This February, home prices in Charlotte jumped by 6.1 percent over 2016’s number. According to Standard & Poor’s CorLogic Case-Schiller national home price index, home prices across the nation have risen by 5.8 percent from February 2016 to February 2017, and Charlotte is ahead of the pack in terms of price increases. For real estate agents, this is great news, as it signals what is believed to be the end of the real estate housing crisis. For buyers and sellers, it’s also important information to help them make strategic decisions in the coming months.
Interestingly, in Charlotte, it’s creating a new problem. The number of homes hitting the market isn’t matching the number of interested buyers, and when demand outpaces supply, prices continue increasing. Why is there a shortage of homes? Here are three potential reasons.
1. Baby Boomers and Millennials Competing in the Same Market
One of the first reasons there aren’t enough homes for the demand is due to the high number of baby boomers in the market, and these baby boomers are taking their time to downsize. Typically when the older generation hits a certain age, they move out of their existing home and into a smaller property often in a low-maintenance community. The Baby Boomer generation isn’t making this move quite as early as prior generations.
Add to this the fact that the Millennials are quite interested in becoming homeowners, and you have a market flooded with homeowners. Many Millennials are in their first homes, and haven’t yet gotten the desire to move. This is eating up the inventory and limiting the number of newly listed homes.
2. Builders Still Recovering
New constructions are happening in Charlotte at a faster rate than other communities, but the reality is that today’s home builders are still in recovery mode after the recession. With inventory they’re still selling off and hesitation about jumping in with both feet, builders are not contributing the thousands of new homes that past markets have had. Those that are offered are sold quickly as the glut of buyers needs something to purchase.
3. Stronger Lending Practices
Finally, stronger lending practices are making it hard for new buyers or buyers with credit problems looking to upgrade their home. This means that fewer first-time buyers are hitting the market, but it also means that more people are staying in their homes rather than selling and moving to something larger. Eventually, more stringent lending criteria coupled with higher mortgage interest rates may cool off demand, but for now, homes are selling in Charlotte almost as quickly as they are hitting the market.
If trends continue, buyers and sellers can expect to see continued increases in prices throughout the summer selling season. Agents should direct their clients accordingly to help them make strategic decisions in the days ahead.