(upbeat intro music) - [Announcer] Major support for Carolina Business Review provided by Colonial Life, providing benefits to employees to help them protect their family, their finances, and their futures; High Point University, the Premier Life Skills University, focused on preparing students for the world as it is going to be; and Sonoco, a global manufacturer of consumer and industrial packaging products and provider of packaging services, with more than 300 operations in more than 35 countries.

- When business watchers and industry economists look back on this moment in time, in maybe 10 or 20 years, the big issue will still be home prices and housing prices.

I'm Chris William and welcome again to the most widely watched and longest running program on Carolina Business Policy and Public Affairs, seen every week across North and South Carolina for more than 30 years now.

Thank you for supporting the dialogue.

In a moment, we have four real estate professionals from across the Carolinas.

And we will start right now.

- [Announcer] Gratefully acknowledging support by Martin Marietta, a leading provider of natural resource-based building materials, providing the foundation upon which our communities improve and grow.

BlueCross BlueShield of South Carolina, an independent licensee of the Blue Cross and Blue Shield Association.

Visit us at SouthCarolinaBlues.com.

The Duke Endowment: a private foundation enriching communities in the Carolinas through higher education, healthcare, rural churches, and children's services.

On this edition of Carolina Business Review, Nick Kremydas from South Carolina Realtors; Andrea Bushnell from North Carolina Realtors; Pat Riley, President and CEO of the Allen Tate Company; and Kevin Wimberly, President and CEO of South Carolina Uplift Community Outreach.

- Welcome again to our program.

Thank you all.

Good to see you all.

Pat, welcome back.

The rest of you: good to have you on this program.

Hope we don't scare you off, but-- Andrea, I'm gonna start with you.

You know, broadly, people talk about real estate over the last two or three or five years as being unbelievable pricing.

How are we gonna-- chasing rates, trying to get homes.

Is this a bubble?

How would you characterize where we are right now?

- So, I would not characterize it as a bubble, only because, traditionally, a bubble indicates that the market is going to pretty quickly fail.

And I don't see that, at least not in North and South Carolina, at all.

I think the housing price increase, the demand, is there.

Unfortunately, what ends up happening is that you have higher demand for properties.

You have lower inventory, and therefore the prices continue to go up.

We are not seeing that slowing anytime soon.

Demand certainly will come down as interest rates go up.

As we know, the interest rates going from a very low of, sometimes, even below 3%, up to over 5% now has certainly impacted the market.

And so, I do think that we're going to see demand diminish a little bit, but in North Carolina and South Carolina I don't see a bubble.

- Yeah.

Pat, what do you think?

- Since WWII, the average appreciation we were happy with was about three and a half, and last year on 20,000 homes we saw 15.2% and we're even more than that right now.

I do believe that appreciation rates will, will come down.

But when I say come down, they will not depreciate.

Only one time, really, in history that homes depreciate and that was the Great Recession.

So, the rest of the country will come down much quicker, but because of in-migration, lack of supply, lack of new construction, I don't see any way in the world that we're in any bubble-world, at all.

- Kevin, Nick, as Andrea just talked about, rising interest rates clearly have slowed activity in home buying and real assets.

Kevin, do you think it's just gonna be a shock to the system at all?

Would you characterize anything differently than you've already heard?

- No, not really.

I do think the opportunities, you know, as we're saying, may slow some but the opportunities for people to get into homes, it is there.

It is just educating and making the awareness of what is available.

And, you know, being, I guess, strategic in how they position themselves to be able to acquire those-- buy those homes is going to be critical.

- [Chris] Nick?

- I think I would agree with the rest of the group here.

There is, ya know, fundamentally, we're in a completely different place than where we were in 2008, right?

Underwriting principles with our lenders are much more stringent, foreclosure rates are at historic lows.

There's no inventory to speak of that couldn't absorb any bump up in foreclosure activity.

I think the real estate industry is extremely healthy compared to where we were at that time.

