Some good news emerged in the housing market recently, but there’s one factor that means homebuyers aren’t likely to see any relief soon: low supply.
After declining for 11 months, year-over-year home sales were essentially flat in April, according to figures released Friday from Carolina Multiple Listing Services. While it’s not a major shift, especially as the spring buying season is in full swing, it’s an improvement from what was expected to mark a full year of decreased sales.
It’s also the latest in a series of reports that show the region’s tight housing market could be changing.
Home prices are still going up — but not as fast. Homes are selling quickly — but not everywhere. And sellers are less likely to get what they ask, as more homes are selling below list price, the reports show.
“This is one of those moments where it feels like we’re at a pivotal point of things starting to go in favor in the buyers,” said Sean Black, CEO of Knock.com, an online real estate platform that allows customers to trade-in their homes.
But experts say that won’t happen until the shortage of homes is addressed.
An unsustainable trend
One sign that price increases could be slowing is that sellers are overwhelmingly receiving less than what they ask for, data show.
In the first quarter of the year, 72% of homes sold below their original list price, an increase of 9% from the previous year, according to a study from Knock.
That’s because the news about the tight housing market is causing sellers to overprice their homes, said Trent Corbin, president of the Redbud Group at Keller Williams SouthPark. And many of them have to later bring the price down, he said.
Still, that varies widely depending on location, said Kim Trouten, a Realtor and senior partner with the Bovender team at Allen Tate. Homes in more suburban communities take longer to sell, she said, while those near the city are often under contract within 48 hours.
“The houses that are priced appropriately and they are in move-in condition, those houses are selling as fast as we can list them,” she said.
And home prices are rising at a slower pace than in previous years.
According to the S&P CoreLogic Case-Shiller Index, home prices rose about 4% in Charlotte in February from the previous year. But in the two years before that, prices were rising at a rate of around 6%.
“We could not sustain the rising prices that we’ve had over the last five years,” Trouten said. “We’re going to see an adjustment.”
Mortgage rates are also lower than they were a year ago, and have been falling since December, according to Freddie Mac, a government-backed mortgage purchaser. The average rate for a 30-year fixed mortgage in April was 4.14%.
“Now that that interest rate number is down, I think buyers are getting back in the game,” said Brenda Hayden, president of the Charlotte Regional Realtor Association and CarolinaMLS.
Seeking a ‘guaranteed outcome’
Still, most buyers aren’t seeing a shift just yet.
When Charlotte resident Mike Willcox first found a home he wanted to purchase, he tried to make a contingent offer: one which would peg the purchase of the home to him selling his own home. But the owners wouldn’t consider it.
So he reached out to Knock. The company was able to make a cash offer on his behalf for $360,000 on a house in south Charlotte’s Candlewyck neighborhood, before listing his old house in Matthews.
“Now that we’re on the back end of it looking at the process, (it) really was smooth,” Willcox said.
Online platforms are drawing customers like Willcox, and that’s had an impact on the local market. Corbin said it is appealing to sellers too, who since they don’t know if they’ll get the price they’re listing their home for.
“Certainly nationwide people are seeing a little bit of softness in the market,” Corbin said. “That’s one of the things that is sending more people to these i-buyer programs where they have a guaranteed outcome.”
Still, without an increase in the supply of homes, most experts don’t see any reprieve for buyers anytime soon.
The data from MLS shows that inventory declined 8.7% in April from the previous year. There’s currently about a two-month supply of inventory, far below the six months experts say is needed for a balanced market.
And the supply shortage is particularly pronounced when it comes to finding an affordable home.
Until 2014, homes priced at or under $150,000 made up at least 35% of the total homes sold, according to a recent study from UNC Charlotte’s Childress Klein Center for Real Estate. Last year, that figure was less than 15 percent.
The situation isn’t likely to improve anytime soon, said Richard Buttimer, director of the UNCC Center for Real Estate. He thinks Charlotte is a long way from California and other states where prices are starting to moderate.
“I don’t think this is a situation where we’re looking at... a bubble or something like that,” he said. “I think there’s a fundamental economic reason that we’re seeing this happen.”
Charlotte’s population is still growing — the region added 44,500 people from 2017 to 2018, census data shows. And there’s still not enough building to meet that demand, he said.