Building permits hit the skids.
|DOLLAR VALUE LISTED ON BUILDING PERMITS - (Residential New)|
Sales of new houses made up about 36% of the total Wake county unit volume sales in 2007, and about 32% in the first 8 months of 2008. By dollar sales volume, at $2.8B new houses were 43% of the $6.5B Wake county real estate sales in 2007.
Building permits are a good predictor of future new home sales activity. From the above chart, it is very clear that as 2008 came to a close, the significantly lower dollar level listed on building permits will impact future total dollar sales of new houses.
Now here's the big deal. The average sales price of the new houses in Wake county was higher by almost 6% in the first six months of 2008 compared to new houses in 2007. The average new home price is about $314K (depending on timeframes and how you count) which is considerably higher than the average resale home price of about $226K. The trailing 12 month average price (through 6/08) for all houses across Wake county is about $258K.
ConclusionsWe are clearly in a tough environment. Like everyone, I would like prices to keep going up. But you should consider price corrections as a necessary condition in a healthy market. This area can only dodge bullets for so long. In the longer term, the drop in permit activity should help repair some of the current market supply/demand imbalance. Based on the collapse of the dollar value of housing permits, future new house (dollar) sales volume should follow this trend in 2009. If and when this happens, the average Wake county sale price per unit should also fall due to a higher percentage of total sales being existing resale units.
Investors who understand the dynamics of the current real estate market, and who can put the numbers in proper context, should be prepared to filter through the upcoming (2009) bad sales and price data reported by the press.
When the news gets unbearable for your clients, contact me about your slow moving listings or REO/HUD deals that need quick cash closings.