The New York Times published a story that our real estate reporter, David Bracken, has been writing about for months, if not longer.
The housing industry is experiencing a standoff of sorts. There is a shortage of single-family homes for sale around the country. We have been seeing this in the Triangle. But it is a strange kind of shortage that doesn't seem to result in a big jump in prices or a buyer frenzy. It is as if supply and demand are existing in different economic universes. Let me explain.
At the end of February, there were 7,515 homes on the market here. That was 20 percent down from last year and 40 percent down from two years ago, according to Triangle Multiple Listing Services data. That means that this area has a five-month supply of homes for sale.
But the average sales price of a home is up just 1 percent and a crucial metric, the number of days a home stays on the market, continues to drop but is still at 117 days.
So, while the Times story suggests that in some markets around the country sellers are getting multiple offers, prices are jumping and the homes are flying off the shelf, something is still holding this market back.
I think that's because the Triangle housing market is still recovering. There is an undercurrent of buyers and sellers still groping around, trying to get a bead on things.
Unemployment, by Triangle standards, is still very high, at 7.7 percent at year end. At the end of 2006, the Raleigh-Cary-Durham jobless rate hovered at 3.5 percent. People without jobs don't buy houses. OK, maybe they did during the subprime days of yore when you could get a mortgage by fogging up a mirror. But not today.
There are other wet blankets on the market. Buyers and sellers are playing a waiting game. People who bought a house back in the mid-2000's for, say, $250,000, may be sitting on real estate that is now just worth $220,000. They may owe more than their house is worth, and sellers don't want to come to the closing table having to write a check to pay off the mortgage balance that the sales price doesn't cover. They were raised by their parents to believe that you walk away from closing with money, the equity that has grown over time.
Buyers, for their part, aren't sure that prices have really, finally, absolutely bottomed, despite evidence to the contrary. Somewhere, out there, is a crazy good deal where they can practically steal a house from desperate sellers.
And, believing that they have the upper hand, they want the homes to be brought up to pristine condition.
No nail holes, no carpet stains, no loose hand rails.
So while the things we learned in that 8 a.m. Econ 101 class -- you never missed a lecture, right? -- suggest that we should be reaching equilibrium soon where all buyers and sellers come together where the supply and demand curves intersect at a price they can live with, it hasn't happened. (Editor's note: For the econ professors out there, I know the curves represent "quantity supplied" and "quantity demanded." Don't email me. I was awake in Econ 101. I'm a journalist engaging in shorthand.)
Sellers are on a sort of strike, keeping their homes off the market, and buyers are being tougher than maybe they should be.
The only thing that will deliver a jolt to this impasse is going to be a significant drop in the jobless rate. In other words, more people working. That isn't going to happen fast. A couple of the historic engines of growth in the Triangle were state government and the universities. Well, the Republicans who now control the legislature and the governor's mansion are definitely not interested in boosting the number of public sector employees. The reverse is true.
They will argue that shrinking government leaves more money in the hands of the private sector, and the jobs will be created there. I have no doubt of this, over time. But it will take time for this transition. Someone who loses a government-funded job -- in the state bureaucracy, as a teaching assistant in an elementary school, or at a university -- doesn't walk into a new private sector job overnight. Then there is the sequester, which may cost this area jobs -- we have folks here who commute to Ft. Bragg and to Seymour Johnson Air Force Base, as civilian employees and defense contractors.
And there are plenty of private employers who are uncertain about what Obamacare will mean for them. Will that additional employee push them over some magic number that will increase their health care costs?
I don't want to sound overly pessimistic. Eventually, the market clears. We have been in a five-year funk. It has been so long that people forget what good times feel like. There is a lot of pent-up demand for housing. In the past five years, a lot of kids have graduated from college and are now in their mid-to-late 20s, and they are forming families and they want a backyard. A lot of folks who bought starter homes back in 2008 want to move up to a bigger house. The Triangle is still growing; Raleigh-Cary is still one of the fastest growing areas in the country.
So the housing market will continue to stabilize, prices will be firming up and rising, and more sellers and buyers will come to terms. Just how fast is tough to gauge, but things are a heck of a lot better than they were a few years ago.