- This is a question broadly for anyone that wants to step up first, and the idea that, as you all describe it, yes, thank you.

Let's overlay now record-setting inflation, at least the last four decades record-setting inflation.

Let's overlay that as well as, clearly, if, clearly, we are either in a recession or will be in a recession, but I think you can peg that at a hundred percent that there's going to be a slowdown.

So, if that's coming, if that's here, how does it change any of these dynamics we're talking about?

Anyone.

- When I talk to the Reserve and they ask, "What rate, Pat, will slowly put the brake on for housing," none of us really know.

When 64% of the world, or the public, has interest rates under four and 42 have 'em under three, it's called rate lock.

And we have no time in history where we have-- what will it be, I ask.

Will it be seven, like the average since WWII?

Will it be six?

What will be, there will be a gentle fall because, especially in midterm elections, in elections there's no sitting office want to have a recession.

So, I personally think 7% will be a soft landing in my opinion.

- [Chris] Anyone else?

- Yeah, I agree.

I think when we hear the media talking about the markets shifting, you know, we've got a generation who went through that recession in '08.

And think, immediately, market crash.

Or bubble.

And we're not any, we're not-- none of the metrics show that we're in any kind of position like that.

So I believe that, as we're going forward, inflation obviously is reducing buying power for first-time buyers and those in transitory markets.

But I believe, you know, everybody asks, "When is the right time to buy?"

Well, in most cases, unless you're an investor, the right time to buy is when your life requires you to buy.

Whether you're moving for a job or growing your family or downsizing, and where working with the local realtor provides you with a, with the dynamics of what's happening in that community to help guide you through that transaction.

- You know, as you all describe this, I can't help to think but, and, Kevin I don't want to pick on you, but I would like you to jump in on this.

It's more than just housing affordability, of course.

That's such an easy way to say it.

But, there are a lot of people, and seemingly an increasing amount of people that can't chase these prices, but still qualify to buy a home.

So, as that gap gets bigger or larger or sustains itself, does that create a problem?

- I would say it does.

It's how we pursue it, and what things can we begin to place to sort of, you know, limit that gap.

And, as you're saying, you increasing the affordability of it, but the education, again, and being intentional as well, you know, and being able to have people qualify to become homeowners.

And it's what policies and things can we put in place to ensure that, you know, the housing market and the individuals that are able to buy and purchase are not losing to others that are, you know, have the means to make it happen in a quicker process.

So, you know, that would be one of the things that we would look at, I would consider is that how to make that, limit that gap.

- [Chris] Yeah.

- I encourage, I encourage our team to adopt two groups.

One is renters.

They should be adopting two, three, or four renters every week.

And two, three, or four Boomers, because Boomers used to downsize at 64.

They're downsizing at 75.

And they're not upgrading their houses from 60.

And, guess what, then they come and they have a real issue to deal with at the end of the track.

On the first home side, we have to help them set budgets, we have to let 'em know what kind of plans are out there to help, because there are plans.

We also have to talk about passing wealth.

If 25 trillion dollars of Boomer money is going to be transferred the next 10 years, instead of waiting til somebody passes, maybe it to help a young person now, because nothing in the future looks like it's gonna be any cheaper or easier to get on the home ownership bandwagon.

Interest rates are- - Pat.

I'm, I'm sorry, finish your thought.

I apologies, go ahead.

Interest rates.

- You know, if Uncle Wiggy out there is gonna transfer wealth after pass, it might be a time for us as a realtor to sit down with, because back taxes but also, just, it's just not easy right now with interest rates and with lack of supply.

That first home buyer is really up against the wall.

- So when you say "adopt" to your team members, Pat, are you talking about reaching out to those folks and bringing them into the process and maybe educating them?

- It's what we're talking about here.

It's all about education out there.

And the media, the media sensationalizes everything.

- [Chris] Course.

- And it's just really one-on-one sitting down and talking and every situation's different.

