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Office, industrial, multifamily, retail: What's to come? | RENX – Real Estate News EXchange

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IMAGE: Allied Properties REIT president and CEO Michael Emory. (Courtesy Allied)

Allied Properties REIT president and CEO Michael Emory. (Courtesy Allied)

When four panelists met to lay out their prospects for the four major commercial real estate asset classes during a recent RealCapital virtual panel in Toronto, trends had been pretty clearly established in three of the sectors.

Industrial and multiresidential were (and are) performing well. Certain segments of retail continue to generate strong returns, while others are struggling. However, while there’s a consensus among many office owners and occupiers that most employees will return post-pandemic, there’s still some uncertainty about the home and office mix once the pandemic ends.

“The sectors are always evolving and total return performance varies,” said moderator Peter Senst, CBRE’s president of Canadian capital markets, in his introduction. “Every sector has its own cycle. It’s therefore critical for leaders of real estate companies to make strategic decisions knowing that the future of different asset classes may, and likely will, change their momentum.”

That set the table for the four highly respected senior executives, including Allied Properties REIT (AP-UN-T) president and chief executive officer Michael Emory, who tackled the office sector.

Allied and the office sector

Allied is focused on providing distinctive urban workspaces to knowledge-based companies in major Canadian cities. Despite the pandemic, Emory said 2020 was an encouraging year.

“We had virtually no tenant failures in the office component of our tenant base. Our same-asset NOI (net operating income) sustained itself relative to 2019, which we were very pleased about given the amount of rent we abated under the CECRA (Canada Emergency Commercial Rent Assistance) program.

“We did 258 lease transactions in 2020, which is a staggering number; 103 of those lease transactions represented deals with tenants that are new to our portfolio across the country.”

Allied had a 17.3 per cent average net rent increase for renewals across its portfolio over 2020. Emory attributed that to the strengths of its three largest markets: Toronto, Montreal and Vancouver.

While there’s been a lot of talk about how working from home will impact the market, Emory said almost all of Allied’s office users intend to return their entire workforces to the office after the pandemic is over.

They’ve experienced corporate cultural disintegration and declines in engagement and productivity as people have continued to work from home.

Emory said knowledge-based organizations’ top priorities aren’t costs and cost-containment, but attracting and retaining top employees.

Allied is very urban-focused and Emory doesn’t believe companies will make any major migration to the suburbs for office space. While he said the suburbs remain viable, he thinks the pre-COVID-19 trend of increasing urban intensification will continue.

“Centuries of human history is not going to reverse itself because of a transitory pandemic,” said Emory. “It just isn’t.”

While trading in office buildings essentially stopped when pandemic shutdowns kicked in last spring, it restarted late last year largely where it left off in February 2020.

“We don’t expect to have any distress opportunities in 2021,” said Emory. “We will pay top dollar for whatever becomes available to us that fits squarely within our investment and operating focus in 2021.

“And if we don’t, someone else will. There’s a tremendous amount of money looking for a home. A lot of it is very long-term investment capital. I expect it to be expensive and I expect trading to be considerably more active for high-quality urban office space in Canada in 2021 than it was in 2020.”

Industrial

Summit Industrial Income REIT (SMU-UN-T) owns and manages an 18-million-square-foot portfolio of light industrial properties in Ontario, Quebec and Alberta. CEO Paul Dykeman said fundamentals for the class were the strongest ever in February 2020 and the year ended in a similar position.

More than 90 per cent of Summit’s portfolio remained open through the pandemic, though some small-bay tenants were impacted and utilized the CECRA program and rent deferrals. Occupancy remained between 98 and 99 per cent throughout 2020.

Summit increased rents by more than 20 per cent on expiring leases and closer to 30 per cent in the Greater Toronto Area. Some increases approached 50 per cent, according to Dykeman.

“By August, we shifted into offensive mode and went into the capital markets a couple of times and the debt markets a couple of times and ramped up our acquisition program,” said Dykeman.

