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May 04
COVID-19 Impact on Wake County Property Market

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Monday, May 4, 2020
For Immediate Release

Contact: Luther Snyder, Deputy Director
O. 919-856-5462 M. 919-369-7045
luther.snyder@wakegov.com

COVID-19 Impact on Wake County Property Market

Real estate sales are starting to decrease, but lending is on the increase

The Wake County Register of Deeds will be issuing monthly reports on real estate activity, rather than quarterly ones, starting with this April 2020 report.

Charles P. Gilliam, Register of Deeds, said “the purpose of the change is to provide timely information so the public can gauge the effect on the Wake County economy of the virus situation and the various measures curtailing economic activity that were taken in response, as well as the effect of the eventual lifting of those measures.”

April real estate activity is down both in the number and value of transactions.

Real estate activity is starting to decrease

In April the number of parcels transferred by deed was down 13.3% from March 2020 and down 11.8% from April 2019. This is a reversal from March 2020 where activity was up compared with both February 2020 and March 2019.

The months of March through May are historically associated with increasing velocity of real estate transaction closings. The following chart shows the number of deeds recorded in 2020 by business day, starting with March 17,1 compared to the corresponding day in 2019. The exponential trend line for 2020, 2019 and 2018 are also shown. In both 2019 and 2018 the trend line was upward at a nearly identical pace. For 2020 the trend line is flat at a time when it is anticipated to be up.

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1 On March 14, 2020 public schools were closed and mass gatherings were prohibited by an executive order of the governor. On March 17 and 23, 2020 additional executive orders were issued which closed certain businesses and introduced additional restrictions. Based on these events, a starting date of March 17 is used for post COVID-19 virus daily real estate activity.

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Deeds recorded in April include many transactions that were in the pipeline prior to the executive orders limiting economic activity. A typical residential real estate transaction takes approximately a month or more to move from acceptance of an offer to closing. April activity reflects a mix of closings of contracts agreed prior to and after March 17. Looking forward, May transactions for the most part should be closings of post-March 17 contracts.

The dollar value of activity is down

The dollar value of Wake County real estate changing hands was down 27% compared to March 2020 and down 26% compared to April 2019.

Commercial real estate closings failed to develop in April. Only 49 parcels sold at a price of more than $1 million. The largest April closing was a North Carolina Department of Transportation acquisition along Glenwood Avenue for $7.5 million

Weakness was not just in the commercial market. Core market transactions were down 10.9% in dollar value compared to March 2020.

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The economic restrictions put in place could have different impacts on real estate activity based on the kind of property. Approximately 97% of Wake County real estate sales are at a price of one million dollars or less. This is the core market. The core market is primarily residential property. Transactions valued at more than one million through thirty million dollars historically comprise up to 3% of transactions and very high-end commercial transactions, those above thirty million dollars, are about one-tenth of a percent of transactions.

A breakdown of the dollar value of transactions by price range for the years 2014 – 2019 is available at http://www.wakegov.com/news/Lists/Posts/Post.aspx?ID=1140

Monthly median sales price

In April the median sales price was $325,000 up from $319,000 in March 2020.

Changes in median sales prices tends to be caused by activity in the core market. The occurrence or non-occurrence of large transactions has virtually no impact on the calculation of median values because there are so few of those transactions.

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The median Wake County real estate sales price for both the first quarter of 2020 and the fourth quarter of 2019 was $310,000. A breakdown of median values for the years 2014 – 2019 is available at http://www.wakegov.com/news/Lists/Posts/Post.aspx?ID=1140

Lending activity

Real estate lending activity has two primary components.

  1. The first is lending that coincides with a transfer of ownership of real estate. This is seen in the typical residential home sale where simultaneously a seller’s loan is paid off and a buyer takes out a new loan as ownership is transferred by deed.
  2. The second is where a new loan secured by real estate is taken out, but there is not a change in ownership of the underlying property. This is the situation in the typical mortgage refinancing or second mortgage transaction.

The relative strength of the second type of lending activity can be quantified by comparing the ratio of deeds of trust to deeds in a period. Relatively more deeds of trust signify increasing refinance of mortgage loans.

From the autumn of 2019 there has been a significant increase in the second type of lending activity. This trend has continued through April 2020. The following chart shows the widening gap between deeds of trust and deeds. This gap, compared to a baseline period from 2017 through mid-2019, quantifies increasing strength in the mortgage refinance market.

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Long-Term Trends in Real Estate Activity

A historical baseline is needed to provide context for 2020 real estate results. This section provides three years of baseline data for the salient indicators of real estate activity.

Aggregate value of real estate transactions

The following chart shows the aggregate dollar value of real estate transfers in Wake County for each month during 2017 through 2019 as well as year to date 2020. Because real estate transactions tend to be seasonal, it is useful to compare monthly results to the corresponding month of prior years.

Aggregate_Value_of_Wake_County_Real_Estate_Transactions_Year_Month.png

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Aggregate value of real estate transactions - linear

The following chart shows the aggregate dollar value of real estate transfers in Wake County linearly (month by month) from January 2017 through year to date 2020. Because real estate transactions tend to be seasonal, this information should be evaluated in conjunction with the year over year comparison shown in the preceding chart.

Aggregate_Value_of_Wake_County_Real_Estate_Transactions_Monthly.png

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Deed volume

The following chart shows the number of deeds recorded in Wake County for each month during 2017 through 2019 as well as year to date 2020. Numbers of deeds recorded reflect the velocity of real estate activity without regard to the dollar value of a transaction.

Wake_County_Deeds_Number_Recorded_by_Year_Month.png

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Real estate lending

This chart shows the number of deeds of trust recorded in Wake County for each month during 2017 through 2019 as well as year to date 2020. A deed of trust is the legal instrument used in North Carolina to secure a loan with real estate used as collateral. Numbers of deeds of trust recorded reflect the velocity of lending transactions involving real estate without regard to the dollar amount of the loan.

Wake_County_Deeds_of_Trust_Number_Recorded_by_Year_Month.png

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Methodology and Additional Information

The statistics in this report are derived from instruments recorded in the office of the Wake County Register of Deeds. Under North Carolina law, changes in property rights in real estate, including security interests in real estate, are recorded with the Register of Deeds of the county where the real estate is located.

The value of real estate transferred is measured by excise tax assessed on the consideration in a real estate transaction. Excise taxes are calculated as $1 in tax for every five hundred dollars of consideration. About 99% of these transactions were property transfers by deed and the balance were miscellaneous transactions such as acquisitions of a right of way. Calculation of the aggregate value of real estate includes all transactions. The calculation of median price includes all transactions where property was transferred by deed.

The number of deeds and deeds of trust recorded with the Register of Deeds reflects the total volume of property and loan transactions regardless of the dollar value of the real estate or amount of the loan.

For a complete picture of Wake County real estate activity, the information in this report should be considered in conjunction with data available from other sources, such as rezoning applications and new building permits.

This report was initially released on May 4, 2020.

 

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