Let’s take a minute and examine Charlotte, the 7th largest real estate market in the country. Employment and wages are improving, creating wealth and with it opportunities in residential real estate. North Carolina’s jobless rate was down to 4.7% in April, slightly higher than the national average but improving. From the looks of things unless something unpredictable is generated out of Washington, that trend should continue:
Based on information provided by Carolinas Multiple Listing Service and Barclays Home Survey for April 2017, as we get well into the spring market, Charlotte continues to show the effects of escalating prices and shrinking inventory.
New Listings are up 5.1% for the year, but are down 20% year over year for April. Couple that with an 8% increase in closed sales year to date and you have the makings of an expensive Seller’s market. Median prices were up 11.9% in April and 12% for 2017. In Mecklenburg County in April, average list prices increased to $363,236 from $346,331 in 2016; average sales price increased 11% to $308,109, and days on market dropped to 31 days from 43 days.
Our read here is the move up buyer continues to be strong and a leading market force, but even with high rents, the first time buyer is still mostly missing in action. But it is all good news for sellers!
So for you homeowners thinking about selling and looking at a lifestyle change, call us (Scot 704/953-8256 and Ann 704/617-7678). It is a great time to sell!
2017 ushers in both a new U.S. president from another political party and one with a lifetime of work in real estate, leaving few believing it will be business as usual. His plans for both deregulation and promised spending on infrastructure, should provide intrigue in 2017. Interest rates were expected to rise in 2016 and they did not, but with the recent bump from the Federal Reserve mortgage rates should increase, but in small jumps that should keep rates below 5%. ( Fannie Mae and Charlotte Regional Realtor Association)
So what does this mean for Charlotte in 2017? After a year where units of closed sales were up 8.4%, where the one year change in price for single family homes was up 7.9%, and for condos and townhomes 8.7% , where Sellers received 96.2 % of their original list price, and where months of supply in Mecklenburg County shrank to 1.5; if January’s activity locally is any indication we are looking at more of the same. Sales are boiling.
Broadly questions remain. How does development impact affordability? 2. Are the millennials going to skip their entry level buy and wait until they start a family or pay off student debt before buying their first home? 3. Will baby boomers continue to make up 1/3 of the market in 2017? Fasten your seat belts!
It has been a strong year for what I’m coining luxury plus condos in Charlotte’s Myers Park and Eastover neighborhoods. Fueled by strong existing home sales, prospects have found it an advantageous time to sell their single family properties and make the transition into condos and town homes. We are tracking 5o of these properties that were either sold and closed in the last 12 months or are under contract (mostly new construction with CO’s).
What do these 50 condos and town houses look like? The average luxury plus home is 3 bedrooms and 3 baths; is 2873 square feet, and sold for $391.77 per foot. With an average price of $1,125,500 it appears that the primary buyer motivation is a change in life style, instead of a financial downsize. Most of the buyers are coming from the neighborhood, buying new or newer properties that offer limited maintenance in an accessible location, with room for family and friends. There are nine more new properties listed for sale in MLS, so expect the trend to continue into 2017.
In other business, clients top design trends according to real estate professionals as listed in BUILDER (11/14/16) were:
- Open layouts
- Neutral color schemes
- Multigenerational floor plans
- First-floor master suites
- No dining rooms
- White kitchens
- Extra-large garages
- Big closets
- Finished basements with 9′ ceilings
- Barn sliding doors
Ps. Your comments are welcomed.
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.
Charlotte’s real estate market continues to improve. Year to date numbers and June 2016 vs 2015 results are showing dramatic improvement:
New listings are up 2.4% year to date and 7.7% year to year
Pending sales are up 11.6% year to date and 19.3% year to year
Closed sales (+4.9%), median sales price (+5.2%), and average sales price (+5.1%) are all up year to date . While days list to close (113 OR -6.6%), percent list to close 96.1%, inventory (-23.3%) and months supply of inventory 3.0 (-31.8%), all shrink. Whats all this telling us? Supply is not keeping up with demand which is escalating pricing, and lop siding the local market to the Sellers side. Add to present conditions, Charlotte’s population growth, and it’s hard to see things changing in the next couple of years.
Still noticeably absent are first time buyers, sidelined by expensive student debt and lending uncertainty post 2008. The home ownership rate for households under 35 is at its lowest percentage in 30 years at 34%, while home ownership for households headed by those over 65 has remained steady at 80%.
(Data was made available from Charlotte Regional Realtor Association for the entire Carolina MLS Area)
As we dive into the heart of the Spring selling season, we may start seeing some negative housing headlines. They will be misleading. Employment figures are positive, and mortgage rates are extremely low, but both March listings (-.2%) and year to date listings (-1.7%) are showing declines over those of 2015, as are closed sales in March (-1.4%). What’s happening? First time buyers remain “careful”, and year over year inventory levels have decreased 27.8%!
