Charlotte Home Prices, The Real Deal On August Prices

Prices are UP, volume is DOWN, reflecting both the underlying strength of Charlotte fundamentals and the affects of the national downturn/recession in housing. This is a look at 13 "bell-weather zip codes" for the greater Charlotte area, from Waxhaw to Mooresville. You might want to get a coffee, this is a long post.

Each zip has the number sold in 2006, and 2007, and the % decrease/increase from 2006.
Each zip has the increase or decrease of average Cost per SF in the % increase/Decrease.
The ATS Ratio is the average Asking To Sold price, for example a 131 ATS means Listing prices 31% higher, on average, than the average solds. Inventory is expressed as the number of months inventory based on the pendings for that month (an admittedly skewed number in August)

		AUGUST 2007
	Area o f	2006	2007	inc/dec	inc/dec	2007	2007
Zip Code	Charlotte	Units Sold	Units Sold	Units %	CPSF %	ATS	Inv (MO)
28173	Weddingon-Wax	142	105	-26	0.82	115.27	3.62
28227	Mint Hill	81	79	-2.47	0.85	114.37	2.05
28226	S Charlotte	65	49	-24.6	1.29	133.18	1.81
28277	S Charlotte	154	144	-6.49	1.77	105.21	2.8
28037	Denver	36	41	13.89	1.91	110	3
28078	Huntersville	119	122	2.52	1.99	106.96	3.23
28269	North Charlotte	194	137	-29.4	2.34	103.3	2.14
28270	S Charlotte	73	51	-30%	4.36	107.68	2.71
28105	Matthews	82	65	-20.73	7.54	109.75	2.03
28209 & 11	SouthPark	77	54	-30	11.26	106.7	3.57
28031	Cornelius	56	56	0	13.88	137.9	3.4
28104	Matthes-Weddi	79	50	-36.7	14.9	97.94	2.34
28036	Davidson	31	16	-48.4	15.93	107.9	2.36

All data is derived from the Charlotte MLS based on single family homes only, but is not provided by the MLS.
These zip codes account for 38% of the 7 County region the Carolina MLS reports on single family homes sold in August of 2007.

Some thoughts

There are 13 zip codes in good to very good condition, despite many fewer buyers. I found c couple if zip codes in negative territory and they will be the subject of future posts.
5 of the 6 double digit ATS, Ask to Selling ratios, were the bottom 5 appreciating region- the meaning? If the underlying value isn't perceived to be there, asking price has little influence on final sales price. Question, could the unrealistically high Listing Prices be driving the Sold prices down? I think so...
So there has been a sizable drop in sales volume this year... the commission checks will be smaller -wah! But is that bad for the real estate market? Well it is when it forces prices down, there's no doubt about it... and that is the result (natural result) nationally of the slowdown, falling prices. But not here.

Despite everything that's been thrown at residential real estate, at Charlotte real estate -- a nationwide slowdown that began in the 4th quarter of 2004, increased through out '05 and gaining momentum in'06 with daily "bubble" stories in national news in the media , the sub-prime debacle which has taken conservatively 10% of the buyers out of the market, and the fact our market is dependent on relocators and the slowdown around the country has kept people who want to move to Charlotte from coming, because their homes won't sell...

Despite all that, prices rose on single family homes for the entire Charlotte MLS area 5.1%- based on the average cost per square foot for sold homes versus August 2006. Wow.

It's as if we are defying a natural law like gravity, because everywhere, everywhere
there has been this kind of drop in units sold, prices have fallen. (I put this out here knowing some of you will check around the country-- be sure and tell me if you find ANYwhere else with similar numbers.) The natural result of a 20% reduction in demand is falling prices.

So why are the Charlotte cost per square foots up?

The reason? The reason is Charlotte's underlying value, our fundamentals, are granite-like. A robust local economy driven by the financial sector, low unemployment, good paying jobs, and generally good government. If we were a stock Warren Buffet would love us! We have a mild climate that folks from around the country are discovering. We still are not heavily taxed.

And much of our real estate is still undervalued.

As the real estate industry has grown more transparent-- the market has grown more national and international, people look at Charlotte homes online from around the world and still say, "That's a good deal." And they are right.

Then people come and visit and find it's prettier than they expected, the city is cleaner, the parks nicer, the people nicer... and they know value when they see it.

And that value radiates outwards.

