Trouble for the “exurbs”?
Living the rural lifestyle
The Chapel Hill area of the Triangle includes some wonderful rural communities that have been extremely popular over the last 30 years or so as homeowners seeking a more rural lifestyle traveled 20-30 minutes outside of the Triangle where they could own some acreage and settle into country life. Because the Chapel Hill/Carrboro area is relatively small you don’t have too drive far to find a piece of rural heaven.
We used to call these areas “living in the country” but there is a more official name for them: the “exurbs.” According to Wikipedia:
Today’s exurbs are composed of small neighborhoods in otherwise bucolic areas, towns, and (comparatively) small cities. Some lie in the outer suburbs of an urbanized area, but a few miles of rural, wooded, or agricultural land separates many exurbs from the suburbs. Exurbs that originated independently of the major city to which many residents commute may feature some cultural institutions or universities of their own. Others, by contrast, consist almost exclusively of commuters and lack the historical and cultural traditions of more established cities.
Exurbs have been in the news lately
with articles like this one from the New York Times:
As a demographer, William Frey of the Brookings Institution, told The Times recently, exurbs were once the “cutting edge” of growth, but no more. “That growth has really come to a standstill,” he said, “and is maybe being given up for dead at this point.” His analysis of data found that the country’s outer suburbs grew by only 0.4 percent in the fiscal year ended in July, down from 1 percent the same period before. It peaked, in 2006, above 2 percent.
For generations, Americans have migrated ever outward from city centers, pulled by affordable housing to places where long commutes were possible because of cheap gasoline. The costs of such migration — in traffic congestion, environmental degradation and increasing addiction to fossil fuels — were played down or ignored.
Recent trends point to a correction, driven in part by the recession, which has made it harder for families to move. The Census Bureau also recently reported that America’s urban population increased by 12.1 percent from 2000 to 2010, faster than the nation’s overall growth rate of 9.7 percent. The exurban tide may be receding.
I can verify this idea that cheap gasoline made the exurbs possible. When gas prices first shot up in 2004 the market for homes in Chatham County and western Orange County dropped significantly despite the fact that elsewhere the housing boom was still raging unabated. Clients who previously were looking in these areas decided to buy homes closer to their work because of high gas prices.
Return to the cities
At the same time the idea of urban living and downtown condos began to take hold, resulting in a new wave of inner city development. According to USA Today:
The nation’s development patterns may be at a historic juncture as builders begin to reverse 60-year-old trends. They’re shifting from giant communities on wide-open “greenfields” to compact “infill” housing in already-developed urban settings.
The market slowdown has given builders time to assess sweeping demographic changes that are transforming the way Americans want to live.
Young Millennials and older Baby Boomers are rejecting traditional suburban lifestyles in favor of urban living and shorter commutes. Many want to live near city centers so they can walk to work, shops and restaurants or take public transportation. They also prefer smaller homes because they’re single or have no kids and don’t want to spend their free time maintaining their homes. …
The housing bust of the last five years hit hardest in subdivisions in remote suburbs, drying up financing for such development. At the same time, gas prices soared and so did environmental consciousness, giving consumers pause about living in distant suburbs away from services, jobs and entertainment.
We are seeing this in Durham where after 30 years of valiant efforts the downtown is finally revitalizing, with a farmer’s market, art galleries, trendy restaurants and downtown condos. Downtown Raleigh also achieved a measure of success in the condo boom of the mid 2000s but was hurt harder during the housing crash because of an oversupply of downtown housing.
What next for rural housing?
It’s difficult to imagine that gas prices will drop, so unless the dream of public transportation in the Triangle becomes a reality the market for homes in the exurbs is likely to continue to be a challenge. There will always be people (like me) that crave the peace and solitude of wooded seclusion and who will be willing to drive a bit more and pay a bit more for that privilege. The lower property taxes of the rural areas offsets the higher gas costs anyway.
But as the market for rural housing shrinks, as long as the supply continues to expand with new developments home prices in these areas will languish and expectations of home sellers will need to comply with the new market realities.
Timing is everything
Just like any real estate agent, I love to sell houses Nothing is more thrilling than having a buyer find the perfect house on the first day, or getting that perfect offer on a new listing during the first week of marketing.
But it doesn’t always work out that way. Sometimes a buyer loses the house of her dreams, and two weeks later gets a job offer in another state. More often, after losing a contract on a house that they thought was perfect, buyers will almost always find a house that is even more perfect, in ways they can’t even imagine.
