Four reasons many Charlotte home buyers – and sellers – are feeling stuck

Construction workers put siding on a Ram Construction house on Magnolia Avenue. The house is being built to replace an older, smaller house that has been torn down.
Construction workers put siding on a Ram Construction house on Magnolia Avenue. The house is being built to replace an older, smaller house that has been torn down.

Charlotte home buyers and sellers are in a curious position: What should be a roaring market is stuck in a lower gear, constrained by low supply and a reluctance on some sellers’ part to move because they can’t find a comparable house in their price range.

The situation is mirrored nationwide, where a report released this week by the National Association of Realtors showed Americans are spending longer than ever in their houses. The median length of time homeowners are occupying a house is 10 years, a figure that’s climbed well above the historical average of six to eight years, where it stood before the housing crash.

Rising prices, bidding wars and a paltry market on the low end of the price scale have made things especially tough for first-time buyers, many of whom are also burdened with student debt. The proportion of first-time homebuyers has fallen to 34 percent of total purchasers, down from 35 percent last year and near an all-time low nationwide.

“Our numbers are almost mirroring the national numbers,” said Roger Parham, who leads Team Headline with Allen Tate Realtors and is president of the Charlotte Regional Realtors Association. “We’re consistently seeing our challenges with the same things.”

A home for sale at 2006 Floral Ave. in Charlotte, NC. Jeff Siner

Here are four reasons the housing market in Charlotte is challenged right now:

Fewer houses on the market

Economists generally consider a six-month supply of housing for sale to be a balanced market. Charlotte’s supply of homes on the market is far below that, however.

In September, the number of houses on the market fell 17.5 percent from a year ago, dropping to 10,140 for sale in the region, according to the CRRA. That’s a 2.5-month supply of houses, not even half of what’s considered normal.

And the inventory is tighter in Charlotte itself. Within the city limits, the number of houses for sale fell almost 20 percent, to just a 1.7 month supply.

One reason: Builders still aren’t building nearly as many houses as they were before the recession. Fewer than 4,000 single-family building permits were issued last year in Mecklenburg County – less than half of the number issued a decade ago, in 2006.

Bart Hopper, who specializes in townhouse development, said one reason is that a lot of developers who went out of business during the recession weren’t replaced.

“A lot of the developers that do this kind of stuff aren’t around any more,” said Hopper. Another reason: It can take years to find a piece of land, get it rezoned, line up financing and start building a project. His latest townhouse project, 74 units west of uptown, has been under development for three years and just recently broke ground, with the first townhouses to be available late next year.

That means that the market can lag demand for new houses by three to four years.

“It has taken us four to five years to get into this mess as far as low inventory is concerned,” said Parham. “It’s going to take us four to five years to get out.”

People are taking longer to move

In what sounds like a paradox in a strong sellers market, many people are reluctant to put their house up for sale.

The average length of time owners spend in a house has risen to 10 years, the NAR said. Some of the reasons are positive, such as a decrease in risky home speculation and flipping by inexperienced buyers that was more common before the 2007 economic crash.

But another key reason is that many buyers are reluctant to put their house on the market, because of how difficult it would be to find something similar in the same price range. That’s made both older buyers who would traditionally look to downsize and younger buyers who want bigger houses more willing to refinance, remodel or find another way to make their current house work.

That’s what Shelley Stockton and her husband are facing. They’ve owned their house near Park Road Park for 4 1/2 years, during which time it’s grown in value. With two children, four and two years old, they’d like to find a new house – but they want to stay in Charlotte, and in a good school zone.

But the houses that fit their criteria are all in the $400,000s to $500,000s, above their price range.

“I remember looking at houses before we got this one that were in the low $300s, and thinking why would we pay that much?” said Shelley. “Now it’s completely reversed. If you can find a house anywhere in the threes, it’s great.”

So until they can figure out their next move, Stockton said they’re staying put. Repeated thousands of times throughout the region, decisions like that mean there are fewer homes for prospective buyers and fewer places prospective sellers might move, feeding a vicious cycle.

“That’s a huge piece of why we’re also challenged in our inventory,” said Parham.

Rising prices

It’s the old law of supply and demand: With high demand and low supply, prices are shooting up fast for Charlotte houses.

On Tuesday, the S&P CoreLogic Case-Shiller Index shows August home prices in Charlotte jumped 6.8 percent from a year ago, above the national average increase of 6.1 percent.

That’s roughly in line with data from the local Realtors’ association, which showed the average September sales prices in Charlotte jumped 6.1 percent, to $271,606. And rapidly rising prices can make it harder to save up for a down payment, especially with rents shooting up as well.

“Home ownership is going out of reach for a lot of first-time homebuyers,” said Parham. “The toughest obstacle for most first-time homebuyers is saving.”

Higher student loan debt

This is an especially acute problem for first-time buyers, the NAR found. Among first-time home purchases, 41 percent reported they had student debt, more than twice the number of repeat buyers. And the average debt load was $29,000 for first-time buyers.

Parham said that’s especially important for first-time buyers trying to purchase from the dwindling supply of starter homes. They’re likely to face stiff competition, multiple offers and all-cash bids from investors trying to buy those same properties.

That makes getting pre-approved for a mortgage with a good lender key – a task that’s harder for buyers with a heavy debt load. Parham said many first-time buyers are also struggling with credit card debt.

“Almost every time in that price bracket...first-time home buyers are coming up against multiple offers,” said Parham. “When you’re in such a severe seller’s market, you have to be a ready, willing and able buyer.”

Ely Portillo: 704-358-5041, @ESPortillo