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Rise in Charlotte home prices accelerates

Charlotte-area home prices remain on an upward path, while in many cities they have cooled off amid rising mortgage rates.

Those increasing rates don’t seem to be putting a damper on Charlotte’s housing market, though – at least not yet.

The Standard & Poor’s/Case-Shiller index reported Tuesday that Charlotte was one of six cities in which the rise of home prices accelerated from May to June. Cleveland, Las Vegas, Minneapolis, New York and Tampa, Fla., were the others.

Nationally, the housing market is being closely watched as mortgage rates rise. While they remain historically low, the rising rates could scare off some potential buyers. On the other hand, that could spur some people to make a purchase before rates go higher.

When it comes to newly built homes, Charlotte-area builders say rising mortgage rates have already begun to make potential buyers skittish. Also, builders say, the higher rates are disqualifying some who are looking to buy.

Case-Shiller, which tracks existing-home sales, showed Tuesday that even with the rising rates, Charlotte home price increases accelerated slightly from May to June, increasing 1.3 percent after being up 1.2 percent from April to May.

Around the country, prices for the 20 cities tracked in the report rose 2.2 percent from May to June, a slower rate than the 2.5 percent increase from April to May. Thirteen cities saw a weakening in price increases from May to June.

“Overall, the report shows that housing prices are rising, but the pace may be slowing,” David Blitzer, managing director for S&P Dow Jones Indices, said in a press release. “With interest rates rising to almost 4.6 percent, homebuyers may be discouraged and sharp increases may be dampened.”

The Mortgage Bankers Association, in its latest forecast, said it expects mortgage rates to hit 4.7 percent in the fourth quarter for a 30-year fixed-rate mortgage. Rates have risen as Federal Reserve policymakers have indicated they support scaling back a bond-buying program this year. The bond purchases have been credited with keeping mortgage rates low.

In the Charlotte region, rising prices and a shrinking number of homes for sale are giving sellers the upper hand. Real estate brokers say the low inventory is resulting in some prospective buyers trying to outbid one another, further boosting prices.

“A lack of inventory and the fact that interest rates are beginning to rise has pushed people into the market, and they are willing to pay more for the house,” said Bill Charles, a broker for Re/Max Executive Realty in SouthPark.

Charles says people shopping for a home are facing stiff competition. As an example, he pointed to a family that has been looking for a home since March.

“We made an offer on one house a month ago – lost it to two other bidders,” Charles said. “Made an offer a couple of weeks ago, and we had to fight off five other offers for the same house.”

Charles said for-sale homes in Charlotte are especially hard to find in the $300,000 to $500,000 range.

‘Cranking as fast as they can’

Not enough newly built homes coming on the market is also being cited as contributing to the low number of homes for sale. Real estate brokers say demand for new homes is being driven in part by sellers who are ready to trade up to a better home and sense that now is a good time to find a buyer.

But observers say more lots are needed for builders to start construction.

“Every shovel-ready lot is already bought and being built on,” said Pat Riley, president of Charlotte-based real estate company Allen Tate Cos. “I’m hearing that we have about a year and a half left of shovel-ready lots. And then we move into having a lag time until we get the new ground developed. For the next at least 18 months it’s going to be a continual lack of inventory as far as new construction.

“The builders are cranking as fast as they can, but they’re still a long way from producing what they used to produce.”

What will prices do?

On a year-over-year basis, Charlotte’s appreciation lagged that of many other cities, according to Case-Shiller. Prices in Charlotte were up 7.8 percent in June, compared with a national rate of 12.1 percent. For Charlotte, it was the 16th month in a row of year-over-year price increases.

Las Vegas, Phoenix and San Francisco are among cities that saw double-digit percentage increases from a year ago, and all 20 cities logged price gains on a monthly and annual basis.

Some don’t expect home prices in Charlotte and nationally to decline in the near future, especially as inventory remains low.

A widely accepted definition of a balanced housing market is one that has a six-month supply of homes for sale. Anything below that is considered to be a seller’s market.

In July, inventory of existing for-sale homes in the Charlotte region fell 18.8 percent from a year ago, to 14,805 homes, leaving the area with a 5.2-month supply, according to the Charlotte Regional Realtor Association. That’s down from a 7.9-month supply a year ago.

Riley, of Allen Tate, says demand is being created by various factors, from higher mortgage rates and rising rents to people migrating to the Charlotte area.

“We’re making up for almost close to 3 1/2 years now of pent-up demand,” he said.

For those reasons, he expects prices will continue to rise, he said.

“But I don’t believe that it’ll be at the fever that it is right now.”

Roberts: 704-358-5248; Twitter: @DeonERoberts
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