A Charlotte ‘starter home’ is about $300K. Here’s what else we know about housing here
Affordable housing is getting even harder to find in Charlotte, and the fastest price increases are happening on the cheapest end of the market.
That’s according to the 2022 State of Housing Report from UNC Charlotte, released annually by the Childress Klein Center for Real Estate.
The report has taken stock of Charlotte’s housing market each year since 2019, but evaluates data going back two decades. In this year’s report, released Tuesday afternoon, researchers also provided a clearer picture of how COVID shaped housing trends in the area.
The 68-page document evaluates pricing, inventory and affordability for local owner-occupied and rental markets. It also looks at the broader metro area, including nearby counties like Iredell, Union, Lancaster, S.C., and York, S.C.
The short version: Affordable housing remains sorely lacking in the region, and recent price increases have been dramatic even for the quickly-growing Charlotte.
More than half of the region’s residents can’t afford some of the area’s lowest-priced homes, while the number of million-dollar homes now exceeds those sold for $150,000 or less.
Here are a few other key takeaways:
Affordable housing remains a challenge
The pandemic exacerbated Charlotte’s shortage of affordable housing, the report states.
Researchers found that only 3.8% of homes sold were priced under $150,000 this year. About a quarter of homes sold were priced under $300,000.
That’s a dramatic decrease from last year, when properties under $125,000 were about 5% of the houses sold, and properties under $300,000 made up 35.7%.
Compare that to about eight years ago, when homes under $125,000 made up just over a third of the market, and 75% of houses sold were priced under $300,000.
“It is very difficult, if not impossible, for a potential homebuyer to purchase a home for less than $150,000 in the current market,” researchers wrote. “These are profound changes… and have significant implications for the ability of first-time homebuyers to enter the market.”
For example, families looking to buy a starter home in Charlotte now need to assume they’ll spend $300,000 or more, researchers wrote. That’s not factoring in the added cost of higher mortgage rates, which have increased dramatically in recent months.
Prices spiked during the pandemic
House prices increased at an “unprecedented rate” over the last couple of years, the report says.
From January 2020 through September 2022, the median house price increased 54%, from $273,500 to $420,000.
By many measures, Charlotte’s housing market was never so tight as it was during the pandemic. The median number of days on the market dropped to three, the lowest point in at least 20 years worth of data.
The pandemic also disrupted the supply side of the market, researchers wrote, leading to fewer new units. That helped drive up prices and rents.
You need to earn over $130K to afford a typical house
Researchers broke down the annual income levels required to comfortably purchase a home in Charlotte, given steep prices increases.
In 2005, to afford a median-priced home in Charlotte — and have your total housing costs at or under the recommend third of household income — you needed to earn about $55,000.
But if you want to buy a middle-of-the-market home this year, you need to make more than $136,000 annually.
Those searching for a home in the bottom 10th of the market still need to earn about $83,000 a year to comfortably afford it, according to the report. That means that more than half of the households can’t afford to purchase a tenth-percentile house in the area, researchers wrote.
Prices for homes on the lower end of the market are rising more quickly than more expensive houses — raising even more concerns about affordability.
“Although the income required to buy housing has increased at all points along the housing distribution, the lowest end of the distribution has been affected the most,” the report says. The minimum income required to afford a home in the 10th percentile increased 64%, from $56,617 to $83,348.
Charlotte rent also on the rise
Rents also increased dramatically during the pandemic.
Average effective rent for apartments is up about $320, or 27% per unit, from the end of 2019, according to the report.
That means that a huge chunk of a $606 increase in average rent since 2010 occurred during just the last few years.
Like the market for single-family homes, many of the largest price increases have occurred among the lowest-priced apartments, researchers wrote.
Despite the somewhat sobering statistics included in the report, researchers concluded by noting that Charlotte is doing well overall when compared with similar-sized cities across the country.
“The region does a good job of providing adequate, relatively inexpensive housing for the majority of its residents,” the report concludes. “However, the dramatic increases in house prices in recent years, especially during the COVID-19 pandemic, have made houses much less affordable.”
This story was originally published November 16, 2022 at 5:46 AM.
