COVID and the Cape Fear Residential Real Estate Market by Robert Burrus
Contributed by Edward Graham, Professor of Finance and Real Estate, Cameron School, UNCW
About a year ago, comments were shared by this author regarding the expected impacts on commercial real estate of the COVID “pandemic”. Massive exits from places such as New York and San Francisco have been observed, with some of the wealthiest residents evacuating to Long Island and Westchester County outside of New York City, and across the country for digitally connected and zoomed-in locals. many cities. Last year, commercial building occupancy rates were expected to decline and values ââto be negatively affected in âvertically denseâ communities like New York and Chicago. Commercial occupancy has declined in many larger and even mid-sized cities, with subsequent drops in rental rates and property values, but the industrial and residential real estate markets have been, as expected in the first months of the pandemic in the middle of -2020, clearly âwinnersâ. The size, depth and breadth of this “win”, particularly in the residential markets, has been remarkable.
With the pandemic, there was little certainty about the impact of communities like Wilmington and the Cape Fear area. There is more clarity now. Median listing prices in many mid-sized communities across the United States fell in the first two months of the closings, but recovered in most markets in June or July 2020. Home prices in Wilmington and across the country have grown since then. .
In February of this year, an article in the the Wall Street newspaper reported that in January 2021, the roughly 180 housing markets tracked by the National Association of Realtors saw monthly price increases among homes sold in various markets. Every market at the start of this year reported that house prices had gone up. This had not happened before. Earlier this year, evidence was provided that, even in real inflation-adjusted terms, house prices are now higher than ever. Wilmington presented similar models. Home prices appear to be at an all time high in the Cape Fear area, and homes remain on the market, once listed, for remarkably short periods of time.
The data published by Cape Fear REALTORS betrays these patterns: Local market update [link below], median selling prices increased by almost 10% during the year ended in April 2021. For townhouses and condos, a median price increase of 17.6% was observed during the year. same period. Prices are rising, days on the market are shrinking, and the inventory of homes for sale – both in the single-family and townhouse / condo market – has fallen almost 75% in the past twelve months. Sellers are usually rewarded with quick offers for their new listings.
It seems to be a seller’s market. But, it’s a two-edged sword. An article from May 4, 2021 in the the Wall Street newspaper describes these two “edges”. Laurie Goodman, vice president of housing finance policy and founder of the Urban Institute’s Housing Finance Policy Center, comments on Federal Housing Finance Agency data dating back to 1991. She observes interest rates historically lows that exist today in Wilmington and across the United States and believes that “housing prices are unlikely to come down.” But Susan Wachter, a real estate professor at Wharton, does not believe in the constant rise in house prices and reminds young buyers – whether in North Carolina or North Dakota – not to “stretch financially.” And take the risk of not being able to pay the mortgage. It is a painful lesson learned by millions of families just over a decade ago.
At the start of the pandemic, Wilmington seemed well positioned to accommodate families migrating away from vertical density in much larger cities. Now, with effective vaccines widely distributed, and large numbers of residents returning to SoHo and Chelsea and other parts of New York City, and with malls like Independence Mall in Wilmington appearing to be “renting” faster than some. ‘expected, and the region’s economy appears to be – for the most part – returning to’ normal ‘. But the warnings of Goodman and Wachter must be kept in mind; the area’s home values ââmay continue to rise, but at the same time, new home buyers should be wary.
The residential markets of Wilmington and the United States are not as leveraged or exposed to financial risk as they were in the mid-2000s, before the bursting of the real estate âbubbleâ. But owners’ attention should always be given to the uncertainty that the future always holds; house prices today are on the rise, and homes bought just a year or two ago have proven to be great investments, but there is no guarantee that home prices in Wilmington or the States United will continue to increase. They cannot continue to increase, indefinitely, at the current rate.
Robert T. Burrus, Jr., Ph.D., is the Dean of the Cameron School of Business at the University of North Carolina at Wilmington, appointed in June 2015. Burrus joined the UNCW faculty in 1998 Prior to assuming his current role, Burrus served as Acting Dean, Associate Dean of Undergraduate Studies, and Chair of the Department of Economics and Finance. Burrus earned a doctorate. and a master’s degree in economics from the University of Virginia and a bachelor’s degree in mathematical economics from Wake Forest University. The Cameron School of Business has approximately 90 full-time faculty members and 30 administration and staff. The AACSB-accredited business school currently accommodates approximately 2,600 undergraduate students in three degree programs and 750 graduate students in four degree programs. The school is also home to the prestigious Cameron Executive Network, a group of over 200 retired and serving executives who provide one-on-one mentorship to Cameron students. To learn more about the Cameron School of Business, please visit http://csb.uncw.edu/. Questions and comments can be sent to [emailÂ protected].