SW Charlotte Real Estate Update- 28278

So we heard last month that the nationwide slowdown in housing has finally caught up with Charlotte in the form of fewer sales in June, with prices (thankfully) and year to date numbers still holding strong. Over the next 2 weeks I'll be posting about various South Charlotte Zip Codes to see how they are faring. This week I'm looking at South West Charlotte, zip code 28278, one of the fastest growing zip's in Charlotte, and a couple of popular new home communities. All of the numbers are taken from the Charlotte MLS, and are believed to be reliable but not guaranteed. Builders do not list every home, therefore every sale is not listed either, and 28278 is all about the new home market. Still the numbers tell a story.

	2006	2007	Inc/Dec %
Solds July	43	54	25.58
3 Months Ending Jul 31	135	156	15.56
Average Cost Per SF
July 1-July 31	142	105	-26.06
3 months ending 7/31	117	103	-11.97

So healthy gains in units sold in 2007 (25% in July, 15% 3 mo average) are somewhat offset by lower prices in 2007. This reflects the substantial discounts being offered by new home builders- in particular the national new home builders- over 2006 prices.

Berewick and the Palisades followed suit.
At Berewick reported sales were 50% higher than in 2006, with average cost per square foot falling from 94 to 89.00/sf, a 5% drop.

At the Palisades, reported sales were 50% higher as well, with average square foot costs falling form $244/sf in 2006 to $221/sf in 2007, a 9% drop.

The drop in average square foot prices for the entire zip is a reflection of the new home market which dominated 28278 which is suffering sharper declines then the re-sale market.

So what conclusions should a buyer make if they like SW Charlotte? Well SW Charlotte is a beautiful area of Charlotte and extremely convenient to Uptown- the increased number of sales are proof of that, but what would the wise buyer do?

1. Buy inventory only, and at a discount. Inventory are homes that are ready now or will be ready within 90 days. Most builders will deal on these, and in this market they would be foolish not to. Insist your buyer agent (hopefully us!) make them an offer for 5-7% less than they are asking. If there is no inventory, don't buy there.

2. Buy in the lower to middle of the price ranges, avoiding the top unless the prices are too good to pass up!

That's all for now!

The Problem With Builders, Part II

As you know, I do love to sell new Charlotte homes-- they account for about half of the Charlotte real estate market-- as I said in Part I, I have a strong preference for Inventory homes or spec homes, sold at a discount. And we are always looking for great Charlotte communities, communities with pools and other amenities. What I am interested in is value. Around here, those best values are found in quality communities, in near to completion Inventory or Spec homes, as builders frequently make deals on these homes. They discount these because their profit is literally running out of the house, like sand in an hour glass, profit they can never get back.

Building from scratch, it is easy to "over-option" the house at the design center- "The granite is great, tile is better, and hardwoods on the first floor all make sense. The only time to upgrade lighting is now, isn't it? And we need the 3rd floor. The extra bath? Yes we need that too." I hear this all the time. It is not uncommon for upgrades to add 50, 60 or $70,000 to the price of the home. But the builder isn't telling you one important item: the builders lender will finance you but the next lender may not. Said another way, the options are here for your enjoyment, don't count on them for resale. In the worst case, you buy a home, lose your job and need to sell. If you paid retail, and you have a lot of options, your home may not sell or appraise for what you paid for it. What's worse? Many builder's business model requires them to sell options.

Only one builder acknowledges this publicly, it is in the form of a statement made part of the contract. Read this carefully to understand its full meaning:

"When you purchase options in your home, you should purchase them with the understanding that ,while the option may add functionality or enjoyment to you, they may not influence the appraised value of the home. Our policy on options is straight forward; our business model does not depend on option profits." (Italics mine)

The above builder who must remain nameless, includes most of the common options, making option purchases truly "optional." His communities appreciate very, very well, and this is one of the reasons.

Happy Buying!

The Problem With Builders...Part I

I love to sell new homes. There is something about them... like a new car they feel great. Maybe it's a throw back to my youth, where I got my start with real estate, selling tons of new homes on a site in Germantown, MD that most considered "too far" out. Today it is like downtown! Yes I love to sell new homes.

Charlotte is the 9th largest new home market in the nation... Pulte, Ryan, Shea, Orleans, Toll Brothers, Wieland all the national builders are here. Yet a new puzzling and disturbing thing happened this past week from a major builder. The "house" lender did not fund the deal for 7 days after the closing... for the uninitiated, my buyer lived in the house for a week, and didn't own it. How did they do it? It is the symbiotic relationship the house lender has with the builder, and a disregarding of good business real estate practices, combined with a jittery lender hold lots of sub-prime paper. But it DID close.

But that is not the biggest problem. By far, the biggest problem is that New Home Builders generally get way too much money for their house. Once you've added options, sometimes $50,000 or more, you can be way, WAY, above market price for your home. worse, many of these builders depend on Option Sales to make their profits, so they are selling options all the time. The downside is that it may take several years for your house to be worth what you paid for it. The flip side of course is that if you have to move in say a year, you'll take a bath on it.

This contributes to foreclosures when folks have to sell and can't get their money out. It's compounded of course when they used the easy credit of old to help people buy homes they couldn't or shouldn't afford. And it means you've given the first several years of appreciation to the builder. They created a market, it felt good , and you bought. I am to the point where in most of these communities I recommend only buying inventory- already built homes- these are typically available at market prices.

Another major problem is bad lots. Every community has them, and the builder would like you to take it from him. These lots are, by most definitions, dogs. Yet they have to sell them. So here is how they do it. They only release so many lots at a time. Then, as they near the end of that "phase" (a totally artificial precept)they create urgency to sell the last of the lots, by telling you, "There are only two left in Phase I"--they don't mention they are the ugly ducks, the runts of the litter. And people buy them. I train my buyers agents what to look for-- it is their job to be sure it is some other persons bad luck, not one of our clients.

What do these lots look like? They may be entry lots, first ones in--these will ALWAYS be less valuable and harder to sell. Why? Because everyone in the community has to pass that way, everybody will want to be further back. This is why so many models are first in, loaded with features and at the end, they are sold at a discount. Either that or pre-sold to an investor early on at lower prices. Thy may back to the road, the bigger road, or some other obstacle/feature difficult to see on a plot map.

Still I love new homes, but I love getting my buyers deals on inventory homes even better! If that means occasionally getting into a fight with the builders, so be it.
Just part of the job. :)