The Charlotte real estate market has managed to keep relative pace with the national market. Thanks, in large part, to an influx of new buyers seeking attractive job opportunities and affordable prices, homes have become a commodity in just about every real estate circle, and investors are no exception. In fact, Charlotte’s real estate appears to favor those with aspirations of both building a rental portfolio and rehabbing assets. The unique market indicators currently lifting the Charlotte housing market should help investors, at least for the foreseeable future.
Charlotte Real Estate Market 2020 Overview
- Median Home Value: $267,230
- 1-Year Appreciation Rate: +9.7%
- Median Home Value (1-Year Forecast): +8.5%
- Average Days On Market: 68
- Median Rent Price: $1,500
- Price-To-Rent Ratio: 17.81
- Unemployment Rate: 6.0% (latest estimate by the Bureau Of Labor Statistics)
- Population: 872,498 (latest estimate by the U.S. Census Bureau)
- Median Household Income: $60,886 (latest estimate by the U.S. Census Bureau)
- Percentage Of Vacant Homes: 9.56%
- Foreclosure Rate: 1 in every 9,306 (1.0%)
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The Impact Of COVID-19 On The Charlotte Real Estate Market
There isn’t a single market across the entire country which hasn’t been impacted by the Coronavirus. As recently as the first quarter of this year, in fact, fear and uncertainty surrounding the pandemic resulted in a stagnant real estate market, if not one that took a few steps back. When nobody was sure exactly how to deal with the Coronavirus, bottlenecks occurred at the office of mortgage underwriters who were understaffed, scared homeowners pulled their listings from the market, prospective buyers were hesitant to enter the homes of strangers, and unemployment skyrocketed.
These factors, and many more just like them, brought about the first significant obstacle the real estate sector has seen in nearly a decade. Every market experienced a setback, and Charlotte was no exception. It is worth noting, however, that the setback was temporary. In just a few months, real estate in Charlotte regained the momentum it lost in the first quarter. The main catalyst was the Fed’s decision to keep interest rates historically low. Now under 3.0% and expected to remain historically low, it’s never been cheaper to use institutional money to buy a house in Charlotte. More importantly, today’s rates are too attractive to pass up and have spurred many interested buyers.
Not only are buyers champing at the bit to take advantage of today’s interest rates, but there are likely more buyers in Charlotte than there were just a few months ago. If for nothing else, buyer confidence is improving with unemployment. While Charlotte’s unemployment rate is still higher than before the pandemic, it has more than halved from where it peaked at the onset of the Coronavirus. More people in Charlotte are employed today than in May, which means more prospective buyers can take advantage of the previously mentioned interest rates.
Buyers appear ready and willing to act immediately because they want to secure a low interest rate and because prices are expected to rise. The added interest from the reasons I just mentioned have created more demand, and competition is fueling price increases in the Charlotte real estate market. More importantly, Charlotte was already struggling with inventory shortages. Supply and demand issues remain a real problem for now, but homeowners appreciate the resulting price increases.
The trends taking place in the Charlotte real estate market are not unique; they are present in just about every major city across the United States. The impact of COVID-19 on the Charlotte real estate market may have actually been a blessing in disguise. While the pandemic has been nothing less than tragic, the reality is that it may have catalyzed real estate in Charlotte.
2020 Charlotte Real Estate Investing
Real estate investors have benefited from a lot of positive Charlotte real estate news. Real estate investors and homeowners across the country, in fact, have enjoyed several years of seller gains and attractive ROI (return on investment). According to Attom Data Solutions’ most recent Home Sales Report, in fact, the average home seller in 2019 “realized a home price gain of $65,500 on the typical sale, up from $58,100 last year and up from $50,027 two years ago.” Profits were calculated using the median purchase and resale prices and currently represent a 13-year high.
The report went on to say that profits “represented a 34 percent return on investment compared to the original purchase price, up from 31.4 percent last year and up from 27.4 percent in 2017, to the highest average home seller ROI since 2006.” Simply put, average U.S. home seller profits are higher than they have been in a really long time, and Charlotte is no exception. Following years of historical appreciation, homes are selling for more than they have in years past, which bodes well for the Charlotte housing market.
Is it a good time to buy a house in Charlotte? The answer will depend on what you hope to do with the newly acquired asset. The Charlotte real estate investing community, for example, has two indicators working in its favor: demand and affordability. With a median home value of $267,230, the Charlotte real estate market is in line with the national average. However, forward-looking indicators suggest real estate has more room for appreciation.
Whereas the United States expects median home values to increase by about 7.9% over the next 12 months, real estate in Charlotte could see values rise by as much as 8.5%. It looks as if homes are going to maintain their value (and improve upon it) shortly. However, the increase is likely due to factors onset by the Coronavirus, which begs the question: Is Charlotte a good place to invest in real estate? At the very least, one scenario is most likely to play out more than any other: Investors who get in now may benefit from appreciation and increase demand for their final products.
