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Prices rising, lots shrinking

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

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As Charlotte new-home construction rebounds from its prolonged slump, prices are up and builders are busier than they have been in five or six years. Lumber delivery trucks are rolling and the pop of nail guns signals the return of construction jobs. All good news.

It’s too soon to paint a clear picture of the rebound. There just aren’t enough numbers in, despite what you see and hear.

But insiders offer their best take on what’s happening – including their warning that the lack of new lots poses a huge speed bump down the road. That should give you pause if you’ll be shopping for a new home in the next few years. Or, rather, send you to tour models now.

Chuck Graham of Newton Graham Consultants, who tracks the local market for builders and other clients, says he hasn’t been surprised by anything he’s seen so far. “It’s too early ...” he said. “We’ve got a lot of mess to work through before any surprises show.”

Here’s what he means: At the peak in 2006, builders in the eight-county Charlotte market took out 27,000 single-family permits. At the bottom in 2010, they pulled just 6,400. Now – despite the buzz of activity – the number has rebounded only to 9,300.

The median closing price is at $226,500, almost back to its peak of $228,000, but not the numbers sold.

Overwhelmingly, say Graham and Alan Banks, president of the Home Builders Association of Charlotte, construction is on lots developed before the downturn, or on reconfigured parcels.

“We’re back to saying, ‘What can we do at higher density, especially closer in?’” Banks said.

He cites what he sees along Carmel Road, for instance. Before the downturn, many new homes along Carmel were priced at more than $1 million. Now, several of those 120-foot-wide lots have been converted to two 60-foot lots – with home prices cut to match.

The newest lots in The Palisades in southwest Mecklenburg are smaller than they would have been at the peak of the boom, he said. The same is true at Springfield in Fort Mill. “Builders who are able to do that are doing OK,” he said.

Banks and Graham agree: No new traditional subdivisions are being developed.

Builders are erecting houses on lots bought during the downturn, often at fire-sale prices. All the best lots have been snapped up, Graham said. When those are gone, buyers will face steep price hikes.

As builders run out of bargain existing lots, they’ll have no choice but to bid up the price of land for new lots, a problem all across the country. “All the new stuff coming on board will be substantially higher than existing lots,” Graham said.

Special to the Observer: homeinfo@charter.net
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