They say owning a home is the American dream. If that’s the case and you’re hoping to pursue that dream, the current situation around home prices in Charlotte is the thing of nightmares. With just two weeks of inventory currently available compared to the four to six months that is considered healthy, it’s a race to the finish line every time a new house goes on the market, as buyers are climbing over each other to come out ahead.
Queen City Nerve recently spoke to real estate broker Jonathan Osman, owner of Tryon Realty Partners, about the skyrocketing home prices in Charlotte. A realtor in the city since 2006, Osman has never experienced a more chaotic scene.
Speaking about homes in the $300 to $375K range, which would be considered the middle-class market, Osman said, “You put a house on the market in that price point, you will get eight cash offers immediately, and after three days, you might have 15 to 20 offers. Buyers are bringing their home inspectors when they show up to the house. They’re paying $400 for a home inspection on a house they haven’t even bought yet.”
And you better have the cash reserves to compete if you’re financing.
“If you’re in that price point, you’re going to have to have more money than you think you need,” said Osman. “You need to make large deposits to the seller to even get your offer considered. Someone offering $1,000 to $3,000 just isn’t getting it. For buyers to compete, they say, ‘I’ll give you $5,000 to $10,000 non-refundable today.’ Oftentimes the seller hopes they won’t close so they can keep the money and put it back on the market.”
The median price for a home in Charlotte is $337,790, up 20% from just a year ago. The average sale price was $447,853 in May. Sellers are currently receiving 102% of their original listing price, up from 98.5% last year.
Charlotte is not the only one feeling the crunch when it comes to home prices. A recent Stephanie Ruhle Reports segment on MSNBC mentioned the supply of homes for sale nationwide is at record lows, while existing home prices hit record highs. Inventory is down 31.1% from 2020, and there has been a 23.6% jump in median home prices from last year, with properties typically selling in 17 days. The median home price for May was $350,000 after it experienced its highest jump in 22 years.
There could be many reasons for these unprecedented housing shortages, including the desire for more space after COVID-19 and low interest rates, but there is a darker side to the story, as well. As reported in a recent article by Ely Portillo and Justin Lane with the Urban Institute, Wall Street is heavily invested in the Charlotte market, buying up affordable homes and turning them into rentals. That not only takes them off the market for buyers, but takes them off the market permanently, driving up home prices in Charlotte.
Taking aim at renters rather than homeowners
According to the Urban Institute report, these companies are focusing on middle-income neighborhoods, and their strategy is appealing to middle-class professionals who either prefer to rent or are unable to buy.
As Osman noted, “They can outbid anybody and pay just about anything. You are bidding sometimes 7-10% percent higher than the asking price or even higher. They don’t care about appraisals and you do if you’re financing.”
Much of Charlotte’s new housing is aimed at renters rather than those looking to own. Osman used one recent development property, located on the 4000 block of Old Pineville Road, as an example of a townhouse community intended to be leased as rentals.
“Builders realize they can sell a bunch of entry-level houses to these [hedge fund] investors and they are happy to pay them because they’re getting inventory and they’re getting it new,” he explained. “There are entire neighborhoods built now just for investors.”
So if new developments are leaning toward rental properties, at least there’s the old inventory to fall back on, right? Not so much. Wall Street investors are targeting houses built as far back as 1970. They target homes in the $200K range or lower and put $15,000 to $30,000 into them to spruce them up then rent them out, leaving buyers with budgets in that $200K range relegated to renting until they can afford to double that, though often they simply give up.
According to Osman, the hedge funds started buying up homes in 2011, and the market has been hot in Charlotte since 2014-15, but never like this.
“Around the time from 2013-2015, Charlotte was known as the millennial city because so many people were moving here with amazing jobs, incomes higher than you would expect, and housing that was affordable,” he said. “Charlotte had usually been a city of relocation because you had everything you could want here, like pro sports teams and great restaurants, and it was a comfortable alternative to the northeast.”
“Previously, it was always a three or four month’s supply,” he continued. “You could sell houses in a day or two if you priced it right and made it look good, but now you see very few homes on the market in comparison to what it was a few years ago.”
In May, there were only 979 homes for sale in Charlotte, down from 2,381 during the same time in 2020.
Osman mentioned the Charlotte Future 2040 Comprehensive Plan, recently approved by Charlotte City Council after contentious debate, and why it’s so important.
The solutions to rising home prices have no foundation
“You need to have a plan to handle this growth so it doesn’t create sprawl and Charlotte becomes like a mini-Atlanta, where you have to live an hour away to afford anything,” he said.
Outside of moving away from the city to buy, what are the alternatives to stop the rising prices? Osman suggested that an economic downturn that affects our local industries like finance, energy and technology could affect housing prices, as occurred in 2008, but that would be a silver-lining on a dark cloud that nobody actually wants to see.
An oversupply of buildings would be the most helpful solution, but the city is so far from accomplishing that, the only possible solution Osman sees is federal regulation like what was seen with the savings and loan industry in the 1980s.
“We need to have these tough conversations about selling houses to people and not these organizations,” he said.
There are still areas of Charlotte that remain relatively affordable, such as the University City area and other parts of north Charlotte around Statesville Road, Osman pointed out. However, even neighborhoods still considered affordable are becoming less so by the day. Houses that were selling for $175K five years ago in Windsor Park near the former Eastland Mall location are going for over $300K now.
If you want to own but can’t afford the rapidly rising prices, townhomes and condos are one alternative, Osman suggested.
“They’re selling pretty well right now,” he said.
Looking at the numbers in the 90 days leading up to July 1, out of 2,382 total sales, condos and townhomes accounted for 809. The good news is that hedge funds aren’t dipping their toes in that market just yet, preferring to stick to single-family homes.
And for those forced into renting, even that market is on the rise, with average rent sitting at $1,400 a month locally as of May, a more than 10% increase over last year, according to Realtor.com.
Even if you can afford it, many developments won’t rent to you unless your income is three times what the rents are, Osman said. He explained that when the housing market fell apart in 2008, it was cheaper to buy than to rent. Even now with the rise in home prices, rents are trying to keep pace to lock in their tenants and take just enough money from them so they can’t move out or even save to get over the hump, keeping them there for another year.
“I’ve heard of places jacking up the rent just because they can,” he said.
So where does this leave those looking for a deal? Here’s what Osman had to say: “If you’re looking for bargains, this isn’t bargain-hunting season. This is the highest people have ever paid for housing in Charlotte no matter what price point. You’re buying today because you need something, not because you’re getting value. Nothing’s really affordable.”
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