Lower interest rates raise builders' hopes.

Thirty-six years after Ann and Charles Smith left the state, they came home. "We were originally from Durham," says Ann Smith, whose husband was a KPMG Peat Marwick executive. "When he retired, we saw Treyburn and knew this was the lifestyle we wanted. There's always something to do - golf, tennis,

North Carolina's residential real-estate industry dozed through most of 1995. But older, affluent customers such as the Smiths, who spent more than $1 million to build their French country home, gave builders and real-estate agents some sweet dreams.

Otherwise, a point-and-a-half spike in interest rates early in the year chilled single-family home construction. But apartment construction continued at an almost frantic pace. In Charlotte, where vacancies dipped to 3.1%, a record 4,600 multifamily units were under way by fall. In Buncombe County, the 128 permits filed through June were the most since 1987. In the Raleigh-Durham area, says Mike Rakouskas, a Raleigh chamber executive, "we've got a phenomenal number - more than 7,000 units - planned or under construction."

It was slow elsewhere, though, and through September, residential construction (including new houses, additions and apartments) was $3.2 billion, only 2.9% ahead of 1994's pace, according to the N.C. Department of Labor. Existing-home sales were about 2% shy of 1994 levels. James Bichsel, the Greensboro-based executive vice president of the 19,000-member North Carolina Association of Realtors, says the $131,533 average price was down slightly from $132,770 the year before.

Some things stayed the same. Raleigh-Durham and Charlotte were hot. Raleigh trailed only Las Vegas on U.S. House Market's "Market Hotness" index, which ranks cities by new houses per capita. Raleigh's count was 14 per 1,000; Charlotte's, 10.6; and Greensboro's, 7.1.

"It's certainly not gloom and doom," says analyst Bernard Helm, whose Rocky Mount-based Market Opportunity Research Enterprises studies the state's 13 largest residential markets. "But the year has been basically directionless." One reason for 1995's lackluster single-family home numbers was the rebound effect. Residential construction reached its post-recession peak in late 1994, he says. "Since then, we've been drifting."

Other factors were at play too, says Ken Mitchell, executive vice president of the North Carolina Homebuilders Association, which has 13,600 members. In early 1995, interest rates climbed to 9% or higher for 30-year conventional mortgages, before easing back to below 7.5% in November.

EMPLOYMENT AND WAGES

(lessors, agents, managers, title officers, subdividers and
developers)

                            1990       1992      1994(*)

Employers                    4,847      5,162      5,207
Employment                  25,780     24,439     28,959
Annualized wages (000s)   $469,650   $484,570   $605,283
Average weekly wage        $350.34    $381.30    $401.95

* from third-quarter 1994 figures
Source: Employment Security Commission
MOST-ACTIVE CITIES

(residential construction authorized)

                    TOTAL                 SINGLE-FAMILY
CITY             COST (000s)   UNITS(*)     HOUSE AVG.

Cary               $322,024     3,927       $132,857
Charlotte           321,764     5,389        115,111
Raleigh             301,087     4,895        111,325
Durham              142,211     2,124        104,029
Greensboro           88,987     1,892         89,324
High Point           74,633       857        103,103
Greenville           69,401     1,806         78,419
Winston-Salem        64,066     1,254        122,837
Chapel Hill          55,303       646        158,766
Fayetteville         49,175     1,098         86,077
NORTH CAROLINA    5,342,321    82,000         98,215

* includes additions and alterations
Source: N.C. Department of Labor, 1994
NEW HOUSING COSTS

(average construction cost of new single-family house)

MOST-EXPENSIVE(*)

Chapel Hill                        $158,766
Hickory                             150,133
Cary                                132,857
Morganton                           125,941
Winston-Salem                       122,837
Boone                               120,803
Lumberton                           116,775
Charlotte                           115,111
Rocky Mount                         113,814
Raleigh                             111,325

LEAST-EXPENSIVE(*)

Sanford                            $70,278
Jacksonville                        65,586
Monroe                              64,995
Asheboro                            64,185
Tarboro                             63,750
Statesville                         62,441
Reidsville                          58,941
Havelock                            52,839
Elizabeth City                      50,860
Thomasville                         49,405

* among the state's 45-largest cities
Source: N.C. Department of Labor, 1994
TOP CONSTRUCTION COUNTIES

(permits per 1,000 population)

Currituck                             25.2
Dare                                  23.5
New Hanover                           20.9
Wake                                  20.6
Pitt                                  16.0
Brunswick                             15.5
Macon                                 15.1
Mecklenburg                           14.7
Union                                 13.8
Carteret                              13.5

(average permit value)

Chatham                           $145,294
Avery                              134,441
Currituck                          133,285
Transylvania                       132,558
Moore                              120,993
Caswell                            120,083
Jackson                            118,709
Catawba                            118,624
Gates                              115,051
Henderson                          111,666

Source: Problem-Solving Research Inc., 1994

Of course, that didn't put off high-end buyers. At Treyburn, "we sold 29 houses ranging from $170,000 to $1.3 million in the fiscal year that ended in June," Marketing Director Beth Kapil says.

Treyburn has rivals at the high end. In Mecklenburg County, 8.03% of new homes in 1995 sold for $350,000 or more, compared with 3.77% in Wake and 1.75% in Guilford. "Guilford is older and has a lot of higher-priced homes already in place," Helm says. "In Wake or Mecklenburg, if somebody wants a large house, chances are they have to build it."

They were doing that at Governors Club in Chatham County, where sales topped $25 million through September. In the Triad, Joe Koury's ambitious Grandover, a 1,400-acre mixed-use community, began taking shape with five homes set for completion in February and the golf club in April.

In Charlotte, relocating workers accustomed to high-density city living are creating a growing downtown residential market. By November, five center-city projects with a total sales value of $400 million were announced. They included Asbury Park, a 23-unit condo project with prices from $220,000 to $600,000, and NationsBank Corp.'s 20-story residential high-rise.

Four national home builders entered the Raleigh and Charlotte markets in 1994 and 1995, and they all build primarily in the $200,000-and-higher range.

"The average new selling price in Mecklenburg now is $180,000, and in Wake, it's over $185,000," Helm says. "The real movement we expect is to see large builders trying to find ways to build more moderate-priced homes, in the $130,000 to $170,000 range."

FOR MORE INFORMATION

N.C. Department of Labor, Division Research and Statistics; 4W. Edenton St., N.C. 27601-1092; (919) 733-4940.