Interest in industrial has grown substantially in the past few years; it’s seen as a stable and safe income-producing investment vehicle with increasing growth upside. Dykeman said Summit is only buying industrial properties in the Toronto and Montreal areas because it forecasts continued growth and demand in those markets.

Dykeman said industrial land is trading at up to $3.5 million per acre, which would push rents per square foot up to $13 to $15, while in-place rents are around $6.50.

With a limited supply of quality industrial space to acquire at below replacement cost, Summit is becoming more active in development. Dykeman said the downside is industrial properties now take longer to build and the cost will approach $300 per square foot. It was around $175 just a few years ago.

Amazon’s aggressive Canadian expansion is dragging the industrial market along and pushing rents up, but it’s not alone. Other e-commerce players are also driving demand and Dykeman said more attention is being placed on the onshoring of additional inventory after product shortages and international shipping delays caused problems in the early days of the pandemic.

Multiresidential

BentallGreenOak is a global real estate investment management adviser and service provider with $66 billion of assets under management. Toronto-headquartered Sun Life Financial Inc. acquired a majority stake in BentallGreenOak in July 2019.

Managing director of portfolio management Christina Iacoucci said BentallGreenOak’s multiresidential portfolio has held up very well through COVID-19 headwinds, including higher unemployment, lower immigration and reduced post-secondary student populations. All of these factors have combined to increase vacancies in the rental market.

Sun Life’s portfolio has been repositioned over the past four years to focus on the intensification of urban cores. Iacoucci said that has paid off even though the pandemic prompted some younger families to move out of the core due to affordability and to take advantage of low interest rates and more space.

BentallGreenOak is building purpose-built rentals in Hamilton, which Iacoucci said has created an affordable live, work and play environment that’s attracting young people.

“Downtown markets have been hit harder than the suburban markets due to an influx of new purpose-built rental supply that has come on stream, as well as the increased shadow rental supply that we’re seeing from short-term rentals and condos,” said Iacoucci.

Iacoucci expects a significant post-pandemic snapback in urban and suburban apartment demand as market and economic fundamentals are still strong.

“There’s still going to be a wide range of investors looking to add multifamily to their portfolios,” she said. “Despite the greater amount of new purpose-built rental that has come on to the market and will continue to come on to the market, the demand will still outweigh supply.”

Multiresidential yields can take advantage of low-interest Canada Mortgage and Housing Corporation financing for leveraged investments, Iacoucci added.

Retail

IMAGE: Jonathan Gitlin is president and COO of RioCan REIT. (Courtesy RioCan)

Jonathan Gitlin is president and COO of RioCan REIT. (Courtesy RioCan)

RioCan REIT (REI-UN-T) owns, manages and develops retail-focused and increasingly mixed-use properties in high-density transit-oriented areas. Its portfolio was comprised of 223 properties, with RioCan’s interest accounting for 38.3 million square feet of leasable space, as of Dec. 31.

Part of RioCan’s diversification strategy is due to the challenges facing the retail sector. However, president and chief operating officer Jonathan Gitlin said: “Our biggest challenge is bridging that wide gap between perception and reality.”

While 2020 showed weak spots in bricks and mortar, Gitlin said physical retail outlets still have a critical function in providing goods to consumers. Necessity-based retail has performed well through the pandemic and Gitlin expects shoppers will want to return to experiential retail stores once the majority of Canadians are vaccinated.

There’s been some weakness in urban storefront locations, but Gitlin believes there will be a resurgence and major Canadian markets will once again thrive.

RioCan has benefited from stronger suburban markets, however, where its retail locations have done well and Gitlin said tenants are happy to renew. The trust has sold all 506 units of a retail/condominium mixed-use development it’s building in the Greater Toronto Area city of Oshawa.

Gitlin said 2020 was quiet for retail transactions due to uncertainty about underwriting, which left many potential investors uncomfortable. He believes grocery-anchored shopping centres are resilient and safe and a good investment opportunity for a variety of different investors.

The lending community is still willing to lend money on the backs of well-located retail properties, according to Gitlin. He believes the Canadian investment market, especially for grocery-anchored and necessity-based retail, will ramp up.

