In short: high demand, low inventory, rising prices
When people meet me and learn that I am a real estate agent, the conversation quickly turns to "how is the market?" Most folks are aware that Asheville is a booming market with more and more people moving here daily to take advantage of our bounteous outdoors and four mild seasons. "Prices can't keep going up. It is a bubble!" they say.
Well, history and probablility prove them wrong on both counts. Every year that I have been in the real estate business (since 2001), with the exception of the awful Great Recession years, people have said the same thing. And we weren't in a "bubble" pre-recession. The market was strong and increasing at a rapid but reasonable pace. The issue then was financial, particularly irresponsible lending and sub-prime loan packaging.
I have been told, though have not done the research myself, that other than the Great Depression and the Great Recession, Asheville real estate prices have never dropped substantially. This has always been an area that attracts people, both as tourists and as new residents. Ever since the railroad came through in the late 1800s, making the area easily accessible, real estate has boomed.
The current market is a reflection of factors. First, the relocation to the Asheville area continues. Asheville and surrounds has made every list I can think of, and some I can't, and people just want to live here. Many of these people are retiring. We don't get as many relocations of working people because, well, we have no real industry and a dismal job market. These retirees have made their money in other more expensive areas of the country, so while our prices are undoubtably high, they don't look so bad to them. This continues to drive our prices upward, as it has since the Vanderbilts, Groves, and other Northerners arrived 100 years ago.
Second, there is an inventory shortage. People in the area aren't moving out of the region as they once did for jobs. Perhaps more people have figured out a way to make a living here (thank you internet!), so I don't see the exit of as many young adults as I once did. I used to say they were on a 5 year cycle of coming to Asheville, trying to hash out an existence, then giving up to go to Charlotte or Atlanta. This still happens, but more people are staying put. Additionally, people who live here are afraid to put their home on the market because they know it will sell quickly. Yes, that is terrific. But then they have to find a house to buy, and in this tight inventory market that is truly a challenge.
Third, and this relates to the inventory shortage, buildable land is hard to find. Developers want to find a large parcel of land close to town and on public water and sewer. It is pretty much all gone. Or, it seems too expensive to build a housing neighborhood unless it is apartment buildings, which are springing up like weeds. Our topography makes building expensive and challenging, and there are places that God just never meant for homes to be built (doesn't stop some builders). In-fill homes in town are HOT items, and builders are slicing off larger yards to fill in new houses where they can. But these are then priced at a premium, and there just aren't enough of them to ease the inventory shortage.
Lastly, it is my feeling that while we are not in a bubble as supply and demand will continue to raise prices, our prices are outpacing what many people can possibly afford to buy. Many of my clients are those young retiring baby boomers, and while they may be able to retire early, they usually have a budget between $300,000 and $500,000. Sadly, a modest, basic, often in need of rehab or remodeling, home in town begins at $300,000. So while I don't see a bubble per se, I wonder if things will slow - not decrease but slow in terms of price increases - in the next few years.
As always, barring a financial collapse, I don't see prices here going down. And many of my clients are buying now for future retirement to get in while they still can!