Enough of the Doom and Gloom!
We’ve all had enough of the doom and gloom talk. Let’s not go there. However, to understand the current situation it may be helpful to see how we got to this point.
So, without all the hype, here’s a simple explanation of how the Charlotte real estate market has changed over the past five years.
For the rest of the country the real estate property values began to “bubble” in 2004 and continued through mid 2007. In Charlotte, NC the property values climbed moderately during 2004 and 2005. It wasn’t until 2006 that we began to see a significant increase in property values. This increase, however, wasn’t irrational. During 2006 we had an influx of people moving to the area. Many people were selling their homes in other cities at a large profit and were taking that money to buy much more house for less money in the Charlotte area. This increase in demand drove the prices up at a reasonable and sustainable rate. This trend continued through mid 2007.
It wasn’t until the initial surge of lender implosions occurred in September of 2007 that the market started to slow down. Across the country nearly 200 smaller lenders lost financial control of their business and, consequently, went out of business. This caused job losses and was the beginning of the financial crisis that we are all aware of today. This first “red flag” caused a slight slowdown in property sales across the country but didn’t have a significant affect on property values. This trend of uncertainty continued to rumble through the real estate market during the fall of 2007 until February of 2008.
When spring hit in 2008 the initial lender scare was over and the normal spring real estate market took over. Throughout the country buyers were coming out and things looked brighter. The only problem was that the market activity slowdown in fall of 2007 had left many properties for sale. The combination of these “left-overs” and the new inventory of homes that came on the market in the spring of 2008 significantly increased the inventory supply. We all know what happens to prices when supply exceeds demand… they fall.
Where did all the foreclosures come from?
Throughout 2008 the housing prices across the country started to fall. How far they fell was greatly a factor of how high they had risen over the preceding years. That is, the cities that had seen huge increases in property values in 2004 – 2007 were rocked by huge devaluations. In many cities homes were decreasing in value by 50% to 70%. This meant that many people were paying mortgages that were significantly higher than the current value of their home! For example, if you had a home in New York that was worth $800,000 in 2006 and you had a mortgage on it for $600,000 you owned about 25% of your home. When that same home value dropped to $400,000 in 2008 you were still paying on the $600,000 mortgage! This caused many people who had been faithfully paying their mortgage to stop paying and let the bank take the home back.
The Perfect Storm
The perfect storm raged when the decrease in property values combined with many people losing their jobs in 2008. This caused even more people to not be able to pay their mortgage. The situation continued in a negative spiral as businesses faltered and cut jobs leaving even more people without a way to pay their mortgage. This strained the remaining larger lenders and banks to a breaking point in September 2008.
Fall of 2008 brought an economic disaster for the entire country. Charlotte, North Carolina is the second largest banking area of the country next to New York City. This creates unique hurdles; however, because the Charlotte area property values never exceeded an unreasonable level in 2006 they didn’t fall nearly as much as those in other large cities. This is the silver lining for the Charlotte Real Estate Market.
The next obvious question is how Charlotte and the rest of the country will recover from the current conditions. This is addressed in my blog titled, The First Step of Recovery which will be posted soon!
Economics and The Charlotte Real Estate Market
As you have read from me before, we need to see the Stock Market become less volatile before we can expect the Charlotte Real Estate Market to strengthen.
I expected that once the uncertainty surrounding the election waned on the week after the election we would see a stabilization in the stock market. Both of those events would combine with a release of the pent-up home buyer demand caused by the upheaval over the past month to create an improvement in the amount of home buyer making offers on homes.
Well... I was partially correct. The negative ads and uncertainty of the election are behind us. However, the continued fluctuations in the stock market indicate that uncertainty remains. This is still keeping some home buyers from shopping and making offers!
Just look at what the stock market has done this week! There has been a swing of
over 1000 points so far this week. We'll see what Friday brings! As long as the corporate earnings (Best Buy this week) continue to be downgraded and the bankruptcies (Circuit City this week) continue to be announced expect to see these gyrations continue. This will cause the real estate market across the country to stay on edge. That means, not pick up significantly with offers or contracts from home buyers.
