Looking at the Charlotte metropolitan residential real estate market using data provided from CarolinaMLS, we continue to find an entrenched seller’s market. Charlotte continues to see both inventory and months of supply of inventory shrinking (-22.7% and -30.2%). Additionally, Charlotte real estate has seen an overall increase in median sales price of 5.3%, with condos making the largest gains of 8.4%. Digging deeper into those numbers, the strongest percentage increases are coming from sales of properties $500,000 to $1,000,000.
These numbers are not unique to Charlotte, but reflect what is going on in the 100 major metropolitan markets in the U.S. since the end of the Great Recession. In 2005 at the peak of the housing bubble, new homes were selling at a rate of 1.283 million per year. Ten years later new homes are selling at less than half that rate. Interestingly a bigger share of new homes sold in 2015 vs before the Great Recession are 4000 sq. ft. or larger. With the median owner occupied home in the U.S. measuring 1800 sq. ft. (U.S. Census Bureau), intuition might suggest that larger homes would be the last to recover. Why would builders risk building more expensive, luxury properties that bankrupted some many of them in 2008? What is going on?
- Though the Washington bank regulators have done almost nothing to eliminate the systemic trading and derivative risks that collapsed the banking world in 2008, they have managed to tighten mortgage standards. It’s harder for everybody to get a loan. Wealthier buyers have more capital/cash to invest in properties, and they have tended to be the only buyers who can qualify for mortgages.
- Lot availability has declined. Lots are scarce and more expensive. Developers who buy them are forced to pay more, and to make a profit, build larger, more expensive homes.
- Demand for new apartment construction in Charlotte fueled by both category shortages and cheap money has increased construction labor and materials costs.
- Housing shortages fueled by Charlotte’s continued population growth is also adding pressure to the mix.
My view is that affordability, though not yet reflected in housing numbers, is slowly starting to return. Mortgage providers are offering a broader range of products with lower down payments, with more focus on the first time homeowner. First time buyers are the force pulling the chain that moves buyers from price category to price category. Almost ten years after the Great Recession, housing is heading back into balance. Hopefully Charlotte can find some answers to its political issues, encouraging business growth and employment, and with it buyer confidence. That confidence will allow the local market to develop in a sustainable fashion.
Your comments are welcomed.
- Data provided from Carolina Regional Realtor Association Housing Supply Overview for August 2016, and information pulled from a 9/21/2016 houzz article, Why So Many U.S. Homes Are Supersized.