Blog :: 2006

New Construction Growth

In my last column, I discussed the increase in lots purchased in Black Mountain during the last year.  With that in mind and a number of my clients considering purchasing lots now for building purposes, I thought it would be interesting to see the patterns in the local construction market.

Through December 15 of this year, according to Dan Cordell, Town of Black Mountain building inspector, there have been 58 new building permits issued.  Compare that with 33 for the same period last year, and it is apparent that the Black Mountain area is still growing strong, unlike other areas of the country.  Nationally, the number of building permits fell in October (the latest available data) for the ninth consecutive month, reaching a low not seen since 1997. 

For Jim McConnaughy, an owner of Ewing and McConnaughy, Inc., the proof of the area's strength versus the national weakness is the number of employment ad responses he receives.

"Buncombe County construction is still good," he says.  "The problem is in Florida and other areas.  A year ago if we placed an ad we would get one or two applicants.  Now we are receiving 20 or so.  Many are out-of-town folks.  We are still busy, but the labor market isn't as crazy as a couple of years ago."

So where is this new construction occurring?  One way to track new home growth is through new customers at the electric company.  According to Gary Hamrick, resource manager for Progress Energy Carolinas, the largest growth in new customers (electric meters) is in Swannanoa, North Fork and Broad River.  In fact, he cites that over the past 7 years, the growth of new electric customers is estimated at around 700 in Swannanoa alone.

Another interesting growth trend in construction is the home size of these newer homes.  Cordell, Black Mountain's building inspector, notes that in 2005, the average size of new construction was 1,959 sq. ft.  For 2006 to date that average has grown to 2,414 sq. ft.  He adds that he is anticipating major growth in commercial and mixed use properties in the next year as well. 

One consideration when looking toward new construction is the increased costs of area building.  Since 2002, average construction costs of building permits have increased 20%.  In part this can be attributed to the larger size homes being built.  In addition, construction costs around the country have been increasing although recent soft construction markets have reduced costs in some areas.  As you can image, this decrease in construction cost is not happening in Black Mountain.

"Black Mountain cost of construction is higher than other areas," explains Maury Hurt, owner of Hurt Architecture and Planning.  "The cost of living is high, so cost of labor is high.  Also, many of the undeveloped properties are on steep slopes that tend to drive up construction costs."

Even with these higher costs, however, Hurt does not see any decrease in construction volume in the next year.  "The future of construction looks strong with so many new lots being sold in The Settings and the new lots proposed in the Cliffs' Swannanoa development."

Dan Cordell agrees.  "Based on what I'm experiencing, it would not surprise me to see the number of building permits double in the next year."

It looks like, as in the land and housing markets, Black Mountain will buck the national trend and continue growing in the next year.  Black Mountain's challeng is not how to spur growth but to find a balance between this anticipated growth in construction and protecting our natural surroundings.

Investing in Land in Black Mountain

People often ask me if buying land is a good investment. And in terms of Black Mountain, I would have to say yes.

According to Multiple Listing Service (MLS), there are a lot of people who agree with me on that. Through October 31, sales volume in 2006 for lots and unimproved property is $11.2 million, compared to $7.7 for the same period in 2005, representing an increase of 45%. The median price per acre in 2006 was $28,497, an increase of 5% over the $27, 100 price recorded for the same period in 2005.

As a specific example, in Laurel Ridge, whose statistics are included in the MLS report, sixteen lots have sold in 2006 through October 31 compared with 6 lots over the same period last year. "Laurel Ridge is a community 'on the move'," notes Sharon Came realtor and residence of Laurel Ridge. Our community receives "high interest because of the currently reasonable lot prices, excellent roads, and city water."

In fact, lot sales are even hotter than those figures indicate. MLS figures do not even include the sales of unimproved property in the Settings, a Black Mountain development. According to Michael Kalb, sales manager for the Settings of Black Mountain, the Settings has sold 70 home sites year to date, ranging in price from $120s to $600s.

What would create such an increase in interest in Black Mountain in general and in lot sales specifically? First of all, there has been a tremendous amount of publicity generated by numerous favorable articles in national publications in the last few years. Money Advisor pointed to the area in 2005 as One of the 5 Best Places to Retire, and AARP chose the Asheville area last year as one of its top 15 Dream Towns. All of this national attention increases the interest in the area.