Enclosed malls are difficult to underwrite and predict and are experiencing more strain. While retail power centres have an enhanced perception of risk, Gitlin thinks they’ll also be recognized as safe places to invest.

Gitlin said there are still solid fundamentals in place for good retail property operators and managers in good locations with value-oriented tenants. The sector also offers another benefit.

“These are typically very conveniently located parcels of land that have great income streams on them. But there’s a lot of flexibility in what you can do with those parcels of land.”

There are opportunities to buy retail in public markets at deeply discounted values and Gitlin expects that discount to net asset value will narrow.

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Luxury Real Estate Sees Unprecedented Growth in First Half of 2021 – Storeys

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Canada’s luxury housing markets were on fire the first half of the year.  

The Engel & Völkers 2021 Mid-Year Canadian Luxury Real Estate Market Report reveals that Canada’s luxury market experienced unprecedented levels of growth in the first six months of 2021.  

The report combines market data with intel from Engel & Völkers’ local Canadian market experts to produce a residential property analysis for the markets in Halifax, Montréal, Ottawa, Toronto, and Vancouver. It shares notable trends, in-demand neighbourhoods, economic factors, and changing buyer and seller preferences in three different price segments; under $1 million, $1-$3.99 million, and over $4 million. 

Factors like changing homeowner priorities, low interest rates, easy access to borrowing, and extra savings amongst professionals who stayed employed during 2020 combined to accelerate what Engel & Völkers calls ‘the COVID shuffle’. The report acknowledges the slight cooling of Canada’s red-hot housing market as of mid-April as competition levelled out. Overall, it forecasts that prices in premium markets are anticipated to stabilize in the short term while still increase in the long term as borders reopen in the wake of COVID-19 recovery. 

RELATED: Sale of Opulent Estate in Point Grey Breaks Vancouver Real Estate Record

In the luxury market, the start of 2021 brought an increase in demand for high-end condominiums. Driving the luxury condo sales market were (somewhat surprisingly) first-time homebuyers looking to enter the real estate market and retirees hoping to cash in their suburban homes, says Engel & Völkers. As many clients who moved to rural areas during the pandemic kept their city properties, luxury condo prices are expected to continue to rise with reopening rollouts across the country.

Interestingly, there is also an increase in multigenerational living. In fact, it’s the fastest-growing housing type in the country. Defined as homes with three or more generations living together, multigenerational homes allow families to redistribute and pool their resources to attain higher-quality luxury homes, says Engel & Völkers. The company forecasts that this fast growing phenomenon will become more frequent in Canada’s urban and surrounding areas. 

Engel & Völkers also reports global pent-up demand for properties in Canada’s major metropolitan cities. As international borders have remained closed since start of the pandemic, international demand upon their reopening is expected to drive the luxury market in Vancouver and Montreal in particular. Given Canada’s limited housing supply, this influx of buyers is anticipated to significantly strain the market. 

“After an unprecedented run, premium real estate markets are normalizing across Canada’s most in-demand cities, and that’s a good thing. At a global level, Canada’s real estate market is largely undervalued,” said Anthony Hitt, President and CEO, Engel & Völkers Americas. “But with low housing inventory and the buyer frenzy we saw in the first half of the year, Engel & Völkers believes the unprecedented demand for luxury properties will sustain. Local demand for luxury housing increased exponentially during the pandemic and international buyers are excited to return after a year of border closures. 2022 will be a year to watch.”

Halifax

18-hour cities
Halifax/Shutterstock

Engel & Völkers finds that The Halifax Regional Municipality (HRM) is a strong seller’s market that continues to draw both interprovincial and international interest. Draws of the city include its cultural attractions, the stunning landscape, and relatively attractive prices compared to other parts of the country, says the company. Last year, the average price for a home in Nova Scotia was $304,590 compared to a national average of $607,250.

Throughout the first half of this 2021, Halifax’s real estate market began a historic run. From January to June, homes priced between $1 million and $3.99 million stayed on the market for an average of only five days, while homes priced below $1 million spent 43 days on market. Despite record low inventory numbers in February 2021, total sales in Halifax increased from the previous year. 