I had a young man that's moving back to Syracuse to be with his family, from Charlotte, and I sat with him and he said, "I have a two and seven-eighths here in NoDa and house appreciation went up 17% this year.

I should really go up to Syracuse and rent.

And just invest in this house down here as an investment."

Those kind of conversations were never had before.

It's just a unique dynamic that we're in now that each situation needs a coach.

- [Chris] Right.

You know, Pat makes a-- Andrea, Pat makes a good point about we don't want to overdramatize these dialogues.

But there is a large cohort that probably, that does feel like they can't, they can't participate.

Don't you see that?

- I do see that.

I think that there is a wide swath of the, of public that really believes that they can't get into a home.

And part of that has been driven by the fact that, you know, our sales have been so brisk.

I mean, when you are in a marketplace where people go out, people even of middle income means, go out, they try to buy a house.

And they make an offer.

And they make another offer.

And they make another offer.

And they are, they don't get the homes, that they are outbid every time.

Oftentimes, by the all-cash investor buyer.

And that ends up giving this sense to the public that I'm not ever going to be able to own a home.

And then, ya know, you look at what, how that is portrayed in the media and it just exacerbates the problem.

And most people, most consumers don't know where to go to get that education and so finding them, and I think that Pat is actually right.

That when he has his realtor agents going out and meeting with people and talking with people and educating people, it makes a difference in their perception of what's possible in the world and in this marketplace.

- Andrea, I'm gonna ask you to do something, and this is off, off of what we normally would.

Is there a way for you to mute those what sound like email or notifications?

If you can do that, I'm gonna go to Nick and Kevin on this as well.

Kevin, Nick, when you hear Andrea and Pat talk about that, this situation of folks that just basically throw up their hands and go, "I don't even know where to start cause the process is complex to begin with and I can't chase prices."

Is that a temporary situation?

Will that fix itself?

Is that just about education?

How do you two come down on that?

- Well, I see it definitely from what our organization does as a nonprofit community development corporation, we're, it's about education.

And it's a thing that's ongoing.

And, you know, individuals, you can't get frustrated and I think Pat is dead-on when he's saying that educational piece and being intentional about informing the community of these opportunities.

Going through housing counseling services and things of that nature.

To really know what it is you're getting yourself into.

And being prepared and ready to purchase.

And it, you know, you're gonna have some-- maybe some delays and things of that nature.

But, again, like he said, having that coach, that mentor.

You know, someone to continue to keep you encourage to, so you'll know.

But, you know, more education and letting them know about the barriers, opportunities, and programs.

Through, you know, like I said, housing counseling agencies, things of that nature, that can assist with getting that knowledge base.

But we have to be intentional about it.

- I think Kevin's absolutely right.

I think there's a group of buyers over this last two-year cycle that we've seen had this fear of missing out, right?

Getting into the marketplace and trying get the home and then you've got another group of buyers that have been scared that have made an offer, too.

Weren't able to close.

And having a, I can't stress this enough, having a local realtor that can preach patience and perseverance for that buyer and set expectations.

That right, that local realtor can provide that expertise to help guide buyer through the market.

Whether the market's up or down.

You need that trusted advisor that can get you through that transaction.

- I had family members that, in different parts of the country, that, aw, are losing out, losing out, losing.

Pap-Pap, Dad, what are we doing with these investor buyers and I just lose out, I lose out, and I'm just gonna give up.

And I'm gonna go to this next one and no due diligence, no inspection, I'm gonna waive this fee and I'm saying, "No, no, no, no, no, no."

The investor buyer is not gonna go away folks.

With rents as high as they are, with money as-- money everywhere, cash everywhere, why shouldn't somebody, rather than put everything in the stock market, invest in real estate?

So we can't begrudge these investors.

But we have to be savvy.

We have four of five programs right now that we can have a buyer, if they have a credit score, we could have them preapproved and go in cash.

Go in cash and meet nose-to-nose with an investor.

And then we put the mortgage on afterwards.

So, there's plenty of tools, there's plenty of tools and operators-- opportunities out there.