For those of you reading from afar, you might want to know about Days on Market-- a stat that is meaningless here because it only counts the last listing. Thats right the MLS just covers the last listing agreement- for example you list with Agent A for 6 months, and then fire him and call me. I sign you up and put you in the MLS and presto you are a "new" listing, you've now been on the market one day. I sell it the following week, and your Days on market is 8. See why I can't use their numbers? In its place, I use "month's inventory" based on pending sales repeating (a stretch or worse for August) but still it is the best indicator we have. Inventory by zip codes ranged from a low of 1.8 in 28277, averaged just under 3. In general, times on the market have risen, it is hard to say how much. Good homes in good neighborhoods have moved reasonably quickly this year.

What's it all mean? I'll be breaking it down more in coming posts.

August Market Report- 28031

Cornelius, NC, Lake Norman's capital city, still growing strong on the lower lake.

Average	2006	2007	% Inc/dec
Cost per SF	$151.12	$172.09	13.88
# Solds	56	56	0.00
Aug-07	Average Sales Price		$445,380
ATS	Index		137.9
Months Inventory			3.4

Again I think it is fundamentals at work here, same Lake Norman as Mooresville, but 25-30 minutes closer to Charlotte, in Meckenburg vs Iredell County and frankly better infrastructure to go with it (I can hear the howl now) and just better planning-kudos to city of Cornelius.
Their Realtors and sellers are a little wild in their Asking prices with ATS (Asking to Selling) index of 138-- but it doesn't seem to have affected sales or appreciation does it? This demonstrates the transparency of the resale market-- underlying value is what counts! Despite out of line asking prices (37% high!) sales continue with high appreciation rates, but no where near Asking. Why? Because buyers can tell the real value when they go there, and then online they can see what the homes should be selling for- and that is what they are offering. And then sellers come back to the real world too.

A genuine Days on Market stat would be telling here, as would a MLS sheet that showed price drops.

All data is derived from the Carolina MLS, but is not provided by the MLS

August Market Report- 28270

August, 2007 Zip Code 28270, central South Charlotte

Average 2006 2007 % Inc/dec
CPSF 117.74 122.87 4.36
# Solds 73 51 -30.14

Aug-07 Average Sales Price $326,842
ATS Index 107.68
Months Inventory 2.71



Average cost per square foot of the solds rose 4.36% in August over August 2006. Number of units fell 30% over a year ago. The ATS index (Asking To Selling) See here for a full explanation- Average Per Sg FT of the Listed to the Average SF of the Solds,- the average listed is asking 107% of the same months solds.

If current sales paces continues, there is an estimated 2.71 months supply of homes.

What of the 30% fewer sales? There were 30% fewer buyers in this zip this month, but prices went up. The market tells the truth, this is still a very popular zip code, central and with good schools.

All data is derived from the Carolina MLS, but is not provided by the MLS

Charlotte Prices By Zip and Getting Rid of Meaningless Stats

The fundamentals within our market- our property valuations- are rock solid. Price appreciation, the main measure of strength, is up 5.1% in single families. Yet there are pockets that haven't done nearly so well, a few have lost ground, and we have 10 - 20% fewer buyers in the market, slowing the growth here for the first time in a decade, you'll see that in the coming zip code posts.

I'm changing format from some of my past market reports, hopefully getting to more meaningful information. We'll still have price appreciation, and units sold, but I'm leaving out Days On Market and %Sold To List numbers, because they just don't make much sense. In fact they are almost meaningless the way our MLS reports them.

I'd like to introduce two new indexes I've created to help get a handle on these two issues. The first is my ATS,(rhymes with Cats, or Fats, but not a_s!) or Asking to Selling, which is a measure of the average Listed cost per square foot, versus the he average Sold cost per square foot for the same period, same neighborhood. For example, in August, zip code 28270 has an ATS of 107.68, and that means Listed homes on the market in August were Listed at average prices per sf 107.68% of the average of solds for the same zip, same time... make sense? Said another way, the listing price is running 7.68% above the actual average sold price, now do you get it? You will see some ATS at around 100, others up to 130. Any guess as to which homes are selling better?

The second index attempts to answer how long the average property will stay on the market. I base this on Pending sales, versus Actives, those on the market. It is expressed in Months Inventory, obviously the smaller the number the better. This index will give you an idea of how many months inventory there is on hand if sales remain at current levels... I know, I know, fall sales will be lower, but still, it may be the best measure we can get out of the available statistics. Some people would add the Pending and Sold to determine Inventory, but to me that counts the Pending sale twice.

So why doesn't the MLS Days on Market count? Simple, when the listing expires without selling, if it is re-listed a day later... Presto- like magic its a new listing and Days on Market is One (1) again. How about our vaunted 97% sales to list average? That's bogus too-- it has no relation to the original list price of the property, it is 97% of the last listed price- that could be thousands, or 10's of thousands off the original price. Insert Days on Market and Sales as a % Sold? Here:
I'll explain more in another post-- why these numbers aren't just meaningless, they're frequently deceptive and dangerous in the wrong hands. The Zip Code reports are on the way, the good,the bad and the ugly- a couple very ugly.