I used to find it very frustrating when buyers would lose a house through multiple offer situations, or if I couldn’t get them to come to a decision in what I thought was a timely fashion. But over and over I’ve seen that when this occurs we usually discover that it was all for the best in the end.
There was the time that a buyer client of mine lost three homes she made offers on, and then received an incredible job offer out of state and had to leave the area.
There was the time that the husband in a seller pair had started working in another state. We put the house on the market, but despite my staging and high impact marketing we were simply unable to sell the house. In the end it turned out that the husband lost his job and moved back home, and found a job locally so that they could stay.
Most recently I have had a home on the market for about a year. The sellers had moved here to be closer to their adult daughter, and planned to downsize into a smaller home with a smaller lot. There was virtually no interest in the home during that period and it sat on the market. Then their daughter became engaged and her parents decided to move back to Floriday. The daughter listed her house with me, and within a few weeks both homes sold on the very same day.
A prospective sellers asked me for statistics on how quickly my listings sell. Despite the high level of satisfaction from past clients, my statistics aren’t particularly exceptional. They don’t take into account the listing that I took of a past client who went into bankruptcy and foreclosure. They don’t tell the story of the clients who put their house on the market but were unable to find a suitable place to live. Statistics don’t tell the human story of lives in transition.
This is why at Lynn Hayes Properties we focus more on the client’s particular needs than the statistical data of making quick sales. One of my clients recently said in a testimonial video “I don’t know how Lynn makes a living,” but caring about our clients means that our clients reciprocate by trusting us with their friends and family.
It’s all a matter of timing.
Raleigh is #2 city for wedded bliss!
In a survey by Rent.com to determine the best cities for newlyweds, Raleigh took one of the top scores. The folks at Rent.com surveyed not only couples’ attitudes but also looked at the unemployment rates and mean income levels of each city.
Young professionals and new families are drawn to Raleigh for its affordability, friendliness, and favorable climate. Livable residential neighborhoods with the cultural benefits of a larger city make Raleigh the perfect place to settle down.
It’s always hard to know whether these surveys mean the City of Raleigh itself, or the Great Raleigh Metropolitan Statistical Area which includes Cary, Durham, and a variety of other Triangle towns depending upon the individual study.
At any rate, it’s good to see that the optimism about life in the Triangle continues strong, despite the travails of the past few years.
This is an actual photograph of an actual Raleigh newlywed from Bridget Mcenany
Reading the small print: Do the mineral rights under your home belong to you?
What the frack?
The process of extracting natural gas through hydraulic fracturing, or “fracking,” is a big issue across the nation and in other countries as well. The Triassic Basin, which I described in my previous post on local foundation issues, is being targeted as a source of shale gas that can be extracted using the “fracking” technique. While members of the gas industry not surprisingly claim that fracking is safe for surrounding property owners, those in areas where fracking is already commonplace have told another story of air quality effects and groundwater contamination.
Do you own the mineral rights under your home?
Whatever your position on fracking, no one wants to find out after they purchase a home that the developer can retain the right to drill and explore for gas, petroleum, coal and other minerals under the property that you think you own but that’s just what has happened in Durham when it was announced that homebuilder D.R. Horton has retained the mineral rights to homes sold in several of its developments.
Evidently a new homeowner was told at the closing of the purchase that D.R. Horton would retain the mineral rights to the property.
I’ve been selling real estate in the Triangle since 1984, and this is the first time I have heard of anything like this occurring and I have to wonder how many people are even aware that this has been going on. The Independent Weekly research team found that D.R. Horton sold the mineral rights on at least 425 Triangle lots to its own energy company over the past two years.
In Chatham County these lots include the Legend Oaks subdivision which was originally developed by the Orleans Company. D.R. Horton bought out the remaining lots when the neighborhood failed to sell as expected. Other subdivisions discovered by the Indy include:
• Durham County: Ashfield Place, Brightleaf at the Park, Keystone Crossing, Swann’s Mill, Carillon Forest (1 lot only), Everwood
• Cary: Bellemont at Cary Park, Cary Park, Prestwyck, Old Millburnie Crossing
• Fuquay-Varina: South Lakes, Summerdale
• Garner: Tunbridge
• Knightdale: Brookfield Station
• Raleigh: John’s Pointe, Macadie Park, Providence
How long has this been going on?
The separate deeding of mineral rights is not an unfamiliar story in parts of North Carolina – in mountain property prospective homebuyers are more accustomed to checking to determine whether the mineral rights have been stripped. I could find no other case of a developer retaining mineral rights on lots that are sold in North Carolina although it does appear that this is not uncommon in Texas. Not surprisingly, D.R. Horton is headquartered in Texas and began severing mineral rights from their North Carolina lots in 2010.
