No reason for fear about Charlotte housing market

From Karla Hammer Knotts, owner of Land Matters, a real estate consulting company:

If you're waiting for home prices in Charlotte to fall significantly before purchasing a home, be careful. You may have been misled – or “Case-Shillered” – by a notoriously negative barometer of the national housing market.

Released at the end of each month, the Case-Shiller Index measures home prices in 20 U.S. cities. It's the media's report of choice on the housing market. Robert Shiller, creator of the index, claims home prices “will fall further than the 30 percent drop in the historic depression of 1930s.”

Why such alarming predictions? Seven of the 20 markets analyzed in Case-Shiller are from hard hit-areas in the West and Florida, places such as Las Vegas (prices down 25.9 percent), Miami (down 24.6 percent), Phoenix (down 23 percent) and Los Angeles (down 21.7 percent). This skews the index and leads to headline-grabbing proclamations that may result in a false fear that prices in Charlotte have a long way to fall before bottoming out.

For an example of a disconnect between the index and reality in Charlotte, look at May's Case-Shiller report and subsequent media coverage which concluded “home prices fall 14.1 percent.” At the same time, home prices in Charlotte, the only N.C. city measured by the index, actually rose.

So what's really happening in Charlotte? On June 18, the Observer declared “Housing slump slams Mecklenburg builders.” Building permits are down to lows not seen in years, the article tells us. This is true. While some view these numbers as further proof of impending doom, savvy observers understand these are signs of recovery and opportunity.

Charlotte is in the middle of a normal real estate cycle. We hit our peak at the end of 2006 and will quickly reach a bottom. Why? Charlotte's strong fundamentals (that is, no bubble) delayed the slowdown, allowing builders to anticipate the downturn and cut new starts and inventory quickly. Evidence of this foresight is clear in the latest building permit data: It shows a sharp, but expected, decline.

Our market had excess permits in 2006 and 2007. Those houses have now sold and permits are balancing with demand. This is good news for homeowners. For prices to stabilize and rebound, builders must eliminate inventory of finished homes. To opportunistic homebuyers, this is a signal that now is the time to buy.