In new normal, houses go to the nimble buyers

Matt and Sarah Leggat got so used to having their offers rejected they developed a feel for who handled it best.

That would be Sarah. For Matt Leggat, the couple's three-month search for a home turned into a blur of living rooms, bedrooms and bathrooms.

"We started in February and found a place a week ago," said Matt Leggat, 43, a seventh-grade language arts teacher. "And that's after pretty much constant looking."

The Leggats' experience reflects the new normal in Asheville and Buncombe County. Competition for residences in hot neighborhoods such as West Asheville has become so intense that real estate agents counsel clients to open bidding with offers several thousand dollars above asking price — within minutes of completing a tour.

From the last quarter of 2014 to the first quarter of 2015, which ended on March 31, the number of home sales in Buncombe County, not including Asheville, spiked 29.2 percent, according to data from Mike Figura, owner and broker of Community Lifestyle Mosaic Realty in Asheville.

In raw numbers, that's a leap to 513 sold, up from 397.

The number of homes sold in the county during this year's first quarter was higher than in any other quarter "since the first quarter of 2007, before the crash, when there were 534 homes sold," Figura said.

Asheville housing market

The number of houses available for sale also has taken a dive, particularly in Asheville.

A dearth of homes priced at $250,000 or below in Asheville has sent buyers outside the city, something that held true for the Leggats.

A seller accepted a bid the Leggat family submitted on a place east of Asheville, just inside the Buncombe County line. Learning from their previous failures, the Leggats' bid was higher than the asking price.

The sub-$300,000 house is under contract and their scheduled move-in is mid-June. But West Asheville had been the couple's first choice.

"We found a great place and we're really excited," said Sarah Leggat, 42, an accountant. "We think it's going to be wonderful."

As home sales have taken off in Asheville and Buncombe County, a low inventory of houses on the market has driven down sales.

Beginning in the last quarter of 2014 through the first quarter of 2015, the number of home sales in Asheville fell to 239 from 252, a drop of 5.1 percent.

The dynamic appears to be a repeat of 2005-08, when Asheville housing prices last peaked, Figura said.

"Buyers were priced out of the city so they moved to the county where they could get more house for their money," he said. "Since the last real estate crash in 2008, prices have risen more quickly in the city of Asheville than in the county in general, making the county more affordable relative to the city."

The rising regional home prices mirror a national trend pushed by the demand for more mortgages and tight housing inventory, economist Ian Shepherdson, named The Wall Street Journal's 2014 forecaster of the year, reported last week.

"It seems reasonable to expect the increase in (mortgage) applications to translate into rising home sales," said Shepherdson, chief economist for New York-based Pantheon Macroeconomics, an economics intelligence company.

"That, in turn, ought to be followed by rising housing construction, given the very low level of inventory," Shepherdson said.

Real-estate experts generally consider a healthy market to contain a six-month inventory of homes for sale.

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At the national level, this year's first quarter showed a five-month inventory.

Shepherdson predicted that would be "enough to signal sustained 6 percent to 8 percent gains in new home prices."

And, he added, "History suggests that when the trend in new home sales rises, increased construction usually is not far behind."

But the lack of land in the Asheville region means a comparable burst of activity, particularly in the sub $250,000 price range, might not follow, said Jim Smith.

He is a nationally renowned economics forecaster and chief economist for Asheville-based wealth-management advising company, Parsec Financial Inc.

Additionally, inventory in Asheville and Buncombe County remains much lower than the national numbers, and home prices keep rising — even for residences that are not deemed livable, Figura said.

During the first quarter of 2015, the inventory in Asheville for houses selling between $200,000 and $250,000 was 1.9 months, according to Figura's data. During the same time period in 2012, the inventory was 8.9 months.

Buncombe County's also relatively low inventory, though not as stark, shows a competitive market, too. It stood at 3.6 months for houses in that same price range during that same time period.

For houses in the $250,000 to $300,000 range, Asheville's inventory was 2.4 months in this year's first quarter. The county's inventory was 6.5 months.

At lower price ranges, the inventory in the city declines further. For houses priced up to $100,000, the inventory was 0.7 months.

Most houses on the Asheville market for below $150,000 are not move-in ready, Figura said.

Likeable and walkable

Sarah Leggat described the couple's home-buying experience as an "emotional rollercoaster."

They put in multiple offers that weren't accepted. Other times, a house in which they were interested would vanish from the listings before they had the opportunity to bid.

Then, there were the places with very high prices, very small square footage and a lot of repair and refurbishing work required after move-in.

"We went into this, pre-approved (for a mortgage) and ready to roll," Sarah Leggat said. "We learned we had to jump at every house where there might be an opportunity."

The three-year residents of West Asheville said they did everything they could to stay in their neighborhood because it has what they want.

They love that they can walk with their two daughters, Ruby, 10, and Nora, 7, and their yellow Labrador retriever, Bo, to places like The Hop West ice cream shop.

Ruby and Nora both attend Vance Elementary School in West Asheville, and will continue to do so. And Matt and Sarah Leggat enjoy the architectural oddities that are part of so many of West Asheville homes.

No sign of a housing bubble

Maggie Marshall, the Leggats' real estate agent, works for Mosaic. She has been an agent for six years. Before that she was a house appraiser for four.

"What we're seeing now is the backup of people who didn't find anything in the fall and winter," Marshall said.

The bidding wars have become especially intense during the last two months, she said.

"Before, you had time to negotiate," Marshall said. "Now, that's not true."

And in all cases, Marshall's clients "are getting beaten out by people from out of the area where home prices are higher," she said.

Because of such battles, "it feels like there's been a huge price increase."

Sellers twice have increased the house price in between the time Marshall booked the appointment for her clients to see the house and when they arrived, she said.

Data showing what's happening in the market today won't be available until July, Figura said.

But for two consecutive quarters, the median home price in Asheville has been $225,000 – equaling the highest median price home costs hit in 2007, before the Great Recession.

Figura emphasized that what's happening here is no bubble.

The low inventory, the absence of house-flipping and the fact that it's cheaper to buy a house than it is to rent all demonstrate no real-estate bubble exists, Figura said.

Simultaneously, the median price of house in Buncombe County from the last quarter of 2014 through this year's first quarter actually fell to $206,000 from $211,000, Figura's data show.

"That's because more people are buying at lower price ranges in the county," Figura said. "There's more activity in the lower price range because people can't afford the prices in the city."

If that trend continues, Figura said he predicts that county inventory will tighten enough that within a year and a half, prices in the lower ranges will begin to escalate.

Then, houses in cities including Arden, Black Mountain, Candler and Weaverville no longer might be the relative bargains they are today.

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