& Associates Annual Market Report 2010 President s Message & Executive Summary National Housing Forecast & Economic Outlook Regional Market Review Page 2 Page 3 Page 4
President s Message We are pleased to provide you with a copy of our annual market report. For over three decades our mission has been to deliver real estate services of exceptional quality. We believe a significant portion of that responsibility is to provide timely market analysis and insight to our past, current and future clients. This report is the result of the research of numerous individuals within our organization. It is this type of teamwork, an unwavering focus upon our customers, and the assembly of Western North Carolina s top real estate professionals that has continuously garnered and Associates position as the market leader. We hope that you find the information contained in this report helpful. We welcome the opportunity to be of service in the year ahead. Warm Regards, Neal Hanks Jr. President Executive Summary Pace of Sales The pace of local real estate sales in 2010 could be described as a roller coaster ride. The year began with federal tax credits powering sales into a sharp incline. When the credits expired in June, sales reversed, declining through summer s end. In late fall, the market leveled out and the year ended with results very similar to 2009. The number of transactions was virtually flat 8,908 in 2010 compared to 8,932 the previous year. Even with the modest decline in 2010, there is reason for optimism in the real estate sector. Buyer interest in all areas appears to be growing and when the strong holiday retail sales are considered it appears that consumer confidence is improving as well. I have long believed that consumer confidence is the catalyst needed for the real estate market to expand. Our prediction for the pace of sales in 2011 is for continued modest growth throughout the year. Not too exciting if you are into riding roller coasters, but good news for all of us with an eye on the real estate market. Inventory Levels Inventory levels remained elevated through most of 2010 with some improvement in the third and fourth quarters of the year. Much of the improvement, however, may be attributed to seasonal fluctuations as owners whose properties had not sold removed them from the market during the holiday season. The ongoing introduction of foreclosures and the large number of owners who have been waiting for signs of market improvement before listing their homes for sale will likely add to our already inflated supply levels. Expect inventory levels to remain high throughout 2011. Home Values With only a modest increase in sales pace projected for 2011 and inventory levels expected to remain above normal, price appreciation is still a ways off. In fact, downward pressure remains a reality in some market segments and price points. Overall, prices are stabilizing and significant movement in either direction is unlikely this year. Regional Home Sales Report 2006 2007 2008 2009 2010 % Diff. '09-'10 Home Sales (units) 8,779 7,569 5,175 4,611 4,649 +0.8% Avg. List $272,414 $290,241 $274,135 $256,566 $251,244-2.1% Avg. Sale $262,503 $278,809 $259,409 $238,818 $231,710-3.0% % Diff. List/Sell 96% 96% 95% 93% 92% Avg. Days on Market 90 104 125 150 170 +13.3% 2
A Thousands! B C 1,200! 1,000! 800! 600! 400! 200! Percentage Rate! 0! 20.00! 18.00! 16.00! 14.00! 12.00! 10.00! 8.00! 6.00! 4.00! 2.00! 0.00! National Housing Forecast and Economic Outlook Source: National Association of Realtors, Research Division October 2010 Outlook NAR Home Affordability Index & Median Sales Price! Single Family Residential: National! 0.0! 20.0! 40.0! 60.0! 80.0! 100.0! 120.0! 140.0! 160.0! 180.0! 200.0! $217,900! NAR: National Housing Forecast! Q1 2011! Q2 2011! Q3 2011! Q4 2011! Q1 2012! Q2 2012! Freddie Mac Primary Mortgage Survey! $196,600! 2007! New Single Family Sales! Housing Starts! Existing Homes Sales! Although Freddie Mac attempts to provide reliable, useful information in this document, Freddie Mac does not guarantee that the information is accurate, current or suitable for any particular purpose. Estimates contained in this document are those of Freddie Mac currently and are subject to change without notice. Information from this document may be used with proper attribution. 