Much has changed in Charlotte over the past few years, perhaps nothing more significant than decreasing unemployment rates and a rebound in both the housing market and consumer confidence. We were pushing 12% unemployment in 2011 and today it’s 6.4%, one the steepest drops in the country. We were barely staying afloat in 2011 with less than 4,600 annual starts. Today, we have moved north of 9,000. Consumer confidence at 82.3 has risen 21.2 points over the past year. Both the inventory of used homes for sale in Charlotte as well as available new housing are at historic lows. Home values continue to rise due to low supply and strong demand. The median closing price of new homes, based on deed documents, has increased 36% from $190,000 in 1Q11 to $257,800 in 1Q14.
“The signs of improvement are everywhere. Charlotte’s annual starts have more than doubled since 1Q11,” says Bill Miley, regional director for Metrostudy’s Charlotte market. “At a 6.1 months of supply, Charlotte’s total new housing inventory is at the lowest level in six years. Finished Vacant Inventory at 1.6 months is at a historic low. Foreclosures are now below pre-recession levels.”
Metrostudy’s first-quarter survey of the ten county Charlotte market shows that quarterly starts for all product types were 1,985, slightly lower than last quarter’s 2,051. First-quarter starts were 1% higher than the 1,965 quarterly starts from a year ago in 1Q13 despite our nasty winter weather. Charlotte’s annual starts (rolling four quarters) as of 1Q14 rose to 9,190, 38% higher than the annual closing rate of one year ago. Charlotte’s 1Q14 closings at 1,983 reflected a small decrease from fourth quarter numbers. Inclement weather forced many builders to miss their targeted first quarter closing dates. The 8,746 annualized 1Q14 closings for all product types are 21% higher than the annual closings from one year ago.
Charlotte’s Vacant Developed Lot Supply
Charlotte’s total vacant lot supply continues to decrease, now down to 35.7 months from a 98 month supply two years ago. While this supply is still above normal equilibrium levels of 24-30 months, (which represents the time to find land, conduct due diligence including environmental studies, obtain full municipal entitlements, arrange financing, and finally develop the property so that home building can begin, there is more to the story. 96% of Charlotte’s housing activity takes place in seven ‘core’ counties, when we exclude the three rural emerging Charlotte counties, the vacant developed lot supply plummets to a 26 month supply. Union county has only an 18.6 month supply of vacant developed lots and most of those are under contract to larger builders. Both developers and builders are looking for undeveloped land parcels in the closer in more desirable locations for future residential communities. Demand is high as is the price tag for these land tracts. The developed lot costs in future subdivisions will be significantly higher than today, further driving up the sales price of new homes.
With the last vestiges of a cold harsh winter behind us, Charlotte is poised for significant job growth and new housing starts. The increase in recent office leasing by MetLife and AIG has led to some new office development, including plans for new buildings in SouthPark, the Ballantyne area and uptown Charlotte, where two new office towers have been proposed. The new intermodal facility opened by Norfolk Southern late last year between two runways at the Charlotte-Douglas International Airport should encourage additional growth of warehouses, distribution centers and light manufacturing around the airport. Charlotte is extending its existing light rail line, with a nine-mile, $1 billion addition to the north that will connect uptown Charlotte and the University area. Charlotte’s economic indicator compass says our course direction is correct, but as always, the key to our economic and housing recovery is continued job growth.
For information contact: Bill Miley at 704-650-7584
Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide. Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. www.metrostudy.com
Learn more about markets featured in this article: Charlotte, NC.