counter tops and hastily constructed golf courses, what do you really have?
As more of these areas begun to sport the look of a ghostown abandoned in mid-construction then I suppose we’ll find out. It’s happening everywhere.
“Well, I guess because YOU wouldn’t live there everyone who does is a complete and total loser.”
No. What I implied is that places like Wilmington will see insurance costs go through the roof just like Florida’s, and that in turn will further reduce demand for housing.
so raven
where do you live now?
in a van down by the river?
in a van down by the river?
Nothing wrong with that! Great view, low monthly payments… no risk of BK due to high savings rate! He’ll be able to scoop up an actual waterfront McMansion in a few years outright!
My impressions of Wilmington were similiar but again, it should be stressed that the SE is just as diverse as the rest of the country and one isolated city shouldn’t be used as a gauge to judge the whole. There are many cities in that region of the country that warrant admirable living standards.
Agreed. For example, my in-laws retired to Asheville, NC, a nice small city with lots of amenities. We love to visit.
Not to sound nasty, I hope that most people from bubble-zones fail to realize this. A swarm of people who think 500k for a home is a “steal” will ruin the economic balance of a region that doesn’t function on NY economics. I think it may be too late and NC will look awfully similiar to anywhere NE coast in 10 years or less.
My hope is that the bubble will burst in these bubble zones fast enough to stem the flood of immigrants.
A typical rule of thumb, I believe, is that the price of the new home is three times what just the land cost.
In the past, high land prices led to larger and higher finish homes being built.
With land prices dropping, I’d say watch for smaller new homes and perhaps less high end new homes.
Who do you expect to absorb the record inventory of lower-high-end homes priced at $300K on up (aka McMansions) currently sitting on the market?
Well, since so many people in my area drive beamers, Lexus, and Hummers, I’d say not to worry. Everyone in CA is rich!
Honestly, I ask myself that same question every single day as I drive past hundreds of homes still being built. Just who will buy all these? I might, but only if they get a 40% haircut. Actually, scratch that, I don’t want anything built during this boom. I see a bright future for construction defect attorneys, based on what I have seen and heard.
CA Guy,
You’re definitely starting my Monday out right! I don’t know how many times I’ve thought to myself I don’t want any part of any home built, bought or re-fi’d during the boom!
Built b/c they couldn’t wait to get on to the next house.
Bought b/c the “owner” can’t imagine selling it for less than he so wisely paid!
Re-fi’d b/c the seller can’t AFFORD to sell it for less than he just borrowed against it!
Besides, the stock built in the 90’s (pre-madness) was done at a more measured pace and before we all became “playahs”! Thanks!
DinOR,
I had to step away from the blog for a while and do some actual work! At present I am renting a bubble home, built in 2003 by one of the national players. It is fine for the moment, but I would not want its ownership around my neck. We have had some minor issues, but I have heard of others that had big-time problems. Code violations requiring significant demolition and repair, faulty plumbing and electrical, etc. There is a complete lack of attention to detail, and this is just what can be seen with the naked eye. It was an easy enough warranty repair, but when your hot/cold are reversed, it makes you wonder what they missed behind the drywall! I would much rather buy something done by a smaller scale builder with local roots. I know some guys like that, and they actually care about their reputation, unlike the brothers Toll and KB, etc.
When I was younger I wanted a Benz when I grew up. It meant something. Maybe it was shallow of me, desiring a status symbol to signify that I had ‘arrived’ or something. (Alas , ’twas a long time ago in any event ). But, even in my youth, I knew I would never have purchased a car like that until I could easily pay cash for it and not give it a second thought. It’s the same thing we’re seeing across the RE market. Addiction to debt, death of thrift or any kind of financial restraint. I see people I know who make 40 grand driving around in 60K Beamers and Benzes all the time now. It’s a serious sign of how utterly off course so many Americans have strayed. By and large, people should probably not be spending more than their annual income on an auto imo. But you see it everywhere. Retail clerks making 25k driving a brand new loaded Camry. Same thing. Maybe I’m just showing my age and disconnect with the new economy. Never had a car loan in my life. (in case anyone is curious - have a 3 year old Prius that I love , and no , I’m not necessarily a tree-hugger because of it :-)).
If you don’t have a lot of money, USED is the way to go. Nothing like a three year old Camry where the price is low and the car is still very young.
“By and large, people should probably not be spending more than their annual income on an auto imo.”
lol
Oh my god!??! Your telling me there are actually people who spend more then their annual income on a car!?? Please, please tell me your kidding. My head is about to explode.
