Charlotte facing tight housing market with low buying options in 2024, experts say
Charisma Southerland moved to Charlotte from Chicago in the 1990s to attend Johnson C. Smith University, and along the way saw parts of the iconic uptown skyline come alive.
“I watched them build the Bank of America tower right in front of my dorm room,” she said while talking about the city’s progress and growing population, which was 1.2 million for the region at the time. Now, it’s 2.7 million. Much of that growth came from people moving into homes for work and to experience what Charlotte offers.
Southerland is now a broker and president of Canopy Realtor Association. As newcomers continue to flock to the region, real estate professionals like Southerland are facing the challenge of working in a housing market where demand outpaces supply — an issue that continued throughout 2023.
“Unless we get some new homes on the market, it’s still going to be a very tight market out there for us,” she said.
But there’s optimism over the possibility of interest rates coming down, according to several experts whom The Charlotte Observer spoke with about the state of the 2024 housing market here.
Still, they remain divided on how it will all play out with inventory levels, down payment needs and other factors in the housing market.
Southerland said prospective homebuyers are motivated by interest rates, which reached the lowest point recently in November at the 7% range. But that rate was still much higher than just a couple years ago.
If rates drop to the 6% range, Southerland thinks there will be another increase in people buying homes, which may cause prices to rise. Buyers may have less competition this year and Canopy hopes the new inventory will grow along with more homeowners willing to put their houses up for sale.
In Charlotte’s housing market, real estate broker Becca Lutes saw a lot of homeowners stay “locked-in” last year —they didn’t want to move and give up paying a lower mortgage interest rate for a higher one. Sometimes, though, people are forced to move out of necessity.
“People get married, they start families, they get divorced, they have job relocation, people die,” said Lutes, of Scout Real Estate Group/Keller Williams Realty.
Lutes thinks the 2024 housing market will be in a better position because of lower interest rates and easing inflation. Those are factors many real estate experts are watching, along with a need for more homes to be built.
“The economy was tough on people,” Lutes said. “So, when they have other essentials that are costing more, it makes people pay attention to the housing cost extra closely because that is some of our largest expenses. It all played into an interesting, potentially challenging market for 2023.”
Here’s what else local real estate professionals are expecting for the 2024 housing market around the region.
Home prices, by the numbers
The median cost for a home for sale in Charlotte was $400,000 in November — a 2.6% increase from the same month in 2022, the real estate firm Redfin reported.
According to a report from SmartAsset, with data from Zillow, average home prices in Charlotte are projected to increase from 5.6% to 7.5% in 2024, based on ZIP code locations.
Among the projections for this summer, the highest average value for a home is $566,966 in the south Charlotte ZIP code of 28277 — a 6.1% increase from last July’s $534,370.
The lowest-priced home on the list, in west Charlotte (28208), was valued at $277,506 last July. It’s projected to cost $298,319 by the summer, a 7.5% increase.
More than 50,286 homes were sold across the Charlotte region in 2022, according to Canopy. There was 9,300 more homes purchased in 2021.
The estimate for total homes sold through November 2023 was 38,684. Buyers pulled back in 2022 mostly because of interest rates rising, Canopy said in its yearly report.
The overall housing market has been smaller, more challenging and less affordable than in previous years, according to Matt Vernon, head of consumer lending for Bank of America.
“I think the shock and speed of the rate increase certainly slammed the breaks on housing in many respects as consumers adapted to this new and different environment,” he said in an interview.
As rates trend down and existing homeowners get more comfortable with listing their homes on the market, inventory conditions may improve for people looking for homes, Vernon said.
The Charlotte market is one of the strongest in the U.S., he said, because it’s fueled by the economic success of the region and the growth of companies in the area.
When houses are priced well, they move quickly, Vernon added. “Optimism would be a strong word (for buyers and sellers), but certainly (there’s) a more positive housing market as we head into 2024.”
Still, affordability, interest rates and limited inventory remain a challenge for the market.
Both existing and prospective homeowners are losing patience for rates to come down, based on a recent Bank of America survey. It revealed that 85% of respondents in April would wait for better rates; now it’s down to 62%.
“That’s just a precursor to the consumer mentality of entering into the homebuyer market,” Vernon said. “And we expect to see that accelerate in 2024.”
Hot neighborhoods around Charlotte
The city of Charlotte has close to 200 neighborhoods, and they all offer something different, Southerland said. That includes people choosing to live near shopping centers or within walking distance of restaurants and bars. Some of the perennially popular places include Plaza Midwood, NoDa and FreeMoreWest.
Another upcoming neighborhood is The River District, a 1,400-acre master-planned community near the Catawba River and uptown Charlotte. Developers broke ground in March and the $6 billion project will be built in phases. It will take nearly a decade to finish.
“That’s probably the last frontier of acreage left in Charlotte, where they are going to highly develop,” Southerland said.
Home builders and buyers eye Charlotte
Construction crews hired by Tri Pointe are working on roofs, windows and the exterior of new homes in the Charlotte region. The yards are muddy, but that’ll change after the grass is laid down for future homeowners.
Tri Pointe, a Nevada-based company, built more than 400 homes in the region last year, said Gray Shell, president of the Charlotte division. The goal for this year is 500.
The median price for an existing Tri Pointe house is about $390,000 in Charlotte. A new one runs about $450,000. Lower payment options are available through the Federal Housing Administration at about 5%, Shell said.
As always, high interest rates are a concern for buyers.
“It’s impacting the broader market and it’s definitely reducing the number of consumers that can afford a home at various price points,” Shell said. “More of your household income is allocated towards your home today than it was two years ago. So, I think it’s impacting overall affordability more than demand.”
For the new year, he thinks buyers will see more stability with mortgage rates even as inventory remains tight.
One shift in the market, Shell said, will be an increase in smaller single-family detached homes and town homes to give buyers some better affordability options in Charlotte.
‘Not enough homes’
With so many people moving to the Charlotte region every day, there’s not enough homes on the market, according to Yongqiang Chu, a professor at UNC Charlotte.
He thinks the market will remain the same this year. “A lot of the home builders told me housing permits are actually decreasing,” Chu said.
And Chu believes interest rates will not decrease for the first half of the year. The Federal Reserve has increased its benchmark rate from around 3.5% about three years ago to 8% last year.
First-time homebuyers are not going to find a lot homes for sale below $300,000. Last year, the median price in the Charlotte region was $380,000 for a home, Chu said.
“The news is probably not good,” Chu added. “We’re at a very high price point, and at the same time the interest rate is super high.”
Lutes said there’s also competition for home purchases among people who need to move for work or personal reasons.
“I have four kids in a two-bedroom house, I have to get a bigger house,” she said as an example. “Those people that ‘have to’ are competing among each other in a low-inventory environment.”
‘You’re not the only one looking’
Southerland expects 2024 to be a sellers’ market, noting that the region only has about two months of housing inventory — a balanced market has six months of supply.
Construction may pick up in Mecklenburg County, but Southerland anticipates more developments in outlying counties because there’s more land available and it’s cheaper to build there. She told people to be prepared for competition.
“You have to remember that you’re not the only one looking for a home,” Southerland said. “The inventory is low and the demand is still high.”
This story was originally published January 3, 2024 at 6:00 AM.
