Happy
New Year and welcome to 2020! The
Charlotte real estate market has seen a steady recovery from the lost value,
short sales and foreclosures experienced just after the Great Recession. Median home values in 2010 in the Charlotte
metropolitan area (including Mecklenburg, Cabarrus, and Union Counties) settled
at about only $160,000.[1] By the close of 2019, median home values had
recovered to approximately $260,000. The
recovery has been strong, but keep in mind this recover has occurred over a ten
year period. It has been steady and
sustained over time, not volatile or dramatically swinging from highs to lows
back to the current high.
The
average list price of a home in the Charlotte metro area rose 8.5% between 2018
and 2019. But the inventory of homes
available for purchase and sale fell a whopping 21.3% between 2018 and
2019. That persistent lack of inventory
has continued to drive market values upward, with the average final sales price
in 2019 rising 6.6% above the average final sales price in 2018. And all of this has been fueled by a
continuation of low mortgage interest rates, making monthly payments low
relative to the cost of renting a comparable home, and making purchases affordable
(and preferable from an overall wealth-building perspective).
In
the context of Charlotte real estate market performance in the previous 10
years—and in the context of the market climate in 2019—what can we expect in
2020? Of course, the overall national
economy is indisputably strong, and the growth and economic health of the
Charlotte region continues to surpass most other regions of the country by
almost every measure. Moreover, we have
entered an election year and those holding the reins of power have every reason
to maintain the country’s economic strength as we move toward November
elections.
One
of the main reasons prices continue to rise and we find ourselves in a classic
“sellers’ market” in the Charlotte area is that inventory of homes available
for sale remains well below demand of buyers.
With inventory of homes available down over 20% in the past 12 months,
it would take a dramatic increase in the number of homes entering the market to
change this in the next 12 months.
Sellers might well decide in greater numbers that this is an excellent
time to cash out their gains (because it is), but the increase in the number of
sellers would have to be dramatic in order to compensate for the shortage of
inventory sufficiently to transform the market in 2020 from the sellers’ market
we have seen throughout 2019. I don’t
expect that to happen—not in any large or dramatic way. The good news about the Charlotte real estate
market is that it is steady, strong, stable and decidedly lacking in the sort
of “drama” that causes volatility in values.
So
what can we expect from the Charlotte area real estate market in 2020? We will probably see more of what we saw in
2019. I would expect inventory of homes
available for purchase to increase a bit as more sellers recognize the
opportunities this market creates for them.
If that happens, there will be some good news for buyers as there may be
more competition among sellers for their interest. But the current market is actually quite
healthy and vibrant for both buyers and sellers. The “screaming deals” created by the
volatility of the market following the Great Recession are probably gone for a
while. But that is a good thing for the
overall health of the Charlotte real estate market. Buyers cannot expect to offer 90% of the
listing price of a home and succeed in getting the home under contract in this
market. But they can expect the value of
the home they purchase to steadily increase with the market over time, and that
stability is something most homeowners prefer over the possible opportunities
created by a volatile market.
This
means investors and flippers will probably continue to find it difficult to
identify properties on which they can generate an acceptable profit in the
short term. That was easy in 2010, but
no longer. However, truly knowledgeable, well prepared investors and flippers
will still find properties in need of repair and renovation—mostly in areas of
the metropolitan region that continue to see revitalization. They will have to rely on their ability to
estimate costs and keep budgets under control because the days in which
properties could be purchased well below their after repair values are likely
gone for a while.
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