Asheville Mountain Real Estate Blog

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Location: Mars Hill, NC, United States

A small, highly personalized real estate firm specializing in mountain homes and land in greater Asheville.

Wednesday, July 02, 2008

Finding The Asheville Real Estate Market: Best To Look Upstream?

USA Today profiled the Asheville real estate market a while back in their Close to Home series. Under the title "It's a Nice Place to Live But Sales are Down", the article captures the conventional wisdom, but we wanted some background.

Conventional widom is not rigorous analysis, but the parts fit together pretty nicely, and we might even discern some trends along the way.

The Basic Idea
The thought is that the selling prices for homes in greater Asheville are higher than local salaries would suggest. Therefore, the majority of homes are being purchased by buyers from outside of the region.

The USA Today piece noted that bit of deduction, it is other geographic areas that serve as "feeders for Asheville's real estate". A brief look at some data illustrates all of this.

Some Macro Data
The median price for a home in Buncombe County is around $265,000. For the 5 Western counties, that number is more like $254,000. So there is our ballpark. Let's look at Buncombe County, the most populous, to see if our incomes can afford that.

For median income, it looks like $37,738 is the number to pick. An old rule of thumb says that three times the amount of income is the area where home prices should be. This would give us roughly $120,000 for house prices. That's a notable gap, measuring less than half of the actual median selling prices.

So, the idea that home buyers are migrating from other places gets some traction here. Taking just a quick look at some population data, one can in fact, make a pretty good case that net migration is the largest contributor to our overall population growth.

Presumably, those are the buyers for local real estate that support the gap between local home prices and local income. One could say in this sense that they are upstream of Asheville.

But If It Doesn't Rain Upstream...
When it doesn't rain upstream a river starts to get low, and it hasn't been raining so much in the main areas where our buyers live. The translation is that if buyers cannot sell their homes back home, then buying a home and moving here is more difficult than in the past.

Our main feeders have been Georgia and Florida, with Virginia a distant third. If the most common contingency that buyers have is to sell their present home first, then those are fairly soft markets in which to accomplish that.

For a while now, Florida and Georgia have been top 10 foreclosure states. Virginia ranks midway in the nation, but has seen a 450% increase in foreclosures since 2006. (Source). There are local variations, but in general those are not easy conditions to sell one's home and move.

The Moral Of The Story
Let's take this analogy one more step with some riverboat wisdom that might be useful for buyers and sellers; If you're wondering about a drought or a flood in Asheville real estate, whether to buy or sell, it might be best to look upstream first.

Related Articles
Held Back By The House: Washington Post
Housing Market Slows Migration to Hot Spots: USA Today

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Filed Under: Asheville Trends in Real Estate

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