National builders like D.R. Horton have their own purchase contracts and it is crucial that a prospective homeowner read through every word of these contracts before signing. Obtaining legal advice is not a bad idea either since these agreements often have terms that are in violation of North Carolina standards of practice.
Meanwhile, this is one other thing for Realtors to pay attention to when bringing buyers to new home communities, and another reason for home buyers to be sure they have a good buyer agent to represent them.
Foundation problems in the Triangle: a true story
It starts with the clay
The Chapel Hill/Durham area is famous for its shrink/swell clay soils, and it’s not uncommon to have settlement cracks around sheetrock corners and windows. Sometimes we see cracks in foundations, and if a house is brick the cracking becomes even more obvious. This is especially true in an area called the “Triassic Basin” which begins on the eastern side of Chapel Hill and Chatham County and extends through most of Durham, but other areas of the Triangle still can have some foundation movement, especially during drought conditions (Click on the map and then click again to enlarge).
My story begins
I recently sold a house to a wonderful family from Florida and the seller disclosed that some helical piers had been installed by a local foundation repair company. Further inquiry uncovered the fact that the sellers had consulted a structural engineer when they purchased the home who informed them that the cracks they observed in the kitchen and around the fireplace were not structurally significant and normal for the area. Over time they observed new cracks and had the engineer come out a second time. Again they were told that these cracks were not structural and didn’t require correction. Still, they were nervous so they called a local foundation contractor who installed a series of helical piers to the tune of over $10,000. They were told they had a “lifetime warranty.”
At our home inspection a few weeks ago our inspector, who is a licensed contractor, noticed a small crack in the foundation that had not been sealed. He did not believe it to be anything important and did not suggest that we have a structural engineer look at it. Instead he recommended that we have the foundation company that installed the piers take a look to see if the crack was part of their original proposal or something new. The sellers did so and were told by that company that three additional helical piers were necessary to correct the issue. Oh yes, and the “lifetime warranty” only covered the work that was done, so the cost would be an additional $3,000 plus.
Panic sets in
My clients, who imagined the worst, began to panic thinking that the foundation was unstable. But to me the whole thing sounded fishy. Now I am NOT a licensed contractor OR an engineer, so I’m really not qualified to express an opinion. But I’ve been around long enough to know that to a hammer everything looks like a nail, and when you call someone who sells helical piers to examine a foundation, he’s going to think you need helical piers to correct the problem. This is also true of waterproofing companies – even if you simply need to clean your gutters to relieve a water issue, the waterproofing company will recommend their particular system as the perfect solution to your problem.
A happy ending
Fortunately my favorite general contractor was able to come out on a Saturday to examine the situation, and put my clients at ease in explaining that the foundation crack in question was superficial – it did not go through the concrete block and did not have any effect on the load bearing on the foundation. The crack likely occurred because of a weakness at the foundation vent but in 26 years it was still just a hairline crack.
The happy ending to the story is that not only are my clients comfortable and happy with the foundation situation, but we saved the sellers over $3,000 in needless repairs.
So if you live in the Triangle and see cracks in your foundation, don’t make your first call to someone who sells foundation solutions. Call a reputable licensed contractor first, and let them recommend a structural engineer if necessary. You will likely save yourself not only thousands of dollars, but hours of needless worry as well.
Don’t let this happen in your yard!!
North Carolina is full of ivy. And kudzu – we have lots of kudzu. I’ll be posting lots of kudzu monster photos this summer. Then there’s poison ivy – the Southern kind that if left untended turns into great snakes of vine-y badness that wraps all over everything. But for now we’re talking about English ivy – a cultivated brand of ivy that seems polite and well-mannered until all of a sudden it’s murdering your prize oak tree.
Ivy is a beautiful ground cover, and lots of people think it’s great to let it meander all over their homes and climb their beautiful heritage oak trees like the one in this photo. But this oak tree, probably close to 100 years old or more, is being strangled by the ivy and dying from the branches down.
These vines aren’t easy to trim from the top down, but you can cut off their nourishment by trimming around the bottom of the trees. Don’t let your arboreal friends be murdered by the vines of summer!
Have we turned the corner? Chapel Hill area real estate, 2012 edition
Multiple offers for the first time in years
We have thirteen listings right now ranging in price from $179,000 to $1.3 million, in Chapel Hill, Durham and Chatham County which gives us a pretty good sense of where the market is going. Over the past few weeks we have had three in-town Chapel Hill listings sell within a week of being listed for sale, and at higher prices than last year’s sales record would suggest. Two out of the three have had multiple offers, and I also brought a buyer to a Chapel Hill listing that had been on the market for merely a few hours before we snapped it up.
