Local Housing Forecast

 

January 10, 2008
RHINO TIMES GREENSBORO
by Cristi Driver

New homes market analyst Edsel Charles has good news for those currently looking for a new home, and mixed news for new home builders.

"There is no doubt in my mind that we are at the bottom of housing prices for consumers," said Charles. "Between now and the first of March 2008 we will see the lowest home prices and then they should stabilize until August 2008 when we will see more firming up of prices. Prices will be getting back to normal by March of 2009."

Charles, founder of Nashville-based Market Graphics Research Group Inc., a new home market research company, presented a market forecast to a group of builders, developers, Realtors and banking and mortgage professionals at a Triad Housing Outlook luncheon held by the Greensboro Builders Association at the Airport Marriott on Wednesday, Jan. 9.

More good news for current homebuyers is that Charles said he is also anticipating a reduction in interest rates – but not by too much. He expects rates to go down between a quarter and a half a point in 2008.

"When interest rates and rates for lumber supplies increase, it has the same effect on housing prices," Charles said. "Building material rates are down right now and it's had the same effect as lower interest rates for consumers in lowering home prices."

An interest reduction is good news for builders who are in need of more homebuyers. And many new homebuilders may be feeling a pinch lately – there are fewer buyers due to the fall-out of the subprime lending market, which has had a ripple effect over the entire housing market.

For new home builders, Charles said he expects the market will remain steady, though at the bottom, throughout the summer.

"It doesn't return to a reasonably decent market until some time between August of 2008 and March of 2009," he said.

Market Graphics was founded 14 years ago by Charles and today is the second largest market research company in the US. Market Graphics covers 11 states, providing services to bankers, who use the company's data to determine the degree of risk in lending, and to builders, who use it to find market opportunities. Eight of the top 10 builders in the country are Market Graphics clients.

Data is collected from multiple sources, including planning commissions, permit reporting areas and employment statistics.

"Every subdivision in every county is driven every four months, counted and drawn," explained Charles, who personally drives all of Guilford County. "Our approach is extremely precise and accurate."

Charles' presentation included the outlook for the triad housing market, an interest rate forecast and a six-year housing forecast, among other topics.

As far as a six-year housing forecast, Charles said in addition to the reduction in 2008, we will see a slow return in 2009 and a full return during 2010-2012, then another downturn in 2013.

Another topic Charles discussed was the aspect of overbuilding versus reasonable building in all areas of the triad. New home building in the region has increased substantially in recent years and Charles said there are some areas suffering from overbuilding.

For example, he explained that markets such as the north High Point market and the northwest Greensboro area from the airport to Lake Jeanette are reasonably good markets for new home development. Surrounding areas such as Alamance County, the eastern part of Forsyth County and eastern Davie County are also fairly reasonable markets.

Charles cited areas such as Burlington and some parts of Randolph and Davidson counties as areas that are overbuilt. Stokes, Rockingham and Caswell County area also areas where builders need to be careful when spec building, he added.

Changes in the area's demographics will also have an impact on the future of the triad housing market. Charles said that beginning in January 2006, the triad saw the start of a much larger retirement market and it is growing rapidly every year. Charles predicts that over the next 18 years, the retirement market will comprise 35 percent of the total new home market in the triad.

"Builders are already seeing a softer market and I am encouraging them to retool their plans and build toward a retirement population," Charles said.