However, somebody just said it.

Patience.

Patience.

This is, this just not the way it used to be.

And yes, we were at hundred miles an hour.

We're, an offer, a property we're on Friday, by Sunday you had 22 offers.

And now we're at 40 miles per hour, everybody thinks the world's coming down.

But we're not in other parts of the country.

We are in a beautiful, beautiful situation in the Carolinas.

Yes, appreciation rates are gonna come down from 15, 16, 18, probably down to 10 or 11.

But I don't see it anytime soon.

Builders aren't building, builders aren't building.

We can't build our new home.

The new home situation is probably two, three years away from correction.

We don't have the inventory.

We don't have supplies.

And we don't have labor.

And getting through the process right now to have, we need sewage plants, we need schools.

We're, we can't look for new construction to bail us out on the supply side.

That's the problem.

- Quick, Pat, just to-- hold on one second, Nick.

- [Nick] Go ahead.

- Just a quick, just a quick response.

Pat, you just used the word correction.

What does a correction look like in home prices to you?

What would that mean?

- I said last year we would go from 13.3 down to 9 this year.

We're now at 15.8 for our 20,000 houses.

And I say, "Okay, next year it's gonna go to 10."

- You mean percent increase?

Year over year?

- [Pat] Yes.

Yes.

- Okay, all right.

- There was only one recession in history where we depreciated.

So when everybody mixes up appreciation, depreciation, depreciation means I lose money, my house goes down in value.

Appreciation rates historically are 3.8 since WWII.

They've been over 10% now for five years.

- Yeah.

Thank you.

Nick, go ahead.

I didn't mean to interrupt you.

- No, I was just gonna echo what Pat was saying.

You know, with construction you need infrastructure and without infrastructure you can't grow in a responsible manner in our communities.

And in South Carolina we don't, we have, our metros are a little bit smaller than the ones in North Carolina.

These institutional investors tend to focus on the larger metros around the country.

So they make up a small, a very small portion of actual buyers in our state.

But it is absolutely critical that as we continue, I mean, South and North Carolina, our economic base.

Our move-to rate, the number of folks that are moving here from across the country, our natural population growth.

We're the most-- two of the most popular states to live, work, and play in.

And there is no doubt that we're gonna continue to grow and the next 20 years I think are extremely bright.

And there may be some bumps along the way, but I believe as a state, as a region, we have to grow responsibly.

And that means addressing these infrastructure issues, which I know is a topic for a whole 'nother discussion, but the two go hand in hand.

- Well to, and just quickly as a followup on that, Nick.

Do you, do you hear that the different, you know, the midlands, the upstate, the low country, do you hear that all of these areas are keenly aware to infrastructure issues?

And that policy, that the statehouse, is addressing this infrastructure issue?

- Absolutely.

We, our upstate associate, one of our upstate associations recently conducted some growth poling and I think the number was, you know, 60% of the residents in Greenville County, for example, believe there's already enough housing in Greenville County.

Right?

And there's nowhere near enough housing to address the needs of the community.

So, there's a disconnect between communities and growth that we've gotta bridge.

- And I wanted to add to that, Chris, that we were short in North Carolina, in general, 42,000 housing units in 2019.

And then you had the pandemic and all the pandemic buying, the fear of missing out that somebody else mentioned.

And so that housing shortage has only increased.

And so, we have to look at different educational opportunities but also different policies.

So, one of the things that I think we are constantly trying to balance in the realtor community, anyway, is, you know, what do we do with regulation, what do we do with legislation that would allow us to have a little bit better balance?

You know, accessory-dwelling units, for example.

In most communities, they're not available, they're not allowed.

But should they be?

And- - What, what is that?

- -that's a policy question.

- What is an accessory dwelling unit?

- So your little cabin, your apartment above the garage.

- [Chris] Okay.

- Places where, maybe a little small home that you could put on your property.

But in many communities, those kinds of dwellings are simply not allowed by regulation.

- Okay.