The same can’t be said of our Durham and Chatham listings, despite the exact same marketing and exposure, which led me to wonder if what I’ve been experiencing is just a fluke, or is it just a Chapel Hill phenomenon?
Statistical analysis
So here is my attempt at a roughly accurate analysis of sales so far in 2012:
For all properties with a Chapel Hill address, which includes portions of Chatham and Durham counties, here are the statistics for the period between January 1 and today:
| List price | # of new actives | # of pendings | % of listings sold |
| Under $200,000 | 126 | 30 | 24% |
| $200-300,000 | 97 | 47 | 48% |
| $300-400,000 | 121 | 48 | 40% |
| $400-500,000 | 119 | 40 | 34% |
| $500-700,000 | 139 | 27 | 19% |
| $700-1M | 64 | 13 | 20% |
| Over $1M | 41 | 9 | 22% |
In Chapel Hill the most active price range is that between $200-400,000, and over $500,000 the sales fall off quickly.
Durham is still the most popular community for homes priced under $200,000, but the number of sales over $400,000 drops off a cliff:
| List price | # of new actives | # of pendings | % of listings sold |
| Under $200,000 | 911 | 322 | 35% |
| $200-300,000 | 305 | 136 | 45% |
| $300-400,000 | 101 | 48 | 48% |
| $400-500,000 | 47 | 8 | 17% |
| $500-700,000 | 41 | 15 | 37% |
| $700-1M | 25 | 4 | 16% |
| Over $1M | 18 | 2 | 11% |
Carrboro is a much smaller market than any others but homes there usually sell quickly, and we are not seeing that this year so far:
| List price | # of new actives | # of pendings | % of listings sold |
| Under $200,000 | 34 | 4 | 12% |
| $200-300,000 | 22 | 6 | 27% |
| $300-400,000 | 15 | 1 | 7% |
| $400-500,000 | 4 | 2 | 50% |
| $500-700,000 | 3 | 0 | 0 |
| $700-1M | 1 | 0 | 0 |
In northern Chatham County the bulk of sales have been in the $200-400,000 range, with the high end golf course communities continuing to see less activity.
| List price | # of new actives | # of pendings | % of listings sold |
| Under $200,000 | 57 | 11 | 19% |
| $200-300,000 | 53 | 15 | 28% |
| $300-400,000 | 85 | 28 | 33% |
| $400-500,000 | 54 | 9 | 17% |
| $500-700,000 | 78 | 5 | 6% |
| $700-1M | 20 | 0 | 0 |
| Over $1M | 11 | 0 | 0 |
Who is buying now?
Because we never really had a winter, our spring market began early. The majority of the people calling us for showings on our listings are in-town people who have been renting and are now ready to buy, or who are making changes in their personal lives that necessitate a move.
Historically our spring market begins in March and April, and we are still not seeing the out of town buyers that in the past fueled home sales in the spring. This reflects the fact that much of the country is still digging out of the housing fiasco and if homeowners are unable to sell their homes they are less likely to move across the country.
Still, it’s clear that there is significantly greater optimism today than at any time in the past five years which is very good news for the entire Triangle.
The effect on real estate of the new 3.8% Medicare tax
What is this transfer tax?
In 2010 Congress passed a new tax to help fund the health care and Medicare overhaul plans. This is a 3.8% transfer tax on the sale of some investment income.
Like most taxes, how it works and who it affects is complex and if you think you are affected you will want to discuss this with your tax adviser. But these are the salient points:
- The tax affects only individuals with adjusted gross income (AGI) above $200,000 and couples with an AGI of over $250,000.
- Some real estate transactions will be affected, but not all.
- Capital gains are affected, so any real estate transaction that does not involve a capital gain will not be taxed.
- The new tax applies to the lesser of either the investment income amount or the excess of AGI over the income levels stated above.
Will I be affected?
The tax seems to most significantly affect sales of investment property of high income individuals and couples, or a second home or principal residence which generated a taxable gain of over $250,000 for a single person or $500,000 for a couple . The National Association of Realtors has prepared a helpful brochure outlining the details of the rules and how it might affect different situations.
The new tax is sometimes called a “Medicare tax” because the proceeds from it are to be dedicated to theMedicare Trust Fund. Th at Fund will run dry in only a few more years, so this tax is a means of extendingits life.