All this being said I am encouraging home sellers to hold the course. At The Ramsey Group we have sold several homes in the past few weeks. In fact, as I'm writing this I am in the middle of negotiations on another property.
So, what is selling in Charlotte, North Carolina? Homes under $250,000 that are aggressively priced and in perfect shape... that's what is selling. Why? Because home buyers want great deals on great properties and there are plenty out there for them to choose from. So, if a home seller wants to sell they must get in the game! Remember, most home sellers will become home buyers as soon as they sell! I say, sell now so that you can cash in on this market just like the buyers of your home are doing!!! Happy shopping!!!
Real Estate Market Update
- November 2008 -
The Charlotte Regional Realtor Association has put out it's statistics for the Charlotte, North Carolina Metro area through October 2008.
Here is what they reported:
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The number of houses sold in the Charlotte area fell 30.6 percent last month
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The average closing price declined nearly 1 percent
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The number of closings dropped to 1,848 last month from 2,662 in October 2007
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The average sales price dipped to $216,777 from $217,504 last year
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The average number of days on the market was 134
Even though the number of houses that are selling dropped, it didn't go to zero!! What does that tell you? THERE ARE STILL LENDERS MAKING LOANS! And, there are buyers who are taking advantage of the market! Look at the numbers... over 1800 homes were purchased last month!
So, if you are thinking about buying a home and you should look at this and realize that now is the time to take action! There are good deals to be snapped up and lenders who want to help you do that! Don't stop yourself because you are concerned about your credit or how much money you will need to have. Talk with a lender and let them help you understand what you can afford. Many lenders have FREE programs that allow you to repair your credit so that you can buy in 6-12 months. The worst thing you can do is to do NOTHING.
How to Thaw the Real Estate Market "Freeze!"
WARNING: If you get easily offended skip to the next article
It is true, the real estate market in Charlotte, North Carolina is similar to the rest of the country... It is slow. I continue to preach that there is not a credit freeze or a real estate freeze but I just had to use the term in the title of this article because it worked so well!
So, what will make the market start moving again? It's simple, buyers and sellers! DON'T STOP READING NOW... THERE'S MORE TO IT. While that may sound simplistic, it's true. This begs the next question, how do we get more buyers and sellers so the market will pick up? This is a little more complicated but still something a 5th grader could understand!
If you get offended easily you should stop reading right now. Otherwise, enjoy reading what you need to know to survive in today's real estate market!
BUYERS:
Many home sellers have figured out the reality of this real estate market - the properties are in a beauty contest and a price war at the same time. These sellers are making the needed improvements and lowering the price so that they are competitive. Go out with a real estate agent who knows how to find these properties for you and take your pick! More buyers are starting to realize this and the best deals are starting to be purchased. Don't wait until you are stuck with the remaining unrealistic sellers!
SELLERS:
Look around... the homes that are selling in this market are priced low and are fixed up wonderfully. Buyers have their choice of many fine properties. They don't want to buy a house with to-do items!!! You need to neutralize the paint, get rid of the clutter and clean, clean, clean! We know everyone knows someone who sold their home for a higher price but the odds are against that. So, if you want to get in the game you have to know how to play the game and then you have to play it that way. There are several things you can do to improve your property for little of no money. Ask a real estate agent who studies the latest trends and has knowledge of what to do and how to do it. Then, follow that advice! You'll be happy you did because the smart buyers who are out looking for the perfect home right now will get a deal and you will get your home sold so you can go get a deal yourself!!!
Credit Crisis... Are Mortgage Companies Still Lending Money??
