Posted by: Todd Long | January 21, 2008

NEW HOMES SALES AFFECT THE RESALE MARKET

Between the years of 2002-2005 people were moving into the Charlotte region at break neck speed.  We didn’t see a crazy run up in home prices thanks to the builder who kept supplying a steady stream of new homes for the market.  It seems elementary when you think about it, but in places were there is very little land to build new housing near the economic center of metro areas you have to have one family move out of a home for the family that is moving into town to have a home.  This causes a price run up. When you have a fair amount of land left to build housing, such as is the case in the Charlotte metro area or up and coming economic centers like Mooresville, NC builders supply homes to take on the load of new families coming to the area.  Now not everyone buys a new construction home of course.  Some people move to this area and need something immediately and can’t wait for a home to be completed.  Some people prefer a resale home for a variety of reasons and you do have investors and speculators buying as well.  All of this causes steady appreciation in a perfect world.

As we all know, the world has not been perfect as of late.  We have seen a steady rise of inventory because the same number of houses have been coming on the market in the Charlotte Metropolitan area but there have not been the same number of buyers.  The good news is the builders slowed down the new housing starts in 2007 by about 25% nationally.  In the Century 21 Hecht Realty market area which basically covers Center City Charlotte to the Northern part of Lake Norman the new housing starts have saw an average of 390 units started per month in 2006 and it 2007 that average is down to about an average of 300 units.  That hit a low in October and November of 2007 with about 240 units per month coming on the market.  Despite builders doing there part to control the rise of inventory buy cutting back new home starts we have still seen a rise in the time it takes to sell a new home in this market area.  Typically there was about 6 months of inventory in 2006 for new homes and in 2007 that has increased to about 9 months of inventory on average.  If the builders would have kept building at their previous speed we would have 12-15 months of inventory in new homes and the resale market. 

I still think we will see this inventory start to decline by this summer as buyers continue to move in to the Charlotte and surrounding areas like Mooresville, Cornelius, Huntersville, and Denver, NC for jobs and to be close to family that has previously relocated to the area.  On top of that, mortgage rates are still very low and the cost of buying a home in this area is well below the national average. 

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