Charlotte Real Estate Market Report: August 2007

Good news on Charlotte real estate prices! For the month ending August 31, area wide prices are UP 5.1% compared with August 2006, comparing average cost per square foot prices of Charlotte single family homes from the MLS. Some news at first glance was alarming, the number of units sold are way down -20% from August 2006- but I believe I can show that this isn't the bad news it might appear to be to the casual observer. (No I didn't say Charlotte Observer) The photo is a Dilworth beauty built in 1903.

What does it mean? I've three broad conclusions, you may have more, tell me what you think:

First, in the face of a nationwide housing recession/depression, and with20% fewer buyers in our marketplace, our prices are up 5.1%. Our economic fundamentals and the valuation in our real estate market remain rock-solid steady. I've said it before- we didn't experience the "bubble" here on the way up, we won't (as a whole) feel it on the way down. Our prices have and continued to grow the old fashioned way, caused by increased population, jobs and increased economic activity- not speculation.

2nd, with unit sales 20% off in August (and Expired listings up 53%!) it is clear Charlotte is feeling the affects of both the sub-prime and the national real estate market downturn through fewer relocations and fewer sales- but how bad is this really for Charlotte? Not as bad as one might think, this reduction in units sold takes us back only to 2004 sales levels. In other words, it is just taking us back a few years with our overall valuations still rising.

3rd- Assuming we have 20% fewer buyers in the marketplace, then the homes not selling could be called the "marginal houses"- the bottom 20% of the market is what is not selling. The question arises what defines the "marginal house"? The Million dollar question don't you think? The 53% increase in Expired listings over August 2006 offers a clue. I think the majority of the "marginal houses" would fall into one of two categories- those in good condition priced too high to sell, and those whose condition does not compare well with other homes in the same price range. In both cases, unrealistic pricing strategies of the sellers or agent's is to blame--remedied by a good agent who prices the home correctly, and home sellers who keep their homes in good to excellent condition.

These comparisons are made easy by the Internet and the increasing transparency of the real estate transaction through pictures , virtual tours, and comparable sales information-- buyers can compare homes side by side and those priced too high, for any reason, don't make the cut.

This too is good news-- with 20% fewer transactions the market is correcting itself, cutting out the fluff, keeping the remaining house sales priced well (indicating our strong fundamentals) and, if it persists it suggests fewer commissions and a shake out of the real estate agents as well as the bottom 20% may seek employment elsewhere- definitely good news!

Let me know what you think. And what are the characteristics of the 20% buyers we lost? Will they be back? Ah, the subject of a future post...