I just bought a new car a few months ago (my first new car ever, but I am 30 years old, so I guess that’s not far behind schedule). It cost me 1/3 of my annual salary (about), and I financed it at a great rate (4.9) for 5 years. I had to think long and hard about that purchase; am I making a mistake spending this much on a car? That seems like a big payment to make every month. And I get paid for milage in my job; the reimbursment is pretty much about equal to the car payment each month.
OH COME ON. Nobody buys a car that cost more then their annual income??!? Please, please, tell me that a lender would not make that deal.
Even if you have some money to spend, used is the way to go:
2007 Audi S4, Loaded, MSRP(w/gas guzzler tax) - $54,000;
2005 Audi S4, Loaded, Autotrader(internet) Price - $42,000
Savings - 23%
Seems to me that earning 23% on your money isn’t nearly as easy as that…
Oh yes! The lender will approve an Escalade or Hummer on a $50K salary. I have even seen ads for seven year financing! It’s all about that monthly payment. Food and shelter are secondary!
I’m a big believer in the used car way, but my wife and I bought our first new car (Honda) last year (at age 31). When I was a kid a Cadillac was a nice car and Benz was only for those with actual wealth. My grandparents had Caddies, and my dad’s attorney friend had a Benz. This was only after a number of years practicing law. Now days you see kids driving German “luxury” straight out of college. I don’t understand it either.
In CA a majority of the Benz & Bimmers are leased to people that make less than the cars list price. I remember someone at the Fletcher Jones dealership in Newport Beach stating that most of their clients make around $50K. All show, rented go.
I don’t get it either… spending one’s yearly income on a car??? I paid about 40% of my income for a new car in 1999, and that was with $5K down and 0% interest for three years, and I *still* felt stretched to make the payments. And I am not a big spender!
At the dealership, when they saw my stellar credit score, they tried very hard to get me to move up from a $17K car to a $26K car. I just kept saying no, no, no until they finally believed me…
I still have the car, and intend to drive it into the ground. In the meantime, I’m saving some money, so I’ll have a nice downpayment for the next one.
“Oh my god!??! Your telling me there are actually people who spend more then their annual income on a car!?? Please, please tell me your kidding. My head is about to explode.”
LOL welcome to the 21st Century, Michael Fink…
Don’t you know it’s a New Paradigm????????
What an irony: the objective to shed the appearance of being middle class is driving said middle class into bankruptcy and/or oblivion.
This old-timer remembers when any set of wheels, and I mean any ride was a point of pride. In fact, we engaged in sort of a reverse snobbery: whose POS vehicle managed to motor on despite many mechanical and structural defects…I vividly recall riding over the Penrose Avenue bridge, and looking through a hole in the back seat floor, which peeked through a hole in the bridge, to the lovely murky waters of the Schuylkill river below.
Yes, Sonny, those were the days…
“Who do you expect to absorb the record inventory of lower-high-end homes priced at $300K on up (aka McMansions) currently sitting on the market?”
This is the million dollar question in all bubble markets, especially the ones with low paying jobs. I am in Reno, NV right now, and I am laughing hysterically as I have been driving around numerous developments. WAY, WAY too much high end stuff. Lots of land, both improved and unimproved, showing up on the mls now. Starting to see more and more large discrepancies in pricing (similar lots, dissimilar prices). I read a listing yesterday, all utilities in, foundation poured, comes with complete set of plans, etc. Desperation is starting to set in. I heard from a friend that his realtor acknowledged that a home which would have fetched $800k last year, would be lucky to grab $550 right now. And the bottom is nowhere in sight.
The hurricane point is key. What is insurance going to be like there, compared with Raleigh-Durham or Charlotte?
The most prosperous parts of NC, GA and VA are inland, not on the coast. They my be fortunate in this relative to FLA in the end.
My family is from Wilmington (I am a member of the Foy family associated with Poplar Grove Plantation) and live in the historic district.
There are definitely some McMansions out by the sound. However, most of the speculation has been in
(a) renovating old properties in the historic district (my Mother’s 1904 bungalow house is “worth” double what it was in 2000).
(b) Condos at the beach.
Once you get out on 17, there are a lot of golf course communities. But unless things have changed in the past two years, those never sold well.
I dunno, but I am still amazed at how people can afford these houses on incomes around the median (which I believe is ~$48,000). We purchased a house in the Pacific NW this summer. We took a few months off to travel during the move and our annual earnings this year will come in right around the median, probably a bit lower, as we’re are both not fully employed yet.
