Asheville Housing Market Begins to Cool Down

Twice this year, real estate broker and analyst Don Davies has accepted a contract to sell property he owns in Leicester, N.C., once from buyers from Florida, once from a California couple.

Both times, the buyers backed out of the deal late in the game, leaving Davies holding the earnest money deposit and the property.

Davies’ experience might be a little extreme, but it does hint at a broader trend in the local real estate market: The bursting of the market bubble in some of the country’s higher-priced markets is starting to be felt in Asheville and Western North Carolina as well.

March was the fifth month in a row in which the number of existing homes sold through the Asheville Board of Realtors’ Multiple Listing Service was less than the same month a year ago, according to board figures.

After several years of rapid growth, existing home sales in the Asheville area were down 4.5 percent for the 12-month period ended March 31.

“It’s going very much from a seller’s market to a buyer’s market,” said Ken Dula, a North Carolina mortgage broker.

Other Western North Carolina communities have seen even larger declines. The number of existing home sales in Haywood County was off 12.7 percent for the same 12 months, from April 2006 to March 2007.

In Henderson County, sales were off 13.6 percent for the period, and sales in Transylvania County declined 10 percent.

The Western North Carolina housing market did not zoom to the heights seen in some parts of the country a few years ago, so they don’t have as far to fall today.

In fact, the average price of homes sold in Buncombe County has continued to rise, and the total dollar volume of home sales in Buncombe was still up 2.7 percent for the 12 months that ended in March.

But with people moving to WNC making up such a large proportion of the local market, problems elsewhere have had a ripple effect in the region, analysts say.

“If you look at those markets where they’re having real trouble, a lot of them are the markets that feed people here,” said Tom Tveidt, head of the Asheville Area Chamber of Commerce’s Asheville Metro Business Research Center.

In more expensive markets on the East and West coasts, dramatic increases in  home prices fueled in part by speculation have ended.

They have been replaced by stories of many sellers being forced to cut prices, sometimes to much less than they paid, in order to sell a home.

Davies said it appears that both of his potential buyers were banking on selling property in their former home cities to buy his, but like many other North Carolina home sales, those sales didn’t happen.

Other people in the industry said problems in other markets seem to have forced some potential buyers to delay moves to the area.

“They’re still coming here to look. They’re still interested in our area … but instead of buying here and then selling their old home, they’re waiting to sell their old home first,” Dula said.

James Blue, president of the J.D. Jackson Associates brokerage, made much the same observation.

“We have a lot of people that come from out of the area, and I think in some of the areas that have been hit harder and experienced some actual loss (in real estate values), those folks are having trouble selling their house,” he said.

Job loss or other local economic disruptions are often the culprit when an area experiences a lack of home loan demand and housing market woes, but Tveidt said that doesn’t appear to be the case here.

The region did experience some significant manufacturing layoffs earlier this decade, but currently, “Job growth is healthy here,” Tveidt said.

A rise in North Carolina home loan foreclosures has probably have an impact on market conditions, although foreclosures rose more dramatically a few years ago and the Asheville area has been less affected by the problem than most other metropolitan areas, according to national figures.

The decline in the local market is still not nearly as sharp as some areas have experienced, and some in the industry note that sales are still significantly higher than they were a few years ago.

“We still are attractive. We continue to be on every top-10 list there is,” said Michael Zullo, CEO at Keller Williams Professionals.

An interesting aspect of the recent slide is that the average price of a home sold continues to rise.

The average price of a home sold in Buncombe County over the 12 months that ended in March was $279,833, a 7.5 percent increase in the past 12 months.

“That … doesn’t quite compute,” Davies said. One would expect the drop in homes sold to have more of an effect on prices, he said.

The disparity also puzzles Sid Heilbraun, broker in charge at Town and Mountain Realty.

“If you can figure out what that means, will you let us know?” he said.

It is a worrisome trend for lower income or even middle-class families looking to buy, said Betsy Reiser, owner and broker at Appalachian Realty Associates.

“The cost of construction has gotten to be so sky high that even the small houses that are being built are very expensive, so we see a lot of hardship on the part of the first-time home buyers,” she said.

Some analysts think the price increases reflect the fact that prices in the local market are still not nearly as high as in some large metropolitan areas.

People coming from those markets still think of Asheville as inexpensive, compared to the mortgage loan costs they would have no choice but to incur elsewhere, analysts said - and rightfully so.

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