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...

So How Much Is Enough? A $50,000 Buyer Bonus?

So how much is enough? Take a look at the flyer I received by email today. Suppose the home sells for 1.3M, that is a 39k Buyer Side-- plus 50K, 89K 6.8%-- not the 12% I've heard from AZ but still, loads of dough. Two questions, 1) Is it unethical to show this home even if you make your buyer aware of the agent bonus 2) As the LA, is it unethical to make this offer to increase showings... do you think it will increase showings? I do. The last question I have is a rhetorical one, with offers like this, is it any wonder that the Redfin's of the world want a peace of our business... or that they can suggest we are lazy bums not sufficiently motivated by 39k so they need to bribe us with 50K more?


$50,000 Selling Agent BONUS!
Did you know average price per square foot of waterfront homes in Cornelius is over $300 per square foot???

Offered At: $1,450,000

* Waterfront
* 3 Level Home
* Private Dock
* Year Round Deep Water
* 3 Car Garage
* Large Rec Room with Full Bar and Wine Room
* 5612 HLA with additional 700+ unfinished sq ft for another bedroom/bathroom


COMMENTS:

Custom built waterfront home in Cornelius is listed $300,000 below value(5,612 x 312=$1.75M)! Some agents have not shown this home because of it's proximity to I77. We are giving you 50,000 reasons to show it! This 3-year old custom home couldn't be rebuilt today for under $1,000,000! Just ask yourself - what would a half-acre waterfront lot, with a private dock/pier and deep water in Cornelius cost? $500k?, $600k? the average is $700k just for the land! Bring your buyer now for an unbelievable deal - plus a $50,000 BONUS!

Scarrier yet Zillow ranks us as the 3rd strongest market in the nation... yeow.

The Real Deal on 2nd Quarter Charlotte Home Prices

Yes I know, Charlotte Home prices are up-- up 7% says the Charlotte Observer today. National real estate powerhouse Zillow , ranked Charlotte third best in the country with prices up 9%--so is that it? Well no, not exactly... not wanting to rain on anybody's parade-- how is Charlotte real estate really doing?

The Observer just asks what the average sales price of a home was-- with no comparison by size, area distribution, or type. (single family, townhouse or condo) I think it is impossible to say how much property has appreciated in 2007 from those numbers. And Zillow? Check their last post on my site, Response from Zillow, to see if you can figure out how they compute their Zestimates, both regionally and nationally. I don't think I get it yet.

So how did I figure the 2nd quarter results you see below? Easy, I computed average square foot price of homes in the area, over the three months of April through June 30, and compared it to the same area, in the same three months in 2006. Its simple division, and the Average Square Foot price of Sold homes increased 4.73% on 7.58% fewer sales.

Here then are the 2nd quarter numbers:

	Charlotte Metro Area, 2nd Quareter 2007
	2006	2007	Inc/Dec %
Solds
Units Sold	14084	13017	-7.58
Average Cost Per SF	110.77	116.01	4.73
Average Days on Market	83	77	-7.23
Expired Listings	1922	2439	26.90

The obvious is that the average cost per sq foot rose 4.73% in the 2nd quarter of 2007 compared to the same period in 2006. But the number of units fell 7.6%, and look at the "Expireds"-- expired listings, those that didn't sell and expired, are up more than 25%.

So then if the number of sales is off less than 8% , but the prices are up 4.73%, that's good, isn't it? In today's market, across the country it is good. While Zillow and I disagree about how good Charlotte is doing, we are in agreement that Charlotte is making it through the national housing decline very well.

There you have the three different methodologies, no prize for guessing which I favor. I like mine because it is based on actual sales, totally objective numbers, that when taken in the aggregate, and averaged based on the heated square feet of a home, should be a representative sample and the leading indicator of how well Charlotte is appreciating. Also, they are easily verified by anyone with access to the MLS.

In the past I've done market reports by zip code, but I'm changing that and I'm working on a list of "bell weather" neighborhoods to keep you posted on-- and taken together, they will provide a unique "value index" not unlike the Dow Jones.

So why can't I just shut up and be happy with Zillows 9% or the Observer's 7%? Isn't that great?As a Realtor, wouldn't I want those numbers to be true? Yes I would and we are doing well, just not that well, and next week I may be sitting in your house, trying to estimate the value of your home to put it on the market. I'm sure you will have seen some of these headlines... and I want your home to sell at the best price, in the shortest time. One thing is certain, transparent real estate is here to stay and only the homes priced right will sell.

I'll post further on these 2nd quarter results as time allows.

tm