In recent perusings of Wilmington real estate websites, we discovered major discrepancies between agents’ reports on our current market condition. This prompted us to do some extensive research and number crunching - the results of which you can read below.

It is my opinion that 2005 was the death of the “last great Wilmington Real Estate Market” (note- not the last as in never again, but the last as in most recent). Many agents thought that it was their arrival to the Valhalla of Sales but a look at the data indicates that the fervor in the market up until September 2005 was actually the death throes of a market that had run too hot for too long. In the preceding 5 years, inventory levels had been gradually shrinking and shrinking until in late 2004, the level was so low that a buying frenzy was on. This consumed most of the remaining inventory and caused prices to skyrocket. One of the interesting side effects of this market was that people were placing contracts on new construction homes that would not close for up to 12 months (and longer in some cases). It is the sale of those new construction homes that underpinned the market in 2006.

As is the natural course for a market a correction was due. We are currently in the middle of that correction and I believe we will continue to trend towards a buyers market with no balance returning until Spring of ‘08 at the earliest.

Here are some market facts:

A) “Wilmington” includes the following zip codes
a. 28401
b. 28403
c. 28405
d. 28409
e. 28411
f. 28412
g. 28429 (Castle Hayne)

This is essentially all of New Hanover County, excluding Wrightsville, Carolina, and Kure Beaches. The markets there are not comparable to the rest of the county for many reason.

B) There are 2469 homes on the market in Wilmington as defined above

C) There are 701 homes “under contract” in Wilmington
a. At first glance, this appears to indicate there are 3.52 Months of inventory (dividing 2469/701)
b. Of the 701 homes “under contract” only 344 of them went under contract in the last 30 days. This would indicate (using the same logic above) 7.177 months of inventory. This would be more accurate because 344 represents approximately a month of activity. A real question, though, is how many of these will actually close. The truth of the matter is that only about 65% of contracts survive to closing. If we are aggressive and say that 75% of them actually close, we would see that .75(344)=258. This yields 9.5 months of inventory. Interesting huh?
c. The other 357 homes went under contract much earlier
i. 2004: 1 home
ii. 2005: 20 homes
iii. 2006: 120 homes
iv. 2007 (Jan 1-February 22): 216 homes.

Who knows when these will close??

D) Sold Data
a. There have been 4337 sales in the last 12 months. This averages 361 Sales per month for the last year (CLOSED SALES) and yields an inventory level of 6.84 months.
b. There have been 1683 sales in the last 6 months. This averages 280.5 Sales per month for the last 6 months, yielding an inventory level of 8.8 months
c. There have been 797 sales in the last 3 months. This averages 265 Sales per month for the last three months, yielding an inventory level of 9.3 months (DO YOU SEE THE TREND HERE?)
d. If you add in the beaches, we have 11.4 months of inventory (3258 current listings, 855 sold in the last 3 months)
I think that you can clearly see the “underpinning effect” of the new construction contracts written in 2005.

E) Absorption Rate: this is the number of new listings in a given month divided by the number of closings in that month
a. February ‘03: 48%
b. February ‘04: 58%
c. February ‘05: 60%
d. February ‘06: 48%
e. February ‘07: 20%

There is another pattern here. Interesting, as well, is that from ‘03-06 the absorption rate increased from January to February. In 2007 it decreased… trending in the opposite direction.

This entry was posted on Monday, April 16th, 2007 at 11:33 am and is filed under Market Reports. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.