Overall, single-family detached homes were by far the most popular housing type. In the luxury bracket, 21 homes were sold from $1 million to $3.99 million in both April and May 2021, respectively. The average price hovered at $1.4 million during both months. This is a marked difference from the previous year, highlights Engel & Völkers, which saw zero sales at this price point in April 2020 and only five in May 2020 (though that was also at the height of COVID’s first wave). Now, as Halifax is open to the rest of Canada, Engel & Völkers anticipates a floodgate of interest from clients who were not prepared to purchase site unseen. Historically low inventory levels could create an even more pressurized situation, says the company.

Montreal

18-Hour Cities
Montreal/Shutterstock

Montreal’s position on the urbanization curve is steadily climbing, says Engel & Völkers, as the city continues to attract buyers from French-speaking regions around the world. “Additionally, strong working and education opportunities paired with a charming European-like lifestyle have garnered interprovincial and international attention,” says Engel & Völkers.

Both home prices and production in Montreal continued to rise during the first half of 2021. Total sales priced $1 million or higher grew 115% in January, from 61 to 131 year-over-year. This compares to an only 17% increase in sales for all homes in the market, says Engel & Völkers, signalling a new era for premium real estate. Plexes did exceptionally well in the first four months of 2021, seeing a 74% increase in sales compared to the first four months of 2020. Similarly, condo sales for units priced $1 million or higher climbed from January to April 2021, totalling 138 units.

While Montreal is still one of Canada’s most affordable cities on the real estate front, Engel & Völkers forecasts it entering a strong growth period, with investors creating funds specifically for purchasing luxury detached homes in coveted neighbourhoods like Westmount and Outremont. This, coupled with growing opportunities and new construction projects, has positioned Montréal to be the new investor favourite of Canada’s real estate markets, according to Engel & Völkers.

Ottawa

18-hour cities
Ottawa/Shutterstock

In the nation’s capital, the first half of the year brought a strong seller’s market that drove home prices to increase exponentially. Engel & Völkers point to fear of missing out among buyers that has resulted in a 513% increase in the number of homes sold in the $1 million to $3.99 million category from January to May 2021 compared to the same period in 2020. The uptick in notable sales in Ottawa was replicated in surrounding rural areas as well, says Engel & Völkers. 

Since January 2021, average days on market for all homes decreased steadily in Ottawa. In April, the average days on market for all residential properties dropped to 18, down 40% from April 2020, in the thick of the first wave of the pandemic. 

In May, Ottawa houses sat on the market for an average of 13 days. For condos, however, days on market increased. In April and May 2021, units sat for 122 and 110 days, respectively, an increase from 90 days in May 2020, says Engel & Völkers. The market began to level off by May. Although prices continued to increase, sales returned to pre-pandemic levels and there was a notable drop in seriously interested buyers. 

Engel & Völkers anticipates a return to a more balanced market in the fall. “As more government and tech jobs become available and borders reopen, Ottawa will likely see increased domestic and international migration,” says the company. “On a global scale, the city’s real estate is largely undervalued compared to other capital cities, leaving room for growth as Ottawa rises from a government town to a dynamic hub of tech and business.”

Toronto

condo market
Toronto skyline/Shutterstock

Like other major Canadian cities, Toronto saw a record-breaking population loss from July 2019 to July 2020, with 50,375 residents leaving the city for rural areas. However, as restrictions ease and vaccines roll out, the city is seeing a renewed interest in urban living, says Engel & Völkers.

January 2021 started off strong, with average home prices rising to $967,885, growing by 15.5% year-over-year in the Greater Toronto Area (GTA). Overall, home sales were up by more than 50% compared to January 2020, for a total of 6,928. All homes sold in the $1 million to $3.99 million bracket nearly doubled from January 2020, with single-family detached homes driving this increase. Homes in this category sat on the market for 24 days in January 2021, down 33% from January 2020. “The luxury condo market, deemed almost extinct in 2020, has remarkably held its value into 2021, as the number of condo units sold valued between $1 million to $3.99 million has also doubled and prices have held,” says Engel & Völkers. 