And I- - [Pat] Chris, it's been, for another day- - Go ahead.

- For another, for another day also, it's a whole other subject, is Boomers are waiting and downsizing way too late and missing the opportunity to get into one of these home situations whether, when healthy or not healthy, there's fewer of them and they're too expensive.

I heard a stat that by 2028, 38% of homes in America will be multifamily.

But not kids coming back from college.

It's gonna be parents who waited too long.

The kids didn't expect it.

Neither did the parents.

But the reality is, is real.

They're staying in the houses and homes too long.

And they can't get into those situations that they need to.

- Chris, this, what we've seen in the runaway cost increases for just the construction cost, labor cost, materials, you factor in local government, the variety of fees and red tape that you've gotta cross.

Building a $150,000 home in South Carolina is virtually impossible.

Just based on costs alone for our middle-class, working-class families.

So our crisis in housing is really, has exacerbated from not just the need for better low-income housing choices, but now it's expanding into the middle class.

And many who serve our communities can't live close to where they work, which further exacerbates our infrastructure issues and stresses those local government services.

- We have about- - Right.

And I was gonna- - We have about three minutes left.

Kevin, I wanna get to you on this because, as we talk about just the buying, just the straight-up, straight-up buying in residential, retail, commercial.

You throw affordable housing into it and it's gotta be at a higher, even a-- the headwind has to be even more.

Is that, is that what you're experiencing?

And again, we have about three minutes.

And is there a solution?

- Yes.

Definitely experiencing it, just like Nick was saying.

You know, building a $150,000 house is near-impossible.

So what are we going to do?

What can we do?

And he talked about, you know, infrastructure, and connecting where, in urban areas but also our rural areas.

What resources can we provide and, again, I think it's those understanding our policies and what we have in place, our legislatures.

Getting things connected.

Partnerships.

Really understanding that and how can we all work together to address the issue.

- What, so what do you think, Kevin?

Not to keep you on the spot here, but what do you think the biggest things that either General Assembly or public-private partnerships within communities can do right now, the one or two things that will help at least go in the direction of alleviating an issue for affordable housing.

- I would say listen to your local constituents, your community, to know exactly what the needs and demands are.

And what-- and listen, again, to your builders, your realtors, and, you know, what policies are being address or need to be addressed from taxes to infrastructure cost.

Is it, you know, incentives that can be provided?

You know, it's just understanding what that is and how can we achieve that again as a whole.

To get to that issue.

- Streamlining permit processes.

Reducing the red tape.

Fast-tracking low-income/middle-income affordable workforce housing.

There are a number of tools local governments can implement now before it's too late.

- Do you feel like they are, Nick?

Are they sympathetic to that, or are they- - No.

No, they're not.

To be honest, they-- you know, I mentioned, the general public sentiment is, "We don't want more density, we don't want more people moving into our community.

We don't want more people, you know, ruining our views on the river, coast, or lake."

And it creates a division between the need for responsible growth in communities versus closing, you know, building a wall and closing the gates.

And what you do when you do cut off development, whether it's intentionally by policy or through these public interventions, you're cutting your nose off to spite your face because the-- if you look at the last 20 years, the local government expenditures, that chart only goes in one direction.

It goes straight up.

- Yeah.

Okay.

- And that burden goes on the existing property owners so everyone pays more for that lack of future growth.

- Wait, we're out of time.

Nick, thank you.

You get the final word on that so thanks so much.

And I wish we had more to unpack this, cause these are issues.

Nick, thank you for being on the program.

Andreq, of course.

Kevin, welcome.

And Pat, always good to have you on the program.

Thank you all for your leadership.

Happy summer, happy weekend.

Until next week, I'm Chris William.

Goodnight.

- [Announcer] Major funding for Carolina Business Review provided by High Point University, Martin Marietta, Colonial Life, the Duke Endowment, Sonoco, BlueCross BlueShield of South Carolina, and by viewers like you.

Thank you.

(orchestral outro)