What about condos?
Some quick condo facts provided by the Carolina Regional Realtor Association:
- Pending sales of condos are up 22.0% in the first quarter with the largest gains (+46.7%) from those listings above $300,001
- Average list to close on all condos dropped (10.3%) to 104 days
- Average days on market before contract fell 25.4% to 53 days
- Median sales price for a condo increased 4.6% to $152,000
- % of original list price received increased to 96.1% in the first quarter
- Inventory of condos For Sale shrank 27.4%
- Months supply of condos fell 40% to 2.1 months
It is clearly a Sellers’ market!
First quarter 2016 has brought continued improvement to both Charlotte’s economy and with it it’s housing market. From Forbes.com, Charlotte is the nations 13 fastest growing CMA:
Its 2015 population grew at 1.84% and is expected to grow at a 1.28% clip this year
Jobs grew at 3.48%, as unemployment shrank to 5.26%
Median pay for college educated workers was $64,500
These factors are heightening home buyers confidence as we charge into the Spring selling season. Jobs feel more secure, homes are trading at higher prices, and on average Charlotteans are making more money. Some detail from the Charlotte Regional Realtor Association for the week ending 3/19:
- New listings increased 1% to 1,275
- Pending sales increased 28.7% to 1,147
- Inventory decreased 25.3% to 10,272
- List to close decreased 3.1% to 127 days
- % of original list price received increased to 94.9%
- Months Supply of homes for Sale shrank 31.8% to 3 months
This combination of factors has been good for home sellers, and has been a boost to the luxury home and condominium markets. Home buyers, especially first time buyers who so far have been relatively absent from this recovery, would benefit from more inventory and with it a slow down in price increases.
The next six months looks good in Charlotte; but after that with this wild and woolly election taking hold, there is reason for caution.
Here we are at the start of a new year wondering what is ahead, but before we jump a quick review:
2015 was by and large a good year in real estate nationally and definitely in Charlotte. Increased employment, higher wages and low fuel prices prompted improved housing. For 2015 in the Charlotte Market
new listings were up 1.1%, pending sales increased 15.1%, closed sales were up 11.7% days on the market or list to close dropped from 125 days to 116 days,
average sales price increased 4.5%, and months of supply of homes on the was down 33% to 3 months.
Looking ahead in 2016, real estate industry economists are predicting home prices to continue to increase between 3.5 and 4.5%, interest rates are expected to increase but remain historically low, and first time homebuyers will likely continue to be older aging from a 2015 record of about 33 years and in concert rental prices will continue to grow to new records.
China will be a challenge for the stock market and internationally, but low oil and gas prices will buoy local consumer markets!
A stronger economy with solid job growth is expected to boost home sales in 2015. Though Charlotte has lagged the US economy both can be expected to improve in 2015! From Lawrence Yun Chief Economist with the National association of Realtors:
- 2015 existing home sales are forecasted to rise 7% to 5.3 million homes
- Median existing home price will increase 4 to 5% after cumulative increases of about 25% over the last 3 years
- New home sales are expected to be up 37% in 2015!
- Distressed sales are disappearing
- First time Buyers are waking up after being absent for 5 or 6 years.
- Job growth may push 3 million this year!
Potential speed bumps do exist:
- Mortgage rates are expected to increase from ridiculously low sub 4% to close to 5% by years end.
- Lenders have been punished by the Feds and could be slow to ease underwriting standards back to normalized levels,
- First time Buyers may continue to look for more proof of price appreciation and job security before the enter the market.
Freddie Mac’s November 2015 forecast echoed The Associations:
- 3% GNP
- Lower energy costs
- Less Governmental fiscal drag
- More business confidence with better paying jobs
Charlotte is finally shaking off it’s “Banking Drag”, job growth is in place, construction has returned……Looks like we are ready to charge ahead!
Its that time in the business world when we do “inventory” and begin to look at the year to come. What can be expected for 2015? Here is my take:
1. The countries economy will grow at a pace (3%) that suggests we are finally shedding the “Great Recession”, thanks to lower energy costs and higher employment.
2. Charlotte will finally keep pace with the rest of the country. We remain one of the fastest growing metropolitan areas. We will continue to recover with increased home building, increased single family mortgage originations, the multi-family “for lease” construction surge will have continued momentum but its acceleration will begin to ease , and the condominium market will reach full recovery.
3. “In-town” home appreciation will be back to a predictable 5%+.
4. Mortgage rates will rise in 2015, from incredibly low sub 4% levels to closer to 5%.
5.Demand for “high end” move down new construction will to be strong, driven by both life style choices and what I’m describing as a new 2008 conservatism.
We are excited about the possibilities! See you in the New Year.