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Charlotte’s housing market recovery is on track

Allen Norwood
Allen Norwood writes on Home design, do-it-yourself and real estate for The Charlotte Observer. His column appears each Saturday.

No, say leading housing economists, the country won’t slip back into recession. There are plenty of hurdles ahead for housing and the broader economy, lots of ups and downs, but no recession. We’re past that.

If worrying about that has been keeping you up at night, get some sleep.

What’s more, said Trulia’s chief economist Jed Kolko, there are three more things you don’t need to worry about: a housing bubble, investors continuing to snatch up whole streets and too few houses for sale.

Kolko was one of three economists on a panel at the recent convention in Atlanta of the National Association of Real Estate Editors. The others were Lawrence Yun, chief economist for the National Association of Realtors, and Mark Fleming, top economist for real estate data firm CoreLogic. They offered their takes on the economy at midyear and looked ahead.

Kolko’s comments caught my ear because lots of homeowners do worry, even those who aren’t wrestling with whether to buy or sell. Your home may well be your biggest single investment.

“Overall, the recovery is doing what it should,” he said, before he listed three things we don’t need to worry about. Sales and prices are up, foreclosures down.

Here are Kolko’s things to scratch off your worry list:

• Nationally, the housing market isn’t in “bubble trouble.” Prices are rising rapidly in some markets, but broadly, any bubble is a long way off.

Overall, home prices are about 7 percent undervalued relative to income and rent, he said. There’s little sign of overbuilding. At the peak, homes were 39 percent overvalued.

Price increases will slow down, due to rising mortgage interest rates and other factors.

• You also don’t need to worry if interest rates tick up a little bit. At 3.5 percent, Kolko said, buying is 44 percent cheaper than renting. Rates would have to climb into double digits before it would be cheaper to rent.

• Investor interest will fade. This is a tough one because there’s real disagreement over the impact of large investors. Economists, including Kolko, often defend them. “Don’t trash investors,” he said. “Without investors, this recovery would have been a lot worse.”

Other industry watchers worry about the impact on communities when those investors sell all those bargain houses after five to seven years. They bought distressed homes by the thousands – and can dump them the same way.

Kolko said investors will increasingly lose interest as prices and rates rise and distressed sales fall.

• More homeowners will decide to sell. Realtors across the country, including Charlotte, say lack of inventory is hampering sales. There just aren’t enough homes on the market. That will change, Kolko said.

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