Earlier this month, there was more news that, for the fourth straight month, existing home sales were up nationally from the previous year’s levels. What is the reason? A lot of this uptick is due to the tax credit of the Spring of 2010 where sales were borrowed from the second half of 2010. This made this Falls’ results more realistic.
The latest report from the National Association of Realtors shows sales of existing homes up 13.5 percent to a seasonally adjusted annual rate of 4.97 million houses in October. I am also hearing from around the country that the upper end is starting to move, especially in the second- home markets. As I stated many times, real estate is a local game. This is good news if it is systemic growth.
Last October was the bottom. With four straight months of 2011 growth, this doesn’t mean that we are on another boom course, but rather a gentle recovery over time.
There has been an interesting phenomenon in the new homes market over the last few months…the luxury market for new homes seems to be gaining some momentum! Now every market defines “luxury” differently. For Charlotte it would be homes in excess of $500,000.We have seen a steady rise in sales over the last few months from our luxury builders. Now, is this a trend or just a blip on the screen? We would prefer to believe there is a trend developing and when you start digging into the reasons, it makes sense. Even to the point that we may be settling into the “new normal.”
There had been very little building of luxury homes since the market was glutted with foreclosures and short sales.
Now that we are 3 years into our “non-recession” recession, a huge chunk of the inventory has been cleaned out and at bargain basement prices! When bargain hunters cleaned out the inventory they also set the pricing for the luxury home market. With dwindling inventories, sellers being able to sell their existing homes, and a modest pent up demand for new product, builders are starting to gain confidence and restock the shelves.
Will homes appreciate again?
This is a trick question because many neighborhoods have never experienced depreciation. How does that happen? It is all about Supply and Demand as well as location, location, location. There are many, many neighborhoods that have been plugging along at 1-3% APPRECIATION PER YEAR. That’s right, appreciation, not depreciation.
For the majority, homes will begin to appreciate in value, but modestly … and from a new reset point (the way that they did over the past 40 years).
Worried about the value of your home? As we have discussed in previous blogs, the best future indicator of your home’s value is the Housing Inventory level in your market. Historically, housing inventory has predicted future pricing in the following manner:
Year over year, the Charlotte Region’s inventory levels were up in all price ranges below $250k. Above $250k, inventories have come down significantly from last year and are even below 2008 inventory levels. (Please note the extremely tight inventory levels in September 2007 at the height of the market – inventories during this peak season ranged between 2.5 and 6.2 months. We can see that the inventory levels at the peak were solidly in an “appreciating market”.)
In June I posted about the upper end market and its rebound. Since then, we’ve seen the market continue it’s up and down course. So what does the upper end market in our region look like today?
First, inventory of $750,000 and plus homes in the Triangle, Triad, and Greater Charlotte markets has decreased significantly in the past 12 months. In fact, inventory is at its lowest level during the past 24 months. New home inventory is not getting replaced so expect to see inventory numbers continue to decline.
Second, demand has increased 40% or more in these same markets since a year ago. Why? There are great values in the market as median prices have dropped 10% or more. There have been comments from Wall Street Journal, Karl Case, John Paulson and others that now is the smart time to buy real estate and the wealthy are heeding the advice and buying homes.