Friday, November 12, 2004

Home values growing slower in Triad, but that's not all bad

Michelle Cater Rash

Triad housing appreciation trails significantly behind the national average, creating an ever-widening gap and putting less money in homeowners' pockets.

One might call it a lack of appreciation, but experts say it may actually be a blessing in disguise.

While slower growth in housing values provides less disposable income for sellers, experts say it keeps prices affordable, which could be a hedge against the housing bubble and an important factor for attracting businesses and people to the region.

Experts say there are several reasons why Triad housing prices are lagging, ranging from a poor economy overall to an abundant supply of undeveloped land that has allowed the Triad's housing supply to continue to grow.

The Office of Federal Housing Enterprise Oversight tracks average housing prices on regional and national levels. Until the late 1990s, housing prices in the Triad had risen at roughly the same pace as prices nationwide.

That began to change in 2000. Since then, nationwide housing prices have risen 35 percent over that period, averaging 7.7 percent a year. Triad housing prices have risen less than half as fast at 14 percent over the same period, averaging 3.3 percent a year.

"The Greensboro homeowner is a lot poorer than his equivalent nationwide," says Don Jud, an economist and researcher associated with the Bryan School of Business and Economics who analyzes housing data for the Triad Multiple Listing Service. "He's missed out on one of the great bull markets of this century."

While housing prices in the Triad lag behind those in Charlotte and Raleigh, housing in North Carolina as a whole is more affordable than most of the nation. North Carolina ranks 44th out of the 50 states and Washington, D.C. for housing appreciation, according to the Office of Federal Housing Enterprise Oversight.

The causes

Why the lag?

Experts say the high number of jobs lost during the last several years has made it harder for people to afford even inexpensive housing.

While the entire nation felt the pinch of the last recession, traditional industries like textile and furniture manufacturing took some of the biggest hits. With plenty of workers already here and available, very few people were moving into the area.

At the same time, developers have been building hundreds of new homes, boosting the supply of available housing. At the end of the third quarter, there were 8,700 homes for sale in the Triad metropolitan statistical area -- almost 2.5 times the number of homes that had been sold during the quarter.

"It's all supply and demand," says Joan Swift, a Realtor with Coldwell Bankers Triad Realtors in High Point. "If there's not enough demand, then prices are going to stay low."

Jud says even having the ability to build new houses has helped to keep housing costs low.

In many metropolitan areas, Jud says, the amount of available land for new developments is very limited or the land is so regulated that it makes it expensive to develop. This has pushed housing costs up. Central North Carolina has plenty of available land and relatively few development requirements.

Low prices not all bad

Experts say there are some advantages to seeing only a small appreciation in housing costs.

The biggest advantage is that it makes an investment in the Triad housing market a lot less risky, says Bernard Helm, the president of Market Opportunity Research Enterprises, a Rocky Mount company that tracks housing trends.

At some point, he says, the nationwide housing bubble is going to burst, quickly devaluing homes across the nation. The Triad is at minimal risk for that.

"With rapid appreciation, there is also a chance for rapid depreciation," Helm says.

Low housing prices are also good for development.

"I don't think folks should be complaining about having inexpensive housing," Helm says. "To me, that is why a company like Dell is coming to the Triad."

By locating in a market with lower housing prices, companies like Dell can give employees being transferred to the market a salary increase without paying any extra money, Helm says. Those employees can sell their old homes and either buy a nicer home in the Triad or buy a similar home and pocket the difference as extra disposable income, he says.

Experts say the announcement that Dell is locating in the Triad may cause prices to rise a little faster if new workers move to the area, although they say the Triad will still not see huge appreciation.

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