2010 by Freddie Mac! $172,100! 2008! 30 Year! 15 Year! 5/1 ARM! 1/1 ARM! 2009! 2010! $173,091!!"#$%&'()*+,"-*.(/00"%,*+,"-("1(2&*.+"$03(( 4"#0,-5(/11"$6*7,.,+8(9-6&:( 6! Millions! Housing Sales to Improve in 2011 Steve Murray, editor of Real Trends, predicts 2011 will be the first year in the past six where housing sales will be better than the prior year. The slowly improving employment picture, low interest rates, affordable house prices and a rise in the net worth of households will lift new and existing home sales by 3-4%. Price increases will continue to be minimal with an overabundance of inventory favoring buyers. Many overlook the significance of consumer confidence, which dropped to a record low in 2008 and has now come back to half of its normal level, but there is great room for improvement. While housing will grow in 2011, it will continue to be restrained until confidence returns in the economy. Long term, the environment for housing sales will be highly favorable as inventories remain above the level of demand and rates remain low. New home starts will pick up in 2011 from their record lows 09-10 which will keep a ceiling on home prices. See Graph (A) for details. Homes More Affordable Now Than in a Decade Steve Harney, editor of Keeping Current Matters, a national publication dedicated to analyzing current real estate trends, offered his insight into home affordability. Prices have reached levels not seen since before the housing bubble. You can purchase a home today at the same price it sold for seven years ago. And it will actually cost you less. Consumers often confuse the importance of price over cost. Price is what you agree is the value of the home. Cost is what you pay every month in the form of a mortgage payment. The cost is a combination of the price and the interest rate, Graph (B), you will pay over the life of the loan. The cost number is far more important to consider when making a long-term decision. Home Affordability Index Rising The National Association of Realtors (NAR) calculates a Home Affordability Index that combines the median cost of homes, interest rates, and median household income. The higher the index number, the more affordable the homes. Graph (C) indicates that affordability has rapidly improved over the last half of the decade but may be finding a balance due to the slowing decline in values. 3
Modest Price Ranges Continue to Dominate Sales Homes in more modest price ranges continued to dominate sales in the region. The average sales price of $216,336 was down from $224,252 in 2009. Fifty-six properties sold for over $1 million last year, which is an increase of 12 sales. Price concessions typically increased in proportion to the contract price. For example, properties selling for under $300,000 sold for about 93% of asking price, while properties which sold for more than $1 million negotiated an 85% list-to-sale percentage. Regional Market Review A $262,503! 8,779! Average Sales Price Vs. Residential Unit Sales! NC Mountains MLS! $278,809! 7,569! $259,409! 5,17 $238,818! $231,710! 4,611! 4,649! Distressed property sales remain strong competition for more traditional home sales and continue to comprise a small but influential market segment, placing downward pressure on prices in all categories. This trend is expected to continue through 2011. Like much of the nation, WNC remains a strong buyer s market. While residential inventory appears to have declined from the seasonal high of 9,700 in July, year-over-year inventory remains consistent with 2009 levels. At present, supply continues to outpace demand. B 190! 2006! 2007! 2008! 2009! 2010! 11,500 plus properties sold in 2010, demonstrating that those that are compellingly priced are attracting buyers. Average Days on Market Vs. % Difference Between:! List Price And Sales Price! NC Mountains MLS! 97%! Both Graph (A) and (B) illustrate the dramatic shift from a seller s to buyer s market over the last five year period. In 2006, demand outpaced supply resulting in higher sales prices and a swift sales pace. Most experts concur that this unprecedented demand could not be sustained, resulting in the current price corrections that will ultimately normalize the housing market. C 7599! 