A second new tax, also dedicated to Medicare funding, is imposed on the so-called “earned” income ofhigher income individuals. This earned income tax has a much lower rate of 0.9% (0.009). Like the taxdescribed in this brochure, this additional or alternative tax is based on adjusted gross income thresholdsof $200,000 for an individual and $250,000 on a joint return. Like the 3.8% tax, this 0.9% tax is imposedonly on the excess of earned income above the threshold amounts. An example and some analysis of thistax is presented in Example 5 of this brochure.
Another way of thinking about these new taxes is to think of the 3.8% tax as being imposed on a portionof the money that you make on your money — your capital (sometimes referred to as “unearned income”). The 0.9% tax is imposed on a portion of the money you make on your labor — your salary, wages,commission and similar income related to earning a livelihood.
But who will reallly pay it?
The website FactCheck.Org reports:
The truth is that only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.
We can understand how this misconception got started. The law itself is couched in highly technical language that only a qualified tax expert can fully grasp. (This provision begins on page 33 of the reconciliation bill that was passed and signed into law.) And it does say the tax falls on “net gain … attributable to the disposition of property.” That would include the sale of a home. But the bill also says the tax falls only on that portion of any gain that is “taken into account in computing taxable income” under the existing tax code. And the fact is, the first $250,000 in profit on the sale of a primary residence (or $500,000 in the case of a married couple) is excluded from taxable income already. (That exclusion doesn’t apply to vacation homes or rental properties.) …
So there you have it. The sort of people who would have to pay the tax might include, for example:
- A single executive making $210,000 a year who sells his $300,000 ski condo for a $50,000 profit. His tax on the sale of that vacation home would amount to $1,900, in addition to the capital gains tax he would have paid anyway.
- An “empty nester” couple with combined income of over $250,000 a year who sell their $1 million primary residence to move to smaller quarters. If they cleared $600,000 on the sale, they would be taxed on $100,000 of the profit (the amount over the half-million-dollar exclusion). Their health care tax on the sale would amount to $3,800 over and above the usual capital gains levy.
However, a typical home sale would not incur any tax. In March, for example, half of all existing homes sold for $170,700 or less, according to the National Association of Realtors. Obviously, none of those sales could possibly generate a $250,000 profit, and so none would be subject to the tax.
Thus, for the vast majority, the 3.8 percent tax won’t apply. The Tax Foundation, in a report released April 15, said the new tax on investment income (including real estate) “will hit approximately the top-earning two percent of families” when it takes effect in 2013.
Does it make sense?
Personally, I don’t see how it makes sense to tax home sales to pay for health care. It seems to me that health care should be reworked so that it pays for itself. And it’s unclear yet how this tax will affect the luxury home market where it’s widely assumed that high income homeowners are less affected by a tax burden. But that’s another story for another day!
Celebrate Black History in the Triangle
Photo from Hey to your Mama, a great photo site about African’American history in North Carolina.
The Triangle area of North Carolina has a rich African-American history that deserves to be celebrated every month, but Black History month offers an opportunity to highlight the many cultural opportunities available to residents and visitors. Unfortunately I am publishing this a little late for the scheduled Black History month events, so you will have to make your own itinerary. Here are just a few places to check out to enrich your understanding of the black experience in the Triangle:
- Check out this roundup of African American history in North Carolina
- Book a Black Durham Experience tour for 20-50 participants.
- Sign up for the Diaspora Festival of Black and Independent Film at UNC’s Sonja Haynes Center.
- Visit the historical collections of the African American Cultural Complex in Raleigh.
- Take an online tour of the history of NC Mutual and Black Wall Street
Last but not least, take an online tour of Durham’s lost Hayti business district and then enjoy this video of the history of the Hayti community. Hayti was a thriving black commercial district up until the time the Durham Freeway cut a swath through homes and businesses but it’s strength lives on in Durham’s thriving black community.
The appeal of a tiny house
Maybe it’s the notion of a small place to hide away from the world. Maybe it’s nostalgia from childhood when I used to crave a small home of my own. Maybe it’s just because they’re so darned cute.
Whatever it is, this collection of small houses and “micro-dwellings” have really captured my imagination.
I can imagine this very cool pod in the woods behind our house. It would make a great place for yoga or watching the creek in the rain.
This one is just sweet and adorable. It was used by Arts & Crafts architect Bernard Maybeck to test some of his techniques.
Then of course there are the Hobbit Holes, always charming. (If you missed this video of one man’s true hobbit home, here’s another opportunity to dream.
You can purchase this tiny house and others from the Tumbleweed Tiny House company. Some of them are even portable and can be hauled off with a pickup truck.
Find more tiny houses at the Tiny House Blog and at Small House Style.