The company predicts the market will continue to normalize. New inventory coming on the market will remain low, which will likely increase pressure for buyers looking to enter, it says. While the city and GTA have not run out of buyers and sellers, Engel & Völkers predicts a slow summer and holding pattern scenario as lockdown restrictions ease.

Vancouver 

Engel & Völkers reports a robust condo market in Vancouver since the start of 2021. “Sales remain stable and are continuing to increase, indicating that buyers are still interested in condo living or taking an initial step into real estate,” says the company. Condos at all levels within premium and ultra-luxury markets continue to sell to discerning buyers with an increased focus on quality over quantity. Rather than a focus on the amount of money they’re spending on a home, wealthy buyers are more concerned with the quality of the home, as its reflected in things like amenities, square footage, and parking, says Engel & Völkers. 

Like Toronto, Vancouver is emerging from the third wave of the pandemic in a promising position,” says Engel & Völkers. The company says significant growth in the pricy city is fuelled by buyers’ growing interest in real estate as an investment and desire to own primary residences. As in Toronto, recreational homes and property outside of Vancouver continue to experience high sales as city residents crave an escape from the concrete and more space. 

Vancouver is still in a seller’s market, but Engel & Völkers predicts that the west coast city will start to see a normalization period and return to a more balanced market in the fall, thanks largely in part to Canada’s new mortgage stress test. Finally, as we emerge from the pandemic, the city will experience an influx of national and international migration. According to Engel & Völkers, the luxury market will continue to grow steadily and see increasingly more ultra-luxury home sales.

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Calgary real estate predicted to moderate this year, with hot spring demand – Calgary Herald

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Homes listed above $600,000 are starting to see sales and prices pick up

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The forecast is calling for hotter conditions — only not as heated as this past spring.

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That’s not a prediction about the weather. Rather it’s a forecast for Calgary resale real estate prices.

Royal LePage recently released its Housing Price Survey and Market Forecast predicting home prices and sales across Canada will remain strong throughout the rest of the year — just not as heated as the sizzling hot markets seen in spring.

“It’s not sustainable,” says Corinne Lyall, broker/owner of Royal LePage Benchmark in Calgary, about sales and price growth that occurred in the second quarter.

As the report notes, from April to the end of June, the aggregate price of home in the city increased by 9.7 per cent year over year to $568,500, a record high.

The price acceleration was driven by record sales, including an all-time resale record for any month, set in April of more than 3,200 homes, Calgary Real Estate Board figures show.

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Driving the market in the second quarter were single-family detached home sales. The median price for this housing type grew by more than 10 per cent year over year to $638,000, the study found.

Yet even the sagging condominium market saw growth, jumping by 4.1 per cent over the same span in 2020 to $226,000.

“One thing were are seeing is a bigger impact in the $600,000-plus whereas, years previous, all the sales were under $500,000,” Lyall says. “This is the first year I can remember since 2014 that we actually saw sales grow and an increase in price (in this range) because people were competing for these properties.”

Price growth has been even stronger nationally, the report notes, with the aggregate price of a home rising by about 25 per cent in the second quarter over the same period in 2020 to $727,000.

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In fact, 89 per cent of regions surveyed saw double-digit percentage gains. Royal LePage forecasts sales will remain strong for the year, driving prices higher — just not at the pace seen in the spring.

The aggregate price nationally is expected to grow to more than $771,000, up 16 per cent from the end of last year. Montreal is forecast to be the hottest market with a year over year price gain of 17.5 per cent.

Calgary is also projected to see price growth, though more moderate at 7.5 per cent, year over year.

Veteran realtor Wendy Morrow with Real Estate Professional Inc. in Calgary says the price growth amid the pandemic is hardly surprising, given rising demand and limited supply.

“Inflation has risen above what we expected this spring and summer due to pent up demand,” she says.

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But this problem is not unique to real estate, she adds. Inflation is rising throughout the economy due to bottleneck supply issues.

Yet supply in the resale market should grow in the months ahead, Morrow says. “This will soften the real estate market prices somewhat.”

Still, uncertainty remains with COVID variants and vaccine rollout, among other concerns like job growth.

“None of us have a crystal ball as to what will happen,” Lyall adds.

What is certain is the city remains an attractive place to call home, she says.

“Calgary is a great place to raise kids, be close to the mountains… and so there’s a really great lifestyle here that a lot of people are attracted to.”

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Out-of-town interest drives local real estate market – Mountain Xpress

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Dave Farrell was new to town. He and his wife, Shelley, had just settled into a West Asheville rental after moving from Connecticut in early April. The couple planned to use their temporary digs as a home base for house shopping. They expected a competitive market.

What they experienced, Dave Farrell says, was extraordinary.

“It was crazy. Things would come on the market, and had maybe been available for an hour, and we would learn they had already been sold. That happened to us five or six times. We would never even get a chance to look at the place, and it was already gone,” Farrell explains.

The Farrells are just two of the many out-of-town buyers who have sought to relocate to the Western North Carolina mountains over the past year. That demand has supercharged an already hot real estate market: According to Redfin, a nationwide real estate brokerage, Asheville home prices were up 22% year over year in June, selling for a median price of $411,000. Area homes now sell after a median of 42 days on the market, compared with 63 days at the same time last year.

While the market may be challenging for outside buyers, it’s even harder for locals searching for homes. The latest available data from searches by Redfin users shows that the average real estate budget for an outsider moving to Asheville was $615,500 as of April, 31% higher than the average local budget of $469,000. That disparity between outside and local buyers was greater than in either Charlotte (21.1%) or Raleigh (25.2%); those cities also had lower average out-of-town buyer budgets at about $554,000 and $543,000, respectively.

Alexandra Schrank
GAME CHANGED: Alexandra Schrank, an Asheville-based real estate agent with the Mountain Star Team of RE/MAX Executive, says she commonly sees offers of $30,000 or more over asking price on Asheville homes. Photo courtesy of Schrank

Alexandra Schrank, an Asheville-based real estate agent with the Mountain Star Team of RE/MAX Executive, says the Redfin numbers square with her on-the-ground experience. And for locals with lower budgets, she continues, options in the Asheville market are severely limited.

“If your budget is $300,000 or lower, it is almost impossible to find anything,” Schrank says. “We are seeing double-wide trailers selling for $250,000.”

Driving factors

Schrank calls the COVID-19 pandemic “the biggest game changer for real estate.” Low inventory due to slower building activity and low interest rates set to stimulate the economy, she says, have generated high demand both in Asheville and across the country. The national median home sale price in May 2021 was over $377,000, up 26.3% year over year, according to the most recently available Redfin data, and the median home sold in 16 days, down from 38 in May 2020.

Increased adoption of technology driven by the pandemic, she adds, has also increased the ability for real estate agents to market properties to potential out-of-state buyers. In-person real estate showings were not considered essential business during the first month of COVID-19 emergency orders, leading both agents and clients to become more comfortable with virtual home visits. “We continued to work through the pandemic, and people were buying houses sight unseen,” Schrank says.

Those recent changes to the market have intersected with longer-term trends. Justin Purnell of eXp Realty says roughly 80% of his buyers are coming from out of town, up from about 50% 15 years ago — and many of them are driven by climate change. As previously reported by Xpress (see “Head for the Hills,” Aug. 26, 2020; avl.mx/9xp), sea level rise alone could drive a 5% increase in the Asheville metropolitan area’s population by 2100.

These buyers, says Purnell, “want to get out of the California fires, coastal hurricanes and high temperatures. Climate is a big reason they are coming, and for the mountains, and all there is to offer here. They all want that lifestyle.”