7757! 12 Month Residential Sold Units Vs. Residential Active Units! Buncombe, 12 Month Henderson, Residential Haywood, Sold Madison, Units Rutherford, Vs. Residential Polk, Transylvania Active Counties! Units! Buncombe, Henderson, Haywood, Madison, Rutherford, Polk, Transylvania Counties! 8367! 9024! 9024! 9668! 9764! 9750! 9596! 9126! 845 Active Units! Sold Units! 7537! 170! 150! 130! 110! 90! 70! 50! 30! % Diff. List/Sell! Avg. Days on Market! Avg. Days on Market! % Diff. List/Sell! 2006! 2007! 2008! 2009! 2010! Abundant inventory results in extended marketing periods. As is illustrated by Graph (C), a direct inverse correlation can be drawn between prolonged days on market and significant price concessions, making it crucial for successful sellers to enter the marketplace aggressively priced. Plentiful inventory coupled with low interest rates makes this an ideal market for buyers in all categories and price points. 96%! 95%! 94%! 93%! 92%! 91%! 90%! 260! 241! 383! 463! 460! 579! 373! 394! 393! 35 330! 390! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! 4
Land Prices Return to Below 2005 Levels Everyone needs a roof over their head. A home is a necessity while land is a luxury. Like boats, recreational vehicles, and second homes, land is often sold at sacrificed prices to raise cash when times are tight. Financing from traditional lending institutions for land transactions continues to be challenging to obtain. Would be buyers have struggled with this need since the financial crisis intensified in the fourth quarter of 2008. This is an unparalleled opportunity for land buyers with cash. Sales of parcels over 20 acres mirrors the weak lot market. Significant lot inventory and too few buyers means the market for large land tracts will continue to suffer in 2011. The massive land development that occurred between 2005 and 2007 inflated price per acre beyond what the market could bear long term. The overwhelming majority of residential lots are priced under $100,000 as shown in Graph (B). Regional Land Market Review 1307! 147! 170! 9 66! Modest Price Ranges Continue to Dominate Sales Residential Vacant Lots: 0-3 Acres With Restrictions! Buncombe, Henderson, Haywood, Madison, Rutherford, Polk, & Transylvania Counties!! 967! 1066! 6 86! 20 63! 22! 1 7! 6! 49! 72! 49! 48! Buncombe! Henderson! Haywood! Madison! Polk! Rutherford! Transylvania! Current inventory as of January 6, 2011 is 612 units, which presents a 13 year supply at the current absorption rate. C $14,000! $12,000! $10,000! $8,000! 541! Average Price Per Acre Vs. Land Sales (units)! Land Parcels Greater Than 20 Acres! 184! 216! 149! Jan'11 Active Inventory! 2009 Sold Units! 2010 Sold Units! 679! A 250! 200! 150! B $1m+! 0.37%! $750k- $1m! 0.33%! $500k-$750k! 1.08%! $400k- $500k! 0.96%! $300k-$400k! 2.42%! $200k-$300k! 5.02%! Price Range Distribution: Active Residential Vacant Lots 0-3 Acres! Buncombe, Henderson, Haywood, Madison, Rutherford, Polk, & Transylvania Counties! $100k-$200k! 20.32%! $0-$100k! 69.51%! $6,000! $4,000! $2,000! $0! 107! 2004! 200 2006! 2007! 2008! 2009! 2010! Land transactions over 20 acres across the region continue to fall, and the dollars per acre are now below 2005 levels. 51! 37! 46! 100! 50! 0! 5
Buncombe County Market Review Buncombe County Remains High in National Rankings Asheville was once again ranked nationally as both a great place to live and to grow a business. Included in the list accolades were: # 1 Of Top 25 Small Cities, American Style (May 2010) # 1 Of the 100 Best Places to Retire, Topretirement.com and Market-Watch (February 2010) # 6 Among All Us Cities as a Place to Do Business, Forbes (July 2010) A 100! 90! 80! 70! 60! 50! 40! 30! Absorption Rates:! Average Price, Slowest, and Fastest Absorption! Buncombe County! Slowest Absorption: $800k-$899k! Average Price Range! Quickest Absorption: $75k-$150k! The price point with the highest number of properties on the market, and lowest number of sales, was the $800,000 to $900,000 range, Graph (A). Seventy-one percent of all residential properties sold in Buncombe County were priced under $300,000, with the $75,000 to $150,000 price range seeing the largest percentage of sales and the least amount of available inventory, Graph (C). While a slight increase can be observed in the number of active listings, the Buncombe County market is still far from a balanced market of supply and demand. Until the market achieves more balance it will continue to be a buyer s market, and that makes 2011 a great time to purchase property in Buncombe County. 