This past week our listings saw an average of 1.3 showings each. That traffic is certainly slower than we’d like to see during normal times, but then we are in the midst of the holiday season. I certainly see no cause for concern and I’m nothing but positive about the Charlotte real estate market heading into 2012. As 2011 draws to a close, lets recap a few fundamentals stats and their path over the course of the great recession.
During the boom years, the first thing that peaked was the number of home sales and that happened in mid 2006. As home sales increased, the inventory (or supply) of housing fell in direct proportion to sales but lagged by a few months. Supply hit a low point at the beginning of 2007 and at that time we were in a true ‘buyer’s market’ with only 4.7 months supply. (A six month supply is considered a balanced market.) When supply hit bottom, prices began their final push to peak. Average home price hit a high point in the summer of 2007 in Charlotte, but it hovered around that point and peaked again in September 2008 right before the market crashed.
After the financial system had its meltdown, real estate buyers went into panic mode and the number of home sales plummetted. Just as the supply dropped during the boom due to increased sales, supply began to rise as sales fell off. Housing supply hit a high point in summer of 2009 and prices followed suit.
Both 2009 and 2010 were quite confusing for real estate analysis because we had a government tax credit that created false demand. During the period that the tax credits were in effect, we saw abnormal sales spikes, small changes in supply, and minor price increases. When the credits expired, the market went back to where it was before the tax credits were implemented.
That brings us to 2011. The first half of 2011 was not much better than 2009 or 2010. However, during the second half of 2011, Charlotte saw a significant increase in home sales over the same periods from last year. In turn, supply has steadily fallen. As of this writing, supply has fallen to levels not seen since April of 2008, well before the finanicial market meltdown. We have not seen any price appreciation yet and we may not for awhile because of the higher than normal supply of distressed homes. But there is no doubt in my mind that the worst is over and we can just about see the light at the end of the tunnel.
Technically speaking, we can’t consider ourselves in a buyers market until supply drops below the six month level. That may not happen in 2012, but keep in mind that supply was at 12.8 months in April of this year and in just eight months it has fallen to just barely under 9 months supply.
There is still a lot of negative talk out there and after almost four years of recession its understandable why people are skeptical. But the truth is that we have just experienced a very ugly low point in normal market cycles. But it takes the low points to make the high ones possible and I’m pretty certain that another high point is not too far away.