Shifting real estate market presents challenges, experts say – DBT
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The sale value of homes in Delaware have outpaced many buyers’ budget, leading real estate experts to be concerned that they could fall underwater on purchases. | DBT PHOTO BY JACOB OWENS
In the First State, a real estate market driven by high prices, rising interest rates and challenges from supply chain disruptions is benefitting some businesses, but not the average homeowner, according to industry experts.
During the inaugural Delaware Real Estate Summit hosted by the Delaware Association of Realtors on Monday, local and national real estate experts analyzed residential and commercial markets as well as local and national trends nearly halfway through 2022. What they revealed may seem obvious to anyone who’s tried to rent or purchase a home in Delaware over the last year or so: there’s a serious lack of affordable housing statewide.
“It’s difficult for a person to work in an area they can’t afford to live, and it’s a shame, too,” Sussex County Association of Realtors President George Thomasson said. “Many workers have to travel sometimes more than an hour to a job that pays minimum wage. This is not sustainable.
“We need to focus very much so on workforce housing, with our local governments and our real estate industry and builders and realtors alike to solve this problem.”
Experts said the situation is similar across the state, especially in New Castle County where space is limited by a lack of available space to build. In a housing market where properties are selling for $40,000 or even $140,000 over asking price, there’s a real concern about the current state and future of housing in Delaware.
“What happens when the market comes down and they overpaid for that property?” New Castle County Board of Realtors President Chuck Lax questioned.
Meanwhile, many of the buyers in the last 15 years or so have been older generations closer to retirement age, while Millennials now in their 30s and younger generations don’t seem to want to settle down in Delaware, according to Kent County Association of Realtors President Steve Schmidt.
On the commercial side of the equation, though, business is booming. Lower interest rates over the past few years have driven significant economic growth, said Jay White, president of the Commercial & Industrial Realty Council and Wilmington-based brokerage Apex Realty Advisory.
Increasing interest rates — now around 5.3% — certainly aren’t making people comfortable, he said, but they’re also not astronomical compared to historical rates.
The biggest challenge in the commercial realm has been a shift to remote work, with many workers not yet back in the office. Those commercial spaces, as well as retail spaces left after some big retailers were unable to weather the challenges of the pandemic, are suffering.
“The pandemic was an accelerator of change, and it caused a lot of change in the retail world,” he said. “Retail centers with large vacancies are going to get redeveloped, repurposed, and rethought.”
But industrial real estate is concurrently booming, thanks in part to a rise in e-commerce demand, he said. Delaware now has 58.9 million square feet of industrial inventory and it’s growing quickly.
“The general snapshot here is that office and retail are a little bit out of vogue on this list,” he said, referring to a snapshot of properties that sold for over $10 million in the last year or so. “Apartments and industrial are in vogue.”
Still, inflation and the rising costs of construction, driven in part by supply chain disruptions and rising oil prices, is also affecting increasing rent costs for commercial spaces, he said. But the demand for new construction, especially housing units, does not seem to be slowing down.
“Costs may dampen risk of overbuilding,” he said. “As [previously] mentioned, housing shortages are a real problem.”
The event was sponsored by Ward & Taylor LLC, Farm Credit, Cutco Closing Gifts and ShowingTime, and also included speakers from the Delaware Prosperity Partnership, the Delaware Department of Transportation, the National Association of Realtors, the University of Delaware and Lieutenant Governor Bethany Hall-Long. To rewatch the webinar in its entirety, visit the association’s Facebook page.
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