20! 10! 0! B Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Distribution of Total Sales By Price Range! Buncombe County! C 2759! 2843! Total Inventory Vs. Closed Unit Sales! Buncombe County! 3182! 3182! 3182! 3509! 3460! 3440! 334 3221! Active Inventory! Sold Units! 2970! 2652! (4)! 14.86%! (3)! 21.83%! (5)! 10.53%! (6)! 6.93%! (2)! 23.61%! (7)! 4.65%! (8) 3.24%! (9)2.32%! (10)1.46%! (11) 0.91%! (18)! 4.38%! (1) 5.29%! (15) 0.27%! (14)! 0.82%! Other 4.4% (13)! 0.68%! (16)! 1.41%! (12)! 1.00%! (17)! 0.18% 207! 240! 218! 26 126! 117! 181! 189! 168! 164! 137! 182! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! (1) $0 to $74k! (2) $75k to $149k! (3) $150k to $199k! (4) $200k to $249k! (5) $250k to $299k! (6) $300k to $349k! (7) $350k to $399k! (8) $400k to $449k! (9) $450k to $499k! (10) $500k to $549k! (11) $550k to $599k! (12) $600k to $699k! (13) $700k to $799k! (14) $800k to $899k! (15) $900k to $999k! (16) $1m to $1.99m! (17) $2m to $2.99m! 6
Henderson County Market Review Average Sales Price Increases in Henderson County The residential market in Henderson County saw the average home sale price increase by almost 5% to $224,533. This is the first increase since 2007, which indicates that property values are beginning to stabilize in Henderson County. On average, 83 homes closed monthly. The active inventory was down slightly (6%) compared to 2009, with the average days on the market increasing by about 1 month over the prior year. The most active price range continues to be under $300,000. Henderson County is somewhat unique in that just over 50% of its sales take place above and below its average sales price as seen in Graph (C). A B Total Sales Activity by Month According to Price Range! Henderson County! Total Inventory Vs. Closed Unit Sales! Henderson County! $5m+! $3m to $4.99m! Active Inventory! $2m to $2.99m! $1m to $1.99m! $900k to $999k! 1866! Jan! $800k to $899k! Feb! $700k to $799k! Mar! $600k to $699k! Apr! $550k to $599k! 1600. 1661! 1936! 1924! 172 Closed Units! 1849! 1780! 1640! 1518! 1540! 60! 4 79! 99! 109! 132! Jan! Feb! Mar! Apr! May! Jun! 1457! May! $500k to $549k! Jun! $450k to $499k! Jul! $400k to $449k! Aug! $350k to $399k! Sep! $300k to $349k! $250k to $299k! Oct! $150k to $199k! Dec! Nov! $200k to $249k! $75k to $149k! $0 to $74k! 0! C 50! 100! 150! Units! 200! 250! 300! Henderson County! $350k to $399k! 3.91%! $200k to $249k! 15.53%! $150k to $199k! 22.75%! $250k to $299k! 9.82%! $400k to $449k! 1.90%! Other 2.8% $450k to $499k! 1.90%! $500k to $549k! 1.20%! $550k to $599k! 0.40%! $0 to $74k! 6.21%! Other! 2.81%! $900k to $999k! $1m to $1.99m! 0.60%! 0.40%! $800k to $899k! 0.30%! $700k to $799k! 0.30%! 74! 87! 72! 73! 93! Jul! Aug! Sep! Oct! Nov! Dec! Graph (A) demonstrates the distribution of sales by price range and explains which months had the most sales. The longer the color band, the more sales that took place that month. The strong sales activity encouraged by the expiring tax credit can be seen throughout most of the price bands below $300,000 in the month of June. Distribution of Total Sales By Price Range! $300k to $349k! 6.51%! 74! $2m to $2.99m! 0.20%! While Graph (B) can be unsettling to consider, it does explain the disparity that exists between available inventory in the county as compared to the actual sales taking place. Despite increasing buyer activity, it is evident this remains a buyer s market for the foreseeable future. $600k to $699k! 1.00%! $75k to $149k! 27.05%! 7
