WILMINGTON – In May 2000, a Tennessee research group called MarketGraphics produced a chart projecting the economic value of assets in the United States for the decade to follow—and was dead on with its prediction of the recession that would begin in May 2006.
Further, the company’s chart guessed values would begin to curve up in May 2009, which MarketGraphics founder and CEO Edsel Charles said is indeed the rough date economists accept as the Great Recession’s end.
Perceiving him as the owner of a housing-market crystal ball, the Wilmington-Cape Fear Homebuilders Association (HBA) on Friday called Charles to the stage for its 2012 Housing Market and Economic Forecast, where he sounded a new alarm: “I think we have a major crisis coming on the land development side,” he told a tightly seated room of planners, real estate professionals and elected officials at the Hilton Wilmington Riverside hotel that morning.
“Let me give you a shock,” Charles said. “I’m not aware of anybody (in the development industry), in all the states I’m in, that is today getting a fresh, new 100-acre tract of land and putting it into the process. I don’t know of anybody.”
Charles’s prediction: Within eight months, the Wilmington market—like most others—will be short on available homes. “Thirty to 40 percent of this market will have no houses left,” said Charles. “The only way to deliver a house is to build it.”
Despite a demand for new homes, developers don’t have the money to create them, he said, adding that MarketGraphics has projected a nationwide lot shortage of 2.9 million by the end of 2017. It also expects new home prices to jump six to eight percent over the next two years.
“If you survive as a land developer and you have good credibility and you know what you’re doing,” he said, “you’re going to get rich.”
The process a developer enters to build new homes can take as long as 27 months. That’s the average pretty much everywhere, Charles said. MarketGraphics, founded in 1988, has audited housing, workforce and economic data for 25 markets in 20 states, according to its profile.
“What happens when the lot counts are coming down?” he posed. “To say there’s anybody out there that’s really pushing land development—it’s just not going on.”
If that’s true, some kind of reform may be in order to ease development processes and reduce that 27-month strain, said Governmental Affairs Director Tyler Newman of the Business Alliance for a Sound Economy, HBA’s legislative affairs arm.
“We’ll be continuing to try to make the process more efficient and make sure that we don’t have that shortage here in New Hanover County,” Newman said. “That’s what we’ll try to do on the regulatory side, to minimize delays any way that we can.”
New Hanover County was among southeastern North Carolina territories that felt a spurt of population growth just prior to the recession and had a substantial development boom. According to the U.S. Census Bureau, the county’s population grew 26.4 percent between 2000 and 2010 and was one of the state’s top 15 fastest-growing counties for that period. There are 100 counties in North Carolina.
In addition to Charles, HBA on Friday presented Richard Kaglic, regional economist for the Federal Reserve Bank of Richmond, who addressed issues challenging the market, such as unemployment.
“One of the most disappointing aspects of this recovery, of course, has been what’s happening in the labor markets,” Kaglic said with particular focus on the second quarter’s hiring slowdown. While the first quarter of 2012 saw 225,000 net new jobs per month, the second quarter saw just a third of that, he said.
“Everybody was just creating jobs at a slower pace,” he said.
July and August showed “a little bit of a pickup,” said Kaglic, but the 100,000 net new jobs added in that period won’t make a great difference. And the marked improvement in the latest national unemployment rate was more to do with persons leaving the labor force and less about job creation.
“If your 23-year-old son or daughter can’t find a job, they’re not going to be able to move out and buy a new home,” Kaglic said.
But home prices are firming, he noted, and a remarkable shortage of inventory is helping to boost new construction. The numbers of new single-family homes available in the U.S. today are “lower than they have been since records have been kept, dating back to 1963 … and it’s by a wide margin.”
Swinging back to Charles’s prediction, Kaglic said he too would not expect a near-future boom of new homebuilding, in this case due to the job market’s poor condition.
According to the U.S. Bureau of Labor Statistics, North Carolina in July ranked 46th in the nation for unemployment with its 9.6 percent rate (the best was North Dakota with three percent). Kaglic’s findings suggested the state’s population surge just before the recession probably played into that standing; essentially, the workforce grew a lot and the job market didn’t.
According to the Census Bureau, North Carolina grew 18.5 percent between 2000 and 2010, putting it among the nation’s fastest growing states.
For New Hanover County, whose 2011 population estimate was 206,189, the July unemployment rate was 9.3 percent.
Brunswick County–population 110,097 by the 2011 count–felt massive growth between 2000 and 2010 at 46.5 percent. Its jobless rate for July was 10.8 percent.
In Pender County, which grew 27 percent over the decade and logged a 2011 headcount of 53,399 people, July unemployment was at 11.3 percent.
The good news for Wilmington, Charles said, is that it’s showing greater housing strength than most of the other markets his company monitors. “This market’s performing at a very high rate,” he said. “I’m surprised.”
