What do we think Asheville's Market looks like through 2021?

[Jacob Martin]

Hey guys, something I've been thinking a lot about lately (as I'm sure most of you have as well) is what Asheville and the surrounding area's RE markets are going to look like going into 2021. This has been a strange year for all of us as we watch many aspects of our lives rapidly change due to Covid. I'm going to present some statistics, both local and national, to try to paint a picture of where we are right now. I would love to hear all of your thoughts on this, and where you think we go from here. I apologize in advance if some of my figures are off, they come from a variety of different sources.

Midway through the pandemic as unemployment rates were rising it looked as if RE was going to start taking a massive hit and cause floods of new inventory to hit the markets, but to this point that doesn't seem to be happening (in Asheville at least). There was an initial slow-down in sales in early spring, but that quickly changed as Asheville saw a 23% increase in September home sales over 2019 figures, with some areas like Waynesville up almost 40%. Median sale prices and average sale prices in the area are up substantially compared to this time last year as well. We're seeing Average Days on Market figures remaining nearly identical to last year at around 60-70 days. Even now, properties under $200,000 are being bought especially quickly and being put under contract in a matter of days. Secondary and tertiary market movement tends to happen after larger primary markets, and some big cities in the US are starting to see substantial drop offs in home sales figures- Manhattan is down 56% from one year ago and have 31 months!! of inventory- while the country as a whole have about 3 months of inventory. 

The ability to refinance homes at record low rates seem to be keeping elevated delinquencies in check with over half of all mortgage loans created since the start of the pandemic being non-cash-out refinances (with up to 70% of all recent mortgage loans being refis). While rates of non-current loans are still higher than last year, serious delinquencies of more than 89 days are now leveling off for the first time since the pandemic started. The national delinquency rate (30 or more days past due) is about 6%, which is still about 2.5% higher than this time last year. 16% of all FHA loans are 60 days delinquent, which is the highest amount ever, and over 2 million people are over 90 days delinquent nationwide. About 30% of all renters are not paying their rents timely, and the commercial sectors are even worse. The CARES act foreclosure moratorium is causing the foreclosure inventory rate to remain lower now than it was pre-pandemic, and that seems to have recently been extended further into 2021. But what happens at the end of this? Are we going to see all of those 2 million properties over 90 days delinquent hit the market, or will the fed come and extend the moratorium to ease the supply dump? When we start to see that inventory hit the market from mortgage forbearance, do we think there will be a substantial dip in housing values around Asheville? Or is the market here too red-hot to slow down with the mass exodus of people still moving here daily? The tsunami always hits after the earthquake, but was the Covid earthquake big enough to impact our markets? Selfishly as RE investors, whether we want to admit it or not, I think we would all relish a substantial inventory dump and market dip to have the opportunity to feast in a long awaited buyer's market for awhile.

Thanks for indulging me guys, and I think this is an important conversation to be had. Obviously it's impossible to predict the future, but we're sitting at a crossroads and having some clarity from more experienced investors could help newer investors in our area decide if they want to pull the trigger now or possibly wait to see what the next few months bring.

[Jake DiSabatino]

Great conversation here. I think it is very interesting to discuss. I am bullish for the Asheville area. I continue to see market forces pushing upward. 

First, the obvious bad news for the Asheville area.    

• - Many local people are not able to buy in this area because they don't have high paying jobs. 
• - If the virus continues at the rapid pace it is at, it's going to be hard for the vibrant local economy (restaurants especially) to stay afloat. 
• - Aging homes at elevated prices MAY be less attractive to out of towners. 
  

Second, the obvious good news for the Asheville area.

• - Asheville is a destination city. It's easy to travel to locally and nationally. It has amazing food, outdoors, and culture.
• - Asheville is a part of the rising tide in the "Charlotte" metro which is third fastest growing in the country. https://www.biggerpockets.com/...
• - Asheville has a relatively stable and temperate climate which means it is a haven when extreme weather happens.
• - Growing job market as more corporations hop on the Asheville band wagon. (Mini-Austin?)
• - With construction costs rising, (~$200/sq.ft.) it's not unreasonable for housing prices to rise.
• - Out of town buyers may not mind buying a fixer-upper at $200/sq.ft. to end up at $300/sq.ft.
• - Outside investors have long taken notice of Asheville. Right @Curt Wortman?
• - Asheville area has room to grow. There is good opportunity for redevelopment and growth in small towns where you have 30 minute access to Asheville. Think of Old Fort, Marion, Mills River, Fletcher, Fairview, Canton, Waynesville, Mars Hill, Alexander, Burnsville, etc. Many cities have commuters living over an hour from where they work.

Summary - 

When you consider the demand in the area, influx of capital, rising cost of construction, low inventory, low interest rates, and growth trends/opportunity we could see the prices in Asheville continue to rise. I would not be shocked to see ~$350/sq.ft. become the average for the Asheville area in 2021.

Of course, it's all speculation, but there are a lot of upward forces in Asheville right now. I'm hopeful but certainly not buying for inflation!