In addition, investors are recognizing the area's potential. Lee Kissell, from Tallahassee, FL., had been vacationing in the area with his family for almost a decade and began looking for land without any real plans to buy. "We started out looking just as a curiosity," he explains. "After looking around and getting initial pricing, we became seriously interested in purchasing property."

The Kissell Family also represents another segment of people who are increasing the land-sales volume by buying lots as they look ahead for their retirement.

"We decided to purchase as an investment and as a place to build a retirement home," Mr. Kissell says. "We didn't want the expense and hassle of a second home, but we did want to buy a lot while the prices were still within our range. This also gives us the opportunity to pay off the land before retirement, which will reduce our costs when we build."

Clearly sales volume has increased, but what about land values? Buncombe County's 2006 tax reassessment which is done every four years, demonstrates that land values have increased with the increase in sales volume. According to R. Keith Miller, chief real estate appraiser, Buncombe county tax department, Black Mountain township land value increased from $129 million to $281 million during the latest reassessment, an increase of 118%. That rate outpaces the county increase of 78% as well as the towns of Woodfin (87%), Weaverville (74%), and Montreat (25%).

What has produced the dramatic price increase in Black Mountain? Basic law of supply and demand dictates that with fixed supply prices will only increase with increasing demand. And we know that buildable land in our area is very limited.

According to Wendell Begley, president of Black Mountain Savings and Loan and well known Black Mountain historian, there are 36,011 acres that comprise the Black Mountain Township, and of this land, 53% is owned by local and state governments or religious conference centers. While these large landholders will most likely protect some of our "view sheds", it does limit the supply of buildable land.

Statistics indicate the population has increased steadily over the last five years in the area. With that information, it is safe to assume that more people equal more interest in land, which produces higher prices, and there is no foreseeable change in that trend. It is safe to assume that now is the time to purchase land as land supplies are limited and prices will only continue to increase.

Black Mountain Market Continues to grow Despite National Reports

Recent national headlines have announced the demise of the once-booming housing market across the country. Publications including The New York Times and USA Today have carried articles such as "Housing Market Slumping" and "Existing Home Sales Decreasing with Softening Prices." An October 11, 2006 article from the National Association of Realtors website states that "existing home sales for all of 2006 are expected to drop 8.9%." In addition, an informal survey within town of local vacationers has them reporting their home real estate markets, particularly in Florida, are very soft this year.

So is that national trend downward of real estate being felt in Black Mountain? It's not seen if one compares area statistics in real estate sales activity in Black Mountain this year versus last year. First of all, in numbers provided by the Asheville Multiple Listing Service, for the first three quarters of this year, total sales volume of homes in Black Mountain increased 14%. The average sales price year to date is $228,000, compared to $195,000 in 2005, a 17% increase. The median price of homes in the area rose 13% over 2005 to $192,000.

Two other important market indicators also defy the national real estate slowdown. Days on market, the length of time a house is listed prior to being under contract, year to date through September 2006 is 84 days, very similar to the 2005 average of 80 days. Similarly, list price to sales price in 2006 is 96%, which is exactly the same as 2005.

So why isn't Black Mountain seeing the softening of the real estate market that's affecting so many other national markets? In the first place, Black Mountain never saw the tremendous surge in prices that other markets have experienced in the last three to five years. The cyclical market correction other areas are experiencing therefore isn't necessary in the Black Mountain market.

Secondly, Black Mountain has received national attention in recent articles highlighting the area's high quality of life. For example, National Geographic Adventure magazine listed the Asheville area as one of its ten Great Adventure Towns in 2004. Consumer Reports chose the Asheville area as one of its five Best Places to Retire in 2005. All of this positive publicity increases the demand for housing as interest among second home purchasers and retirees grows. In addition, new developments such as the Settings of Black Mountain, Creston and Catawba Falls have advertised the area heavily in national publications.

So is Black Mountain just a little behind the times or has the area managed to avoid the downward trend? Nationally, the decrease in the housing market seems to be stabilizing. According to the National Association of Realtors website, pending home sales are up 4.3% from July to August this year, the latest data available. In addition, the national average for 30 year mortgage interest rate has declined to 6.3% from a high of 6.8% in July 2006.

In short, it appears that Black Mountain has likely avoided that national downward real estate trend, once again showing that the area remains a great place to live, invest and retire.