More jobs, younger buyers fuel hot Asheville housing market

ASHEVILLE – Want to know what's behind all the optimism over Asheville's housing market?

Then you'll need to sit down and take some notes.

It's Gen X and the millennials. They're all bucking trends and buying now.

And there are the numbers, like the number 10, as in all those national top 10 lists that include Asheville. Keep in mind 3.7, too. That's the metro area's job growth percentage over the past year — way up from the national average of 2.2 percent.

But more than anything, Realtors say, you'll want to make note of supply and demand. There are fewer houses for sale in the city and more buyers in the hunt for a new home.

"All the attention Asheville has gotten has done nothing but spur the market," said Julie Smith, an 18-year real estate agent who works for Beverly-Hanks & Associates Realtors in Asheville.

The two measurements pointing most to rising demand include the city's low inventory of houses for sale and a jump in housing permits for new construction.

During the first quarter of 2015, the inventory in Asheville for houses selling between $200,000 and $250,000, for example, was 1.9 months, according to Mike Figura, owner and broker of Community Lifestyle Mosaic Realty in Asheville. During the same time period in 2012, it was 8.9 months.

For houses in the $250,000-$300,000 range, Asheville's inventory was 2.4 months in this year's first quarter. It was 11.6 in 2012.

Buyer patience

Susanna Smith, 35, and fiancé, Jon Clancy, 34, bought into the fact that they were operating in a sellers' market during their recent search for a house in Asheville.

The couple accepted that their initial offers might have to be higher than the asking prices.

Moving the instant they learned a house they wanted became available was all right for them.

That some desirable houses would require thousands of dollars' worth of renovations — no problem.

But one thing they couldn't abide was a seller who refused to negotiate.

One such person, who was offering a $300,000 bungalow in Montford, declared he would not come down in price — even after the inspection demonstrated the need for serious repairs.

"He was ridiculous," said Smith, who, with Clancy, has rented a place in West Asheville since 2012. "So we told him, we're walking. He asked us to come back. We gave him a complete list of the things we knew were wrong, with a fair estimate of how much it cost to fix them, about $50,000."

The work they wanted done included a new roof, the installation of heat in one of the rooms and the replacement of a dishwasher that poured water into the basement while Smith, a marketing consultant, and Clancy, a massage therapist, watched.

"He said no," Smith said.

They found another bungalow in West Asheville, this time going for $250,000. The pair made an offer. It was accepted.

The inspection on that house revealed $30,000 in repairs, including a new roof, a broken furnace and a buried oil tank.

"We're talking big-deal things," Smith said. "The owner offered a $2,000 credit for us to deal with the oil tank, or he would fill it, but he wouldn't remove it."

That was that.

Smith and Clancy had been looking "seriously" since January. They finally found a place early last month. Closing is scheduled for Thursday.

"It was owner occupied," Smith said. "She had lived in it for 10 years and was much more fair."

The house listed at $250,000 and the couple's offer was "significantly over the asking price." But the owner came down $7,000, satisfying all parties.

The pair is happy with their purchase. Yet the speed with which they had to make decisions and the advantage that cash buyers — who can close deals more quickly – had over those buying with loans frustrated Smith.

"We're glad we bought now," she said. "We wish we bought in October, or even January."

Multigenerational, more jobs

Buyers in a broad range of ages might be saying the same thing.

Millennials — and even members of Gen X and Gen Y — had postponed homeownership until recently, said Debbie Williams, executive vice president of Beverly-Hanks.

"Their entering the market is a game-changer for sure," Williams said.

They weren't players three years ago, or five years ago, she said.

"The job situation wasn't great, so they postponed homeownership past the traditional ages of mid- to late-20s," Williams said.

"But the pace of growth and job creation has improved dramatically," she said. "There's a direct correlation between job growth and home ownership."

From October through March, the Asheville metro area notched between 180,000 and 181,600 jobs each month based on the most recently available U.S. Bureau of Labor Statistics data. Jobs in each of those months surpassed record levels.

Federal officials adjusted those statistics to account for seasonal fluctuations, such as the annual increase in retail hiring during the holidays.

Asheville job growth from March 2014 to March 2015 exceeded the national average at 3.7 percent, compared to 2.2 percent, according to BLS data.

The retail trade, education and health and tourism industries are leading that expansion locally, according to data from the BLS and Haver Analytics, a New York-based company that provides economic and financial data.

"Job growth in Asheville is nearly twice the national average over the last year," said David Berson, chief economist and senior vice president of Nationwide Insurance, based in Columbus, Ohio.

Berson said the right questions to ask regarding the Asheville real estate market surge relate to the dynamics of the national economy.

"Why was job growth weak for so long?" he said. "What's changed?"

The answer to both questions: Exceptionally weak household formation.

U.S. Census Bureau officials define a household as an individual or group of people occupying a housing unit.

The Great Recession curbed household growth for years, despite steady and gradual improvement since 2009.

"New households should be about 1.2 million every year," Berson said. "But we weren't getting that."

People in the 21-35 age range were living with their parents due to reasons including college debt and low-paying jobs, he said.

Instead, the annual total was roughly 500,000 to 800,000, Berson said, because "the economic expansion we've had has been very modest."

But that changed locally and nationally about a year ago, he said.

National new household formation hit about 1.7 million for the 12 months prior to Dec. 31 and roughly 1.5 million for the 12 months prior to March 31, Berson said.

Local data do not exist yet for time periods that recent, said Tom Tveidt, a research economist who analyzes communities for the Asheville-based SYNEVA Economics LLC. The most up-to-date data available would be from 2013, he said.

"What we're seeing now is a change in the kind of jobs available and that's pushing up the demand for rental and house-buying properties," Berson said.

Other factors

Since it's cheaper to own a home in Asheville than it is to rent one, more people are choosing to buy.

And though land constraints in the region always will place a maximum limit on total housing, builders seem to be responding — at least, according to permit data.

Housing permits pulled jumped in both March and April of this year over March and April of last year, Census data show.

Permits pulled in April climbed to 212 from 148 last year. Permits pulled in March hopped to 169 from 108 last year.

No local housing-start data — statistics that show how many houses contractors have begun to build — exists, Tveidt said.

Continued low mortgage rates, with the expectation they will soon rise, are driving house-purchasing activity, too, Williams said.

San Francisco-based Wells Fargo bank officials put the rate at 4 percent on Wednesday for a 30-year fixed-rate mortgage. That figure fell to 3.375 percent for a 15-year fixed-rate mortgage.

The annual percentage rate for those two time periods were 4.061 percent and 4.125 percent, respectively. The annual percentage rate is the cost of the total finance charge during a loan's lifetime.

Williams called rates like that, "crazy good."

"We don't know how long the current environment will last," she said.

A comparison of last year's and this year's Asheville city-limits real estate market from Feb. 1 through Wednesday.

2015

Housing units sold: 381
Average sale price: $275,472
Average listed price: $285,176
Median sale price: $225,000
Median asking price: $231,900
Average total days on the market: 111

2014

Housing units sold: 379
Average sale price: $277,794
Average listed price: $291,125
Median sale price: $218,100
Median asking price: $225,000
Average total days on the market: 123

Source: Don Davies, a broker and owner of Realsearch, an Asheville company that analyzes local real-estate trends