Charlotte Prices Almost Back to Peak Levels – Affordability Still Great

Oh how the tables have turned. It was just a year ago that sellers were discouraged and wondering if they would ever get right side up on homes they purchased in 2006 and 2007 after watching prices plummet for four straight years. Many of those sellers who waited out the storm, might just find that by this summer they will be back to even on those peak purchases. That’s a scary thought for many buyers including several with whom I’m working right now. There is tremendous fear building among buyers that prices are screaming back too quickly and that we are going to end up in another bubble. Frankly, since the crash of 2008 doesn’t seem like it is that far behind us, I have similar worries. But the numbers and facts paint a different picture.

There are two key reasons why the current market is not likely to repeat what happened in 2008.

1) The 2008 crash happened because lenders sold mortgages to people who simply could not afford them and counted on home price appreciation as their security blanket. Those buyers failed to make payments in mass numbers and foreclosure rates went through the roof. The high number of foreclosures caused prices to fall and the snowball effect began. Fast forward to 2013 and lender guidelines for mortgages have become extremely tight. In order to get a mortgage, you need great credit, solid income, and money to put down. The mortgages that are being sold today have a very low default rate and will continue that way until lending guidelines ease.

2) Interest rates have almost been cut in half since the peak in 2008. Prices may be getting back to peak levels from 2008, but the monthly payment that a homeowner would have paid at peak is over 30% more than the payment for the same priced home at today’s rates. This means that the payments are much more affordable now. This is another reason why today’s loans are less likely to end up in foreclosure.

This week we will publish our monthly E-Newsletter with the real estate stats for Mecklenburg County comparing this past April to the prior month and again to the same month last year. Here’s a sneak peak:

– Home sales are up 12% from last month and 43% from last year.
– Average sales price is up 4% from last month and 10% from last year.
– Median sales price is up 7 % from last month and 16% from last year.
– Days on market are down 11% from last month and 20% from last year.
– Pending home sales are up 6% from last month and 25% from last year.
– Housing supply is even with last month and down 31% from last year.
– Mortgage rates are at 3.45% which is well below where they were last month and last year.

Note that Pending home sales are at the highest level that I have recorded since I started tracking them in September 2005. Pending home sales is an indicator of homes that will close in the next 30-90 days. With pending home sales hitting record levels, we can be certain that home sales will also continue to rise over the next few months.

Also note that the average home price for this April is higher than April in any other past year since I’ve been tracking since 2004. Given that prices are already at these levels in April, I will not be surprised to see them match or surpass the Charlotte market peak prices; we are already very close. Stay tuned to this blog over the coming months as we will find out by the end of the summer.

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