My point is, I do not see how people can get buy living on mortgages that are 30+% of gross income. We are right now paying close to that and are stretching our budget to the limit. And this is with one auto (we sold the other because we didn’t need it) that is paid off and no kids. And we don’t watch TV, so we have no cable. We do have DSL and a cell for the business, but that’s about the extent of the lavishness. On top of that, we rarely eat out (although we do buy better quality food and ingredients to cook). And with our down payment, the mortgage is approximately $200K, 30-yr fixed.
There are some screwed people out there. I don’t see how they are going to make when the ARM’s reset. Maybe that’s why I keep getting drawn this blog…
Uh-oh. It had to happen. I found kindred spirits on this blog. with a tip of the hat to B-hamster, I have a confession to make: I don’t watch TV either. Hence, no cable here, except for the Internet access.
You guys aren’t the only ones. I am in a low spot and I receive exactly two channels on my TV. Most of the time that is still two channels too many. I do have cable Internet, but cable TV is absolutely useless.
Be sure to click the link and read the complete article. The edit left out much of the full article’s data and information concerning the actual current market conditions in the City of Wilmington.
When you read articles, (in full), like that one in the local press, is when savvy buyers know to hold back from “catching a falling knife”. No matter which market someone buys real estate in today, it will be worth less in a year from now. The question is, by how much. I’m guessing anywhere between 10 to 25% less, based on market location.
I’ve been reading this blog for a while to get feedback on the Carolinas (my home for 14 yrs) and have to make the observation that in my whole time here, we have had steady population growth, but this past year it has been stunning. We discuss at social events the number of out of state plates you see everywhere you go (Florida plates are everywhere!). My kids’ school has so many more children than expected that they are at their capacity.
Real estate prices have risen slowly but steadily, but this summer jumped dramatically. I have a feeling the bubble peak has squeezed in here from the areas through which it has passed, and the prices we are seeing today are the highs.
Just too many houses from 450K to 700K going up all over, really saw few of these until last year (median at 227K right now).
Just an observation from the Upstate of SC…
Wilmington is different. Property values near the beach and water will never go down.
The water will never go down. Isn’t that what people said in flooded parts of New Orleans after Katrina?
Wilmington is different? Bull!!!
I live in Mobile and thats what everyone says about here. Good economy? Yes. Relatively good paying jobs? Yes. Over-priced housing? You bet.
This bubble may not affect Mobile that much but eventually even we will see some unwelcome issues. This bubble is a nationwide phenomenum and will hit us all. Sooner or later.
“Wilmington is different? Bull!!!
I live in Mobile and thats what everyone says about here.”
It’s different here. That’s what I heard when I lived in Lake Tahoe. I hear the same thing here between Seattle and Vancouver. I am sure that is repeated a hundred places around the US.
Everyone…and I mean EVERYONE in my area(CA) thinks it’s different here. They really believe it!!!It CAN’T be different EVERYWHERE…why…that would make it all the SAME…wouldn’t it?
It is different! That’s why they are different places. Every place is different. Is it better? Is it worse?
W.C. Fields said. “Some things are better than sex, and some are worse, but there’s nothing exactly like it. ”
Goes for places, too.
Wow, what a thrill. I’m finally quoted in an article on Ben Jones’ blog. I need to answer Bryan:
Comment by Bryan
2006-11-27 11:45:12
“Wilmington is different. Property values near the beach and water will never go down.”
In three years time, 2002 Carolina Beach lots, like I bought for as little as $30,000, sold for as much as $300,000 (I wasn’t smart enough to hold them long enough to make the big payday). Now people are lucky if they get $150,000. The mls shows around 550 homes for sale, but the real number is around 1,000. In october there were 11 sales (down 80% from last year). If you crunch the numbers, Carolina Beach has more than a 7 year supply of homes for sale. Those who aren’t upside down in their beach homes, are starting to bring prices down to early 2004 levels. On the other hand, where else can you rent a $500,000 ocean view 2,000 sq.ft. townhouse for $1,000 per month?
The mls shows around 550 homes for sale, but the real number is around 1,000.
How does one obtain the real numbers? I don’t trust data the local realty mob produces.
There were more than 1,000 homes for sale 7 months ago, and we’re only averaging 14.5 sales per month. The 550 mls number is only that low, because approx 500 sellers have given up and pulled their homes off the market.