| HousingIntelligence Spotlight: Charlotte-Gastonia-Concord, NC-SC MSA |
| Written by Jonathan Smoke | |
| 10.26.2007 | |
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Discuss this article on the forums. (0 posts) Today I decided to turn my attention to one of the markets in the country that seems to be defying most of the housing woes. The Charlotte-Gastonia-Concord, NC-SC MSA is one of the gems of the south and has benefited from growth in recent years. However, the prospects going forward reveal the need for some caution in the months ahead. According to our most recent Housing Prospects Index, Charlotte ranks 143 out of 361 MSAs for having the best prospects for housing over the next 3-5 years. While that is definitely in the top half of the class, its prospects don’t look as great as its recent history. On the positive side, Charlotte’s housing market appears to be in relatively good shape. While there was a bit of an oversupply from mid-2005 to late 2006, most of the excess production should have been worked off and forecasts for permits going forward indicate much slower production paired with robust household growth. )) Click on image for larger view In part because home prices did not appreciate rapidly in Charlotte during the first half of this decade, we are currently forecasting less than a 30% chance of home prices in Charlotte declining between now and the end of 2008.
The trouble forming on the economic front is visible through recent increases in unemployment and bankruptcies. Job growth in Charlotte has been slowing and is forecasted to grow at a rate lower than the average MSA. Equally problematic, Charlotte has limited household income growth forecasted over the next 5 years. Jobs and incomes are critical for strong home sales and price appreciation. )) Click on image for larger view While existing home prices are not likely to fall, the forecast doesn’t call for much appreciation. And while new home sales have fallen dramatically from their peak, it doesn’t appear that the market has quite reached the bottom yet.
)) Click on image for larger view Permits and new home sales should recover slightly starting in early 2009, but the expected equilibrium level of production is likely to remain substantially beneath the levels seen in recent years.
The performance of the new home premium in Charlotte adds further evidence of why Charlotte is not a top prospect for housing performance. The new home premium is measured as the percentage difference between the new home price per square foot over the existing home price per square foot.  Looking at 2004 through our most recent data in Neighborhood Insights, we see that while there is a new home premium in Charlotte, it is beneath the average premium seen in other markets. Likewise we see that the local premium has been aggressively discounted away in order to sell new homes over the last year.
Charlotte is a fiercely competitive market with top 20 builders and sizable regional builders well represented and pulling in the majority of the market share. Charlotte is also a market with limited constraints on growth. This helped contain speculative price increases earlier this decade as production kept pace with household demand, but now it’s delivering new homes at a discount to existing homes and putting a significant damper on the prospects for future price gains. 
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