Justin Purnell
OUTSIDE LOOKING IN: Justin Purnell of eXp Realty says his client base has shifted to roughly 80% buyers from outside the area, up from about 50% when he started as a real estate agent 15 years ago. Photo courtesy of Purnell

And the greater acceptance of remote employment, Schrank says, is allowing people from all parts of the country to relocate. “[Out-of-town buyers] make better money than someone from here. Having more income means they can get prequalified to offer more money, or many will have cash,” she says. “Out-of-towners are beating out the locals.”

Seller’s market

Schrank primarily works with local sellers, many of whom are benefiting from the high demand and low supply of homes in the area. Some of those locals, she continues, “feel like Asheville is getting unaffordable. Many are moving to South Carolina and Tennessee just to get out. They are cashing out.”

Sellers receiving upward of seven offers in 72 hours, often for $30,000 to $40,000 over their asking price, is not uncommon, according to Schrank. “I’ve never seen it like this. I put stuff on the market and think I am overpricing, then end up getting over asking price,” Schrank says.

For many out-of-town buyers, those prices may not seem unreasonable. Despite the recent surge, Asheville’s median home price is only 9% higher than the national figure. Many large urban markets, including Los Angeles ($935,000), Seattle ($800,000) and Boston ($750,000), had much higher median prices as of June, according to Redfin.

Asheville residents since 1977, Marsha Browning and her husband, Joseph, are reaping the benefits of the current market as sellers while simultaneously struggling as buyers. The two say they wanted to downsize while capitalizing on the high prices for local real estate.

“We sold our house in two days,” Browning says. “We listed on a Friday night at 6 p.m. and had a contract Monday morning. They offered way above,” she adds of the Florida-based buyers, who paid $481,000 for a house the Brownings bought in 2019 for $340,000 and listed at just under $460,000.

As buyers, the Brownings are unwilling to leave Asheville and the doctors they have built relationships with over the years. But for now, they’ve decided to wait out the market by moving into a Weaverville rental apartment.

“We don’t want to purchase right now,” Browning says. “It is really hard. Out-of-staters come here and have the money. We have a $350,000-$400,000 budget, but most of the houses are way over $400,000. The $300,000s or less usually need a lot of work.”

Ripples and bubbles

Despite the crowded market, examples do exist of buyers able to find something within their budget. The Farrells, with a budget between $300,000 and $500,000, were the sole bidders on the third home they targeted in their search, located in Woodfin and priced inside their range. “It’s only a year old,” Dave Farrell says, “and everything is still brand-new. It’s great.”

But local nonprofits seeking to promote and develop affordable housing options argue that individual successes don’t address the structural issues in Asheville’s market. For Scott Dedman, executive director of Asheville-based Mountain Housing Opportunities, lack of supply is a primary obstacle, and the result is higher rents and homeowner prices.

“In Buncombe County, more than 8,500 renter households are paying more than half of their income for rent. That’s about 21% of [Buncombe’s] renter households,” Dedman says, referencing 2019 census data. “At the same time, more than 5,000 Buncombe households are paying more than half of their income for homeowner costs, about 8% of Buncombe homeowners.”

Increasing supply, Dedman feels, would help. He shares some frustration with residents who protest against new residential development, especially in downtown or other areas with easy access to jobs and services, and encourages them to think about the affordability implications of restricting construction.

“We live in a popular place,” Dedman continues, “and many of us are here for the same reasons that newcomers are here. So there is high demand for land and homes. The question should be, are we working hard enough to meet the increasing demand with new housing supply?”

Like Schrank, Purnell suggests that the Asheville market may soon reach its own limits. He’s seeing an increase in buyers simply choosing to bypass the city and look at other parts of WNC, such as Jackson and Macon counties, or even outside the state altogether.

“Some buyers have sticker shock,” Purnell says of the current Asheville market. “They can’t believe how much it costs to live here. If they want mountains, they can go to South Carolina or Tennessee and find much better prices.”

And while Schrank says she has witnessed steady increases in home prices during her six years as a real estate agent, she is bracing for an eventual correction to the market. As COVID-19 emergency measures come to an end, she predicts an increase in foreclosures this fall and potential increases in inventory by spring 2022, which may cause prices to drop. “Everything that goes up has to come back down,” she says.

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