This is exactly what sellers in Charlotte, North Carolina want to know along with sellers across the country. At The Ramsey Group we work a lot with the Carder/Palmer team at Myers Park Mortgage. Their answer to this question is:
#1. Yes, Yes, Yes! Mortgage brokers, mortgage bankers and local banks are still making loans everyday for the purchase of homes. Note, though, that their are several scenarios that have become quite restrictive as a result of the current financial and real estate market conditions across our country. They are:
#2. RATES ARE LOW! The Fannie and Freddie Bail-Out has created a very low interest rate window for home buyers in today's market! Because mortgage rates for most loans are driven by the sell of bonds guaranteed by Fannie and Freddie, the government take-over of these huge corporations is good for rates! They are backed by the U.S> Government now which makes their bonds extremely low risk. This has driven fixed rates even lower! So, getting an accurate rate quote is even more important than ever.
#3 DEMAND A VALID RATE QUOTE! In order to quote an accurate interest rate in today's ever changing home mortgage world, a lender needs to know the Type of Property, the Size of the Loan, the Credit Score, the Purpose of the Loan and the Loan to Value Ratio. Without this information it is nearly impossible to quote a valid mortgage rate.
Our thanks to Olan and Gary at Myers Park Mortgage for supplying us with this valuable information! We hope it helps all of you home buyers who are wondering if it is a good time to buy a home in Charlotte, NC! Happy house hunting!
Knowledge is the First Step To Safety
Charlotte, North Carolina is a great place to live. In fact, it has been rated as one of the best cities to live in throughout the country several times! However, their are bad people among us no matter where we live. That's why it's so important to know who is living around you. One of the easiest ways to do that is to check the location of offenders who live near you. This can be done by simply going to www.FamilyWatchDog.us where you will see a map of your neighborhood. On this map will be indicators to show you where the offenders live.
This is not just for Charlotte, North Carolina! It works for areas across the country. As their tag-line says, "Awareness is your best defense."
How is the Real Estate Market
In Charlotte, North Carolina?
10/23/2008
With all the financial issues currently going on in the United States and now in the world I wanted to update you with what we know about the real estate market in Charlotte, NC. We are studying the financial situation on a regular basis. While we used to monitor it weekly recently it has become a daily event. We want to know as quickly as possible any changes that are affecting the housing situation so that we can let our clients know as well. As you know, the current stock market condition along with the lending crisis has created conditions in the real estate market that haven't been seen since the 1930s. Even the conditions in the early 1980s didn't have the effect we are experiencing today.
The big question on everyone's mind is, 'when will the real estate market pick back up?' Right now we hear about the market being "dead" and we hear about the "credit freeze." This is simply not true. There are qualified buyers actively looking for homes right now. At The Ramsey Group we have clients who have loan approval and can buy. The problem is that there are very few buyers in this position right now and that creates the appearance of a "dead" market because of a "credit freeze." In fact it is an incredibly slow market because of extremely tight lending conditions.
So, the better question is, 'what should a seller do to get their property sold in this market?' The best answer to this question lies in studying the situation so that we can derive an educated expectation to act on. At the same time following the analysis of some prominent economists is helpful. This two-pronged approach is exactly what we at The Ramsey Group are doing to allow us to give good direction to our clients who are selling their homes.
Time Frame
First let me share what some economists expect the duration of the slowdown to be.
National Association of Realtors? (NAR)
By Lawrence Yun, Chief Economist
October 9, 2008
Based on a survey of REALTORS? in August regarding their most recent transaction, we estimate that about 40 percent of home sales are distressed sales. What does today's data mean for REALTORS? and consumers? Retail sales have been weak and now we are getting weaker wholesale activity. Penny-pinching consumers will cause the overall economy to contract at least through the first quarter of 2009. Weak consumer spending does not necessarily mean potential home buyer will sit out. Past recessions have shown that consumers do buy homes even as they constrict spending in other areas if housing affordability is favorable.
CNN
Kim Rupert, fixed income analyst at Action Economics
October 9, 2008
The Fed has "done an absolute ton" to juice the economy and yet credit markets are still choked. "It probably will take time and making sure that there are no more shoes out there to drop," for the credit markets to loosen."
As suggested in both of the quotes above, I agree that there will not be a quick change in the market. However, we can look at the normal trends in real estate sales and consider how the current conditions will affect them.
