• New home starts up 2.6% over 2Q15
  • Quarterly closings up 10.4% year-over-year
  • New homes priced from $300K - $399K were the fastest growing segment, with starts up 34.7% and closings up 39% compared to 2Q15.
  • New homes have been selling at a 30% premium to existing housing stock in the first half of 2016, but prices are expected to return to more normalized rates of gain as newly renovated existing home prices pick up speed.

Metrostudy’s 2Q16 survey of the Charlotte housing market shows that homebuilders started construction on 2,912 new homes, up 2.6% from 2Q15. Quarterly closings – previously unoccupied new homes that now are occupied – totaled 2,812 units a 10.4% increase from 2Q15. The 10,702 annual starts surveyed through the end of 2Q16 were 9.8% higher than the number of homes started in the same period a year ago. The annual closings figure of 10,128 was 8.1% more than in 2Q15.

“The Charlotte housing market continues to exhibit strong fundamentals and there is progress being made towards a market that can perform at historical levels of production, but for the near term the progression is being significantly stifled by continued capacity constraints,” said Jay Colvin, Director of Metrostudy’s Charlotte region. “Non-distressed existing home prices rose 2.2% in 2015, and are on pace for a similar gain in 2016. New home prices have continued to show strong gains as well, on pace for a 4% gain in 2016, and are selling at a 30% premium over the existing housing stock half way through 2016. This premium is higher than the historical average of 20%, and signals that existing housing is now offering significant value over new. Value seekers are active in the housing market and, as those existing homes are revitalized, the existing housing supply should begin to grow in volume and in price."

Ultimately, we believe new home prices will return to more normalized rates of gain, while newly renovated existing home prices pick up speed. This is expected to bring premiums back in line with historical ranges and increase the flow of move-up and move-down buyers into the new home market over the next few years.

The fastest growing price segment in the Charlotte market during 2Q16 was the market for homes priced from $300,000 up to $399,999. New home starts in that segment were up 34.7% from 2Q15 and new occupancies (closings) were up 39% versus a year ago. This segment has a 21.2 months’ supply of developed lots, and a 7.8 months’ supply of housing inventory. Both metrics are considered to be within the normal range considering building and development timeframes. The below $299,999 segments are all under supplied by traditional measures. The least supplied across all price segments, when factoring in both horizontal and vertical supply, is the $200,000 to $249,999 segment with a 5.2 months’ supply of vertical units, and an 18.6 months’ supply of lots.

Market Share Trends by Price Point

In 2Q16, total inventory – models, finished vacant unoccupied new homes, and new homes under construction, regardless of contract state – equaled 5,592 units, 11.5% above the amount recorded in 2Q15. Under Construction inventory stood at 4,004 homes (4.7-months’ supply), which is 13.1% higher than the number of homes under construction in 2Q15. Finished Vacant inventory numbered 1,210 homes (1.4 months’ supply), which is 5.7% more finished units than observed in 2Q15. At current closing pace, total inventory represents a 6.6-months’ supply of homes, below Charlotte’s 16 year average of 7.2- months’ supply.

“The near term Charlotte new home market is in a very strong position to grow both volumes and prices of new homes,” said Colvin. “We believe that pricing gains in existing housing stock, will ultimately address the lack of competitive supply from existing homes. In the near, term prices will continue to rise but new and existing supply will continue to enter the market to take advantage of higher prices over the longer term. Builders, developers, and lenders in Charlotte will need to be positioned in the longer term to focus on affordability, especially where renovated existing housing stock can approach parity in value.”

For further analysis of the Charlotte market, reach out to regional director Jay Colvin: