What is playing out in the Carolinas is that October 2010 was the bottom based on closed unit sales. The Allen Tate Companies closed over 14,400 properties in 2011 which is 400 more than 2010 and more than 2009 and 2008.
That supports the theory that we’ve hit the bottom and it’s onward and upward from here. The story is complicated by the fact that most of us measure recovery based on a home’s appreciation status.
The average sales price in 2011 for the Allen Tate Company’s footprint – the Triangle to the Upstate – was $217,000 versus $222,000 in 2010. I’m afraid 2012 will be the same — a bit more of a slide in values overall. While this is market and neighborhood specific, the fact is that we have an additional inventory of distressed properties to pass through the system. This process is taking longer than anyone anticipated and is coupled with the influence of the new home production that is taking place on shovel-ready lots.
2012 equals two to three more percentage points in depreciation; and hopefully, 15 percent more sales units closed. Interest rates at best, because it’s an election year and the economy is still volatile, should stay at historically low levels. There is caution out there — when the lid is taken off, interest rates may rise as much as two percent.
Buyer confidence is the key. America’s economy is built upon buyer confidence. We’re seeing record spending in retail, food and entertainment; but spending on larger, more costly purchases is still down to some extent and will be through the election. Leadership uncertainty abounds and causes paralysis of the analysis.
I’m as bullish as ever on the Carolinas’ future, especially when it involves housing and job creation. It’s just going to take time and patience for us all. The mantra for 2012 will continue to be “sell low and buy low.”
By Pat Riley (President and Chief Operating Officer)