The Triangle has been spared the foreclosures crisis and severe price declines experienced in some other markets. But the drop-off in activity has still been dramatic, particularly given how significant residential real estate is to the local economy.

Trying to gauge the health of the market has been difficult. Federal tax credits artificially inflated sales numbers for a period and then caused the market to slump badly once they expired this summer.

Home sales through the first 11 months were down about 7 percent compared with last year and are on pace to end the year at roughly 2003 levels.

There are signs that the market is poised to rebound. Pending sales in November were 10 percent higher than the same month last year, and industry experts say there is some pent-up demand.

The biggest challenge facing the Triangle market in 2011 will be the glut of existing homes on the market.

There were 9,915 existing homes listed in November, an 11 percent increase over the same period a year ago, Triangle Multiple Listing Services data show. A majority of the region’s submarkets have more than seven months supply of homes, the level at which supply outpaces demand.

Downward pressure

“There is such an inventory that there really is a downward pressure on the price of those homes,” said Bernard Helm, president of Market Opportunity Research Enterprises, a Rocky Mount company that analyzes residential real estate trends. “And some people are willing to negotiate the price down to sell and some are not.”

Listings typically increase in advance of the spring selling season, meaning the Triangle’s inventory problem is likely to get worse before it gets better.

“If it’s [an increase of] 5 to 10 percent it’s going to be a problem because the market typically has fewer buyers in January,” said Stacey Anfindsen, a Cary appraiser who analyzes MLS data for the Triangle.

Real estate professionals will be watching closely to see how quickly inventory levels start coming down.

“Just because there’s more demand doesn’t mean that we’re going to eat up all the excess supply we have in a short period of time to a place where prices could go back up,” said Phyllis Brookshire, senior vice president with Allen Tate Real Estate.

Better than elsewhere

Despite its struggles, the Triangle housing market continues to hold up better than many others. The area is drawing new residents and creating jobs, albeit at a much slower rate than needed to bring down the unemployment rate.

In some U.S. housing markets, sellers are finding it difficult to unload their home no matter how steeply they discount the price.

“If you position your house right as far as pricing, you have it in proper condition and it’s presented well, you can sell your house,” Brookshire said of the Triangle. “If you don’t do any of those three, it makes it much harder.”

Helm believes the inability of people to sell their house in other markets continues to be a drag on the Triangle market.

“There has to be higher activity somewhere else in order to promote activity in the Raleigh market,” he said.

Helm predicts that pricing and sales of new homes will remain relatively flat next year. Existing home sales, he said, are likely to continue to fluctuate and suffer weaker pricing.

The dynamic between new and existing home sales will be something to watch over the next 12 months.

Will new homes prevail?

The number of new homes on the market in the Triangle has been declining. New home listings in November were 12 percent lower than a year ago.

Those builders who survive the downturn will adjust their product to make it more appealing to buyers who are living in a new economic reality.

“They’re going to be building very efficient, smart, well-priced houses,” Brookshire said. “When that happens, people typically choose new over old.”