Haywood Strongly Influenced by Second Homes Haywood County Market Review Historically, Haywood County has been strongly influenced by second home purchases and relocation for quality of life. The impact of challenged real estate markets in other areas, including Florida, have slowed the pace of home sales. In response to this and with bankowned properties adding to inventory levels, competitive pricing has become an increasingly important factor in sales. Opportunities for those looking for retirement, second homes and rental properties are likely to continue to improve throughout 2011. Haywood County continues to be a highly desirable retirement area and longterm growth remains strong. A Average List Price & Average Sales Price! Compared to Units Sold! Haywood County! 1,133! 1,089! Sold Units! 300,000! 250,000! 90 Average List Price! 814! 200,000! Average Sales Price! 544! 150,000! 510! 496! 100,000! 50,000! 0! 2004! 200 2006! 2007! 2008! 2009! 2010! An abundant supply of inventory continues, especially in the higher price points. Combined with slower sales this has resulted in higher absorption rates as shown in these graphs. Graph (A) demonstrates the large portion of sales in the more modest price ranges. Graph (B) illustrates escalating absorption rates as price point increases. Graph (C) clearly visualizes the decrease in unit sales, list, and sales prices over the last 6 years. B Average Absorption Rates (months) By Price Range! Haywood County! C Distribution of Total Sales By Price Range! Haywood County! 234! 248! $250k to $299k! 8.7%! $350k to $399k! 3.2%! 134! $200k to $249k! 11.7%! $300k to $349k! 5.2%! $400k to $449k! 2.4%! $450k to $499k! 0.6%! $500k to $549k! 0.4%! Other 1.6% 11! 20! 37! 47! 48! 37! 71! 48! $0 to $75k to $150k $200k $250k $300k $350k $400k $450k $500k $550k $600k $700k $800k $900k $1m to $74k! $149k! to to to to to to to to to to to to to $1.99m! $199k! $249k! $299k! $349k! $399k! $449k! $499k! $549k! $599k! $699k! $799k! $899k! $999k! 93! 64! 43! 81! 72! $150k to $199k! 20.0%! $75k to $149k! 31.7%! $0 to $74k! 13.1%! $550k to $599k! 0.2%! $600k to $699k! 1.2%! Other! 1.6%! $900k to $999k! 0.4%! $800k to $899k! 0.2%! $1m to $1.99m! 0.4%! $700k to $799k! 0.6%! 8
Healthcare and Tourism Fuel Our Economy Commercial Market Review A growing mix of professional/technical services, knowledge-based enterprises and arts/crafts industry enhances the business landscape. The office market vacancy rate has decreased slightly over the past 12 months with rental rates remaining stable. The largest lease transactions have been predominantly in the healthcare industry. Approximately 7.1% of the market s retail inventory was reported vacant, a slight decrease over the past 12 months. Several mixed-use projects were completed. Industrial vacancy rates are at 14.2% with rental rates between $2 and $8 SF. There were no properties under construction in the fourth quarter of 2010. The Asheville Regional Airport recently adopted a 20- year master plan to handle the increased traffic that is expected as growth continues in the region. The plan calls for improvement and expansions to current facilities, including a $20 million investment over the next five years. Downtown Office Low High Effective Avg. Vacancy New Construction (AAA) $19.00 $24.00 $22.00 13.60% Class A (Prime) $17.00 $22.00 $21.00 12.70% Class B (Secondary) $14.00 $20.00 $16.00 16.40% Suburban Office New Construction (AAA) $21.00 $28.00 $25.40 22.80% Class A (Prime) $20.00 $26.00 $23.40 20.00% Class B (Secondary) $14.00 $18.00 $15.10 14.60% Industrial Bulk Warehouse $2.00 $4.00 $3.70 16.00% Manufacturing $3.50 $6.00 $4.50 15.00% High Tech/R&D $5.50 $8.00 $6.00 10.00% Retail Downtown $10.00 $18.00 $12.80 13.00% Neighborhood Service Centers $8.00 $16.00 $14.80 90.00% Community Power Centers $8.00 $17.00 $12.50 93.00% Regional Malls $16.00 $26.00 $22.95 14.00% (Rent/SF/YR) Development Land Low/Acre High/Acre Office in CBD $240,000.00 $620,000.00 Land in Office Parks $280,000.00 $550,000.00 Land in Industrial Parks $120,000.00 $200,000.00 Office/Industrial Land-Non-park $48,000.00 $150,000.00 Retail/Commercial Land $320,000.00 $1,100,000.00 Residential $28,000.00 $110,000.00 9
