Wake County Property Market in May Changed Little

Compared to April 2020

But May 2020 was down sharply compared to May 2019

Real estate lending remains strong

In Wake County, May 2020 real estate activity was down 37% in dollar terms, and 18.8% in the number of transactions, compared to May 2019. Compared to April 2020, however, May was little changed.

May real estate activity continues the trajectory set in April

Charles P. Gilliam, Register of Deeds, said, “the most interesting aspect of the data is that May did not decline further as compared to April. A typical residential real estate transaction takes approximately a month or more to move from acceptance of an offer to closing. May closings were primarily ones contracted for after official declarations of Covid-19 states of emergency, while April closing included transactions that entered the pipeline back in February and March. One might have expected May’s activity to fall off compared to April’s. This was not the case.”

The months of March through May are historically associated with increasing velocity of real estate transactions. The following chart shows the number of deeds recorded in 2020 by business day, starting with March 17 through May, compared to the same corresponding days in 2019. The exponential trend lines for 2020 and 2019 are also shown. For 2019 the trend line is upward, in line with historical expectations. For 2020 the trend line remains flatter, as it was for the period March 17 through the end of April 2020.[1]

[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 to demark the advent of Covid-19 related legal restrictions on economic activity. The 2018 exponential trend line (not shown on the chart) is nearly identical to the 2019 trend line.

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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 to demark the advent of Covid-19 related legal restrictions on economic activity. The 2018 exponential trend line (not shown on the chart) is nearly identical to the 2019 trend line.

The dollar value of activity is down from 2019 and Q1 2020

The dollar value of Wake County real estate transactions was down $506 million or 37% compared to May 2019 and was flat compared to April 2020.

Commercial real estate closings were slow in May, as was the case in April. There were only 44 transactions at a price of more than $1 million. The largest May closing was a North Carolina Department of Transportation acquisition of a right of way for $24 million.

Gilliam said, “the big question is will the commercial market, now dead for two months, come back in June as the second quarter ends?”

May core market transactions in dollar value were down 10.7% compared to March 2020, nearly identical to the 10.9% decline in April when compared to March 2020.

The Covid-19 situation and 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 May the median sales price was $320,000 down from $325,000 in April 2020.

Changes in median sales prices tend 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.

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 continues to be quite strong. The number of loans secured by real estate was up 46% compared to May 2019 and was about the same as April 2020. This continues a trend that started in the autumn of 2019.

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.

Since the autumn of 2019, there has been a significant increase in the second type of lending activity. 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.     

Long-Term Trends in 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 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 is shown in the preceding chart.

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.

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. 

The number of deeds includes transfers where monetary consideration did not change hands, such as transfers within a family. 

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.

Methodology and Additional Information

The statistic 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.

In the period from March 17 through May, there were 52 business days in 2020 and 53 days in 2019.

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. The number of deeds includes transfers where monetary consideration did not change hands, such as transfers within a family. 

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 June 4, 2020.

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