Boom, Bust … Or Neither?

CNN, The New York Times, Diane Sawyer, Newsweek, and every other national media outlet have told us the housing market's about to collapse. But with homes selling and builders building, Charlotte's been able to ride the wave and come out on top of the declining national real estate scene. So the million-dollar question is this: Is Charlotte booming or busting? Turns out, it's neither


It's a typical Saturday morning for Amanda Cash: she brews a pot of coffee, reads the paper, and then makes her weekly trip to the supermarket, where she wanders the aisles, tossing apples, peanut butter, and eggs into her cart. All the while, one thought occupies her mind: "Am I ever going to sell my house?"

 Carolina Multiple Listing Services, Inc. area and sub-area map
In the Zone: Carolina Multiple Listing Services, Inc., which provides services to more than 9,000 member Realtors, divides Mecklenburg and surrounding counties into areas and sub-areas. Our real estate chart on page 78 is based on the areas identified on the above map as well as the sub-areas, which can be found at


Cash put her 2,500-square-foot, four-bedroom home in south Charlotte's Sardis Forest neighborhood on the market in August. Since then, there have been more than twenty showings, open houses, and newspaper ads. She's even dropped the price by $10,000. But still, no offers.

"It's hard to stay optimistic when the house has been on the market for six months," she says. "I just want to be done with it."

Cash is not alone. Millions of Americans are trying to sell their homes in a real estate market that's become increasingly unpredictable. National headlines decrying the inevitable burst of the housing bubble, the subprime meltdown, and skyrocketing foreclosure rates are creating panic among sellers and homebuilders.

Compared to the rest of the country, though, Charlotte is faring quite well. In fact, unlike the so-called "bubble markets" such as Las Vegas where real estate is ready to implode, Charlotte is faced with a minor blip in an otherwise strong market. Consider this: in Miami and Phoenix, declines in housing prices have reached double-digit percentages over a one-year period, and in cities like Atlanta and Dallas where prices were rising, home values fell at the end of 2007. Charlotte, on the other hand, is sitting very pretty in comparison to the rest of the country.

Home values here increased by 4.3 percent from October 2006 to October 2007.

But the biggest thing allowing Charlotte to potentially come out on top of an otherwise tumultuous national market is the fact that housing prices here have risen slowly and steadily instead of skyrocketing like they did in Las Vegas, Phoenix, and Miami, where price increases had been in the double-digit percentages since 2005. In other words, without a major bubble, there's nothing really to burst.

More positive factors in the local market: the cost of living in Charlotte remains relatively low, more than 50,000 people relocate to the metro area every year (up from 39,000 in 2000), and business is booming: 1,326 companies opened or expanded operations in Charlotte in 2007, a record number.

But in spite of the obvious positives, no matter how you spin it, Charlotte is still affected by the national downturn.

"In Charlotte, there is widespread paralysis by analysis," says Pat Riley, president and chief operating officer of Allen Tate Companies.

"People are reading about the national housing woes and deciding to wait before making a move. That is one of the biggest problems in our real estate market right now."

In the past, homeowners were pulling equity out of their homes in higher-priced markets and moving here, according to Matt Martin, an economist with the Charlotte branch of the Federal Reserve Bank of Richmond. Now, homeowners who can't sell their homes in other parts of the country aren't going to be able to buy in Charlotte.

Which is exactly what happened to Rhonda Dupras, who has been waiting, not so patiently, to buy a house here. She has spent the last twenty-two months trying to sell her home in Katy, Texas, and even lowered the price by close to $30,000. Still no takers. The problem: the market in Katy is slow and the number of foreclosures in her neighborhood has left sellers like Dupras, whose homes are listed at market value, not below, vulnerable.

"I was getting a lot of showings, but as soon as prospective buyers drove through the neighborhood, they noticed all the houses that were in foreclosure and knew that they could get a better deal," says Dupras.

Tired of waiting for an offer on her home, Dupras decided to move to south Charlotte and rent out her house in Houston. Even though the tenant rent covers her mortgage, Dupras still can't buy a home in Charlotte. She needs the equity from her Texas residence for the down payment and is fearful that if the renters decide to move, she'll be stuck with two mortgages.

Sellers aren't the only ones feeling the pinch. Developers all over Charlotte are holding off on building spec homes, and building permits for single-family homes were down 22 percent over the past year. Rather than constructing spec homes, builders are putting more emphasis on selling existing inventory, says Brian Pace, a partner with Pace Development Group Inc. and president of the Charlotte Homebuilders Association.

"Too many builders have been burned after contracts have fallen through because buyers can't sell their homes in other markets," explains Pace. "It's gotten so bad, some builders have stopped taking contingent contracts from out-of-state buyers.
"Builders have to move their inventory off the books," he says. "They're cutting prices and making deals with buyers to cover closing costs, slash interest rates, or throw in extras like stainless steel appliance packages."

Pace estimates that in existing developments, prices have been cut by at least 10 percent in the hopes of boosting sales.
In older developments, especially those in high-demand neighborhoods like Elizabeth, Dilworth, and Myers Park, the real estate market is holding its own. Median sales prices in Charlotte were up 11 percent from 2006 to 2007, and homes are still selling relatively quickly even though, on average, homes in Charlotte were on the market for ninety-seven days in January 2008, up from eighty-one days a year earlier.

"Sellers might have to offer a home warranty or buy down the interest rate and they might not get what their neighbor got last week or last year but it's still going to sell," says Riley.

There's more to fixing the area's flagging real estate market than simply selling houses. The biggest problems: high foreclosure rates, struggling banks, and loan availability.

Charlotte is suffering from higher-than-average foreclosure rates, particularly in a few pockets of new development in the east and southwest, which affects property values. The national foreclosure rate jumped almost 80 percent from 2006 to 2007; in Charlotte, that increase was 113 percent in the same time period, according to the national tracking service RealtyTrac.

The subprime meltdown has also put a strain on financial institutions (Bank of America and Wachovia announced layoffs earlier this year; Charlotte likely won't see the ripple effects of the banks' struggles until later this year) and caused another, perhaps bigger, problem: buyers are having trouble qualifying for loans.

"Banks are irrationally reluctant to approve mortgage loans at the moment, regardless of your credit score or the amount of your down payment," explains Chuck Graham, principal at Newton Graham Consultants, a management consulting firm for the home-building industry.

The effects of tightening loan restrictions have been especially acute in the starter-home market. Typically, first-time homebuyers are the ones taking advantage of creative financing programs. As these programs disappear, aspiring homeowners are being forced to rent homes, preventing the housing market from improving.

"There are only a few things that will have a positive impact on the real estate market, the most
significant being the strengthening of the national economy," says Mike Helmar, an economist with Moody's "It's not something that's going to happen overnight; it's going to take some time to climb out of this slump."

That's not news that Cash wants to hear.

"Right now, I have a positive attitude and I believe that everything will work out," she says. "But if my house is still on the market in another six months, I might be in tears."

While Cash is not alone, the truth remains: as the national real estate market deflates, Charlotte looks to be holding its own. "It's not so much that we're wonderful," says Graham, "but that the rest of the country is in bad shape."

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