Normal Real Estate Trends
After the strong real estate market in Spring and Summer the Charlotte market experiences a slowdown in home buyer activity in mid-August. This is quite normal as many people are involved in getting children started in school. The market activity rebounds in September and again in November leaving the months of October and December somewhat slow. While the peaks and valleys in the market sometimes shift a bit, this is the typical Charlotte real estate season during the Fall months.
Real Estate Trends This Year
This year we saw the normal slowdown in mid-August. Then, in early September the financial problems with the large mortgage lenders hit hard. Many were pulling loans from home buyers and others were going out of business altogether. Obviously this reduced the number of home buyers who could get loans for homes in Charlotte and this stymied the usual September surge. Simultaneously, other large financial companies began to fail. Consequently, we have not seen an increase in home buyer activity since mid-August. The chart below shows the number of on-line visitors to all The Ramsey Group property listings on Realtor.com since early August. As you can see, the number of home buyers who are actively looking for properties on-line is now less than 50% of what we were seeing in mid-August! Likewise, we have seen the number of showings of our listed properties drop by more than 50%.
This is primarily a result of mortgage lenders tightening up their credit restrictions. However in many cases the home buyers have simply changed plans to buy because of the uncertainty in the market (they think prices may go lower) or in their personal situation (job concerns, etc.). These home buyers who can get a loan but have decided to wait are creating a pent-up demand.
Crystal Ball
What's going to happen with the real estate market in Charlotte, NC? Hopefully the enormous volatility in the financial markets will somewhat stabilize over the next few weeks. In the same time period the elections will be over and the country will know who the next President and other elected officials will be. Regardless of who wins I believe that it will be helpful to have the uncertainty and battling of the elections behind us. This reduction in uncertainty combined with the pent-up demand may cause home buyers to come back to the real estate market again at that time. If this happens we could see a nice increase in showings and possibly in offers from mid-November through the first half of December. However, please note that mortgage lenders now require 10-20% down for most loans. The days of down payment assistance are behind us as well. Because of this we will certainly not see the same level of home buyer activity that we've seen in the past several years. Home sellers will have to be willing to work with home buyers to get the property under contract.
Normally January is quite slow. I imagine 2009 will start off the same way. What can we expect the real estate market in Charlotte, NC to look like next Spring? I believe all the markets are far too unstable at this time to realistically predict the Spring real estate market in Charlotte or the rest of the country. That will have to be done after we see how 2008 closes out.
Conclusion
Where does all of this leave us? Well, in general I would suggest home sellers hold off on making any price changes or adding any incentives to their property at this time. If possible they should wait another few weeks and see where the market stands. We are seeing that even foreclosure properties are having a difficult time getting any showing action because of the current real estate market conditions. Price changes are a great way to rekindle market activity so home sellers should avoid the possibility of "wasting" a price change in the current market. Of course, some home sellers are in a distressed situation. In that case it may not be realistic to wait on the market. Instead, they may need to make price concessions right now and try to get the attention of real estate bargain hunters!
I hope this helps shed some light for those of you who are considering either selling your home in Charlotte or home buyers trying to determine the best time to take advantage of the current real estate market in Charlotte, North Carolina.
Mark Ramsey
Broker, MBA
THE RAMSEY GROUP
www.YourCharlotteConnection.com
Christenbury Corners
You may have seen the large real estate developer's signs and all the new construction at the intersection of Concord Mills Blvd. and Derita Road. This area is called Christenbury Corners and it holds big promises for everyone who would like more retail shopping in this area. Residents of Skybrook, Highland Creek and all the neighborhoods in that area who have wanted a close-by home improvement store and grocery store will soon be satisfied. The Lowes Home Improvement store is set to open in late October or early November. There is a Bloom grocery store coming and Walmart will be right behind Christenbury Corners.
Keep reading our website at YourCharlotteConnection.com for updates on this development!
Welcome to Charlotte North Carolina
from The Ramsey Group
Having a family of our own, we understand the questions and details that can arise during a move. That is why we put this site together for you to do your own research at you convenience...on your time frame! We are with you every step of the way and want you to know that we are here when you need us!