Comparison of the Top WNC Real Estate Firms 2010 Year End: Sales Volume For Top Five Firms! NC Mountains MLS! Millions! $504! $302! $77! $69! $60! & Associates! Keller Williams! RE/MAX Mtn.! Prudential Lifestyle!Century 21 Mtn Life.! We Market to the World When selling your home, you need out-of-area as well as local exposure to the highest possible number of potential buyers. As a member of Leading Real Estate Companies of the World, we market your home in 30+ different countries, ensuring the most eyes on your property. It s global vision with a personal view. We receive inbound referrals from of our fellow 150,000 network associates in 30+ countries...clients who may be interested in purchasing your home. As soon as your home is posted to our website locally, it is immediately accessible from the websites of the top real estate firms in the world through our network s RELO Home Search program, with access to nearly 2 million online listings and high Google rankings. 10
Comparison of the Top WNC Real Estate Firms 2010 Year End: Sales Volume Relative To Top 10 Firms! NC Mountains MLS! (Top 10 Firms Represent 60% of Total Market Share)! 25.0%! 15.0%! & Associates! Keller Williams Realty! RE/MAX Mountain Realty! Prudential Lifestyle Realty! Century 21 Mtn Lifestyles! Preferred Properties! Coldwell Banker! Town & Mountain Realty! 1.5%! 1.9%! 1.9%! 2.4%! 2.4%! 3.0%! 3.4%! 3.8%! RE/MAX Advantage Realty! Asheville Realty Associates! Where are 90% of today s buyers? Our agents can tell you. Savvy buyers and sellers know that to be successful in today s post-boom real estate market, they need a cutting edge, highly-trained REALTOR who understands today s online marketing and technology tools. Over 90% of real estate buyers and sellers use online tools in conjunction with the help of a real estate agent to make educated buying and selling decisions. & Associates continues to set the standard for what it means to be a highly-trained real estate professional. Our agents have mastered the online marketing and technology tools to provide our clients with the absolute best possible service. beverly-hanks.com 11
Sell your property with Timothy Bosonetto and Realtors Our goals are mutual: We want to get your property sold and for the best price and in the quickest time frame possible! Especially in this current market you need a Realtor that is experienced, knowledgeable, specializes in your area, and is aggressive in the Asheville real estate market. What can I offer you? I am an energetic, enthusiastic and aggressive Realtor with 18 years experience. I have a proven multi-million year-end sales record for each and every year. My referral business is strong, backed by happy customers and testimonials. Superb customer service with daily updates and feedback. I use a smart phone for quick response and always use the latest in technology. I focus on the positive highlights your home offers and market its unique attributes locally and to the world. My experience in networking and target marketing is second to none, visit my personal web site www.ashevillerealestate.com and see! I have the staff, tools and support of, the top-producing firm in WNC. In addition to all the web sites your property will be placed with, and I each provide very successful and heavily visited WNC web sites www.ashevillerealestate.com and web site to further showcase your property. Together as a team, what can and I offer you? has the largest network team in WNC: Over 300 professional Realtors, part of the largest relocation network in the world, a huge network of third party clientele, top web sites and search engine positions, 8 offices, listings sent to 11 major search platforms, e.g. Realtor.com etc Members of (LREW) "Leading Real Estate Companies Of The World" which link our inventory to over 700 markets worldwide. Top sales record in WNC each and every year since 1976 (34 years). Fully staffed marketing department to help with the marketing of your home. stays on top of the game with TV, radio, print advertising /branding, WNC Market Reports, Welcome Magazine etc Outstanding customer service and attention to individual needs. Full commercial department, bringing in commercial and residential customers. 8 offices to serve our clients better and to bring in new customers. Fully staffed relocation department, bringing in customers from around the globe. Fully staffed mortgage department, prequalifying our clients, servicing existing clients and always bringing in new customers. Full support staff to assist in all aspects of real estate. ranks among the top 7 firms in the state and among the top 250 in the nation. Are you serious about selling? Call Timothy Bosonetto at 828-712-9088 www.ashevillerealestate.com