Charlotte real estate investors have turned to “flips” in the last year as one of their primary exit strategies. In fact, the Charlotte real estate market was the beneficiary of the third-largest increase in home flipping rates from 2018 to 2019. Rehabs and flips were up 44.1% in that span because of strong supporting fundamentals, according to Attom Data Solutions.
Real estate investors should look to capitalize on the local distressed property market. If for nothing else, distressed assets are more likely to award savvy investors with better profit margins. Subsequently, the most abundant source of distressed homes is those which are placed up for auction. Representing 65.5% of the city’s foreclosed properties, pre-foreclosures could prove to be the best source of deals for today’s investors. At the very least, marketing for distressed homeowners will place the odds of landing a deal with attractive profit margins in an investor’s favor.
However, it is worth noting that locating a deal in the Charlotte housing market is only part of the investing equation. Once found, investors will need to know what to do with a property, which begs the question: What has served the Charlotte real estate investing community as the most viable exit strategy? More importantly, what should real estate investors in Charlotte do with deals once they acquire them?
The answer is simple: any of today’s most popular exit strategies serve as a viable investment strategy for real estate investors. However, one stands out above the rest: rental properties. With prices higher than they have been in quite a long time, profit margins are slim. That’s not to say flipping and wholesaling can’t be done, but rather that the current real estate environment appears to favor long-term investment strategies.
While acquisition costs are up, investors have the ability to offset today’s high prices with years of cash flow by renting out their assets. In as little as a few years, investors may be able to justify today’s higher purchase with substantial rental income. Not only that, but landlords will be able to pay down mortgages with other people’s money.
Perhaps even more importantly, it’s never been cheaper to borrow money from banks. As recently as November, interest rates were as low as 2.77%, according to Freddie Mac. The lower borrowing cost can simultaneously justify buying at today’s higher prices and increase monthly cash flow.
If that weren’t enough, the city’s lack of available housing would increase the demand for rental properties. While more people are ready and willing to buy in the Charlotte real estate market, there aren’t enough homes to meet demand. As a result, even those who want to buy will be forced to rent, turning even prospective buyers into renters. Until more inventory is brought to the market, landlords will rest assured their properties have demand.
2020 Foreclosure Statistics In Charlotte
The Charlotte real estate market has a relatively high foreclosure rate, which may bode well for local investors. RealtyTrac, a nationally recognized real estate information company and online marketplace for distressed homes, has identified 999 homes in some distress: default, auction, or bank-owned. Contrary to national trends, the city has actually seen an increase in foreclosure filings. As recently as January, “the number of properties that received a foreclosure filing in Charlotte, NC was 31% higher than the previous month and 32% higher than the same time last year,” according to RealtyTrac.
Of the distressed homes identified by RealtyTrac, auction homes saw the largest year-over-year increase, jumping 180.0% from this time last year. After the increase, auction homes now represent 45.5% of all the distressed properties in the area. On the decline from last year, bank-owned homes now represent the smallest portion of distressed homes (13.0%). However, the remaining distressed homes aren’t technically in a state of foreclosure but are rather at risk of falling into foreclosure. Otherwise known as pre-foreclosures, these homes make up 41.5% of distressed property inventory.
Regardless of their current status, distressed homes represent a unique opportunity for investors in the Charlotte housing market. Distressed homeowners are much more likely to sell quickly and at a discount, which bodes well for investors who know exactly where to look. For a better idea of where the largest distributions of distressed homes are, here’s a list of the top five neighborhoods and their statuses:
Data provided by RealtyTrac
2020 Median Home Prices In Charlotte
The median home value in the Charlotte real estate market is in line with the national average—$267,230 and $262,604, respectively. However, it is worth noting that real estate in Charlotte has seen slightly more movement to get to where it is today. In the last year (October 2019 to November 2020), the median home value increased by 9.7%. The median home value across the United States, on the other hand, saw median home values increase approximately 7.9% over the same period.
Will real estate prices continue to rise in Charlotte? Moving forward, the market is expected to level out. While the Charlotte housing market forecast calls for an 8.5% increase in the next 12 months, the national forecast should jump by approximately 7.9%. The average house price in Charlotte will continue to rise as long as inventory levels stir up competition.
The Queen City has benefited from eight consecutive years of appreciation, but positive trends have extend beyond the latest recovery in more than a few of the city’s neighborhoods. For two decades now, these Charlotte neighborhoods have appreciated the most (according to NeighborhoodScout):
- S Kings Dr / S Independence Blvd
- E 3rd St / S Mcdowell St
- East Blvd / South Blvd
- New Life Theological Seminary / N Davidson St
- Hawthorne Ln / Belvedere Ave
- Grace St / Parson St
- Eastway Dr / Arnold Dr
- Central Ave / Saint Julian St
- Hawthorne Ln / Parkwood Ave
- Park Rd / Marsh Rd
The slightly faster pace may be due largely, in part, to the city’s latest propensity towards population growth. This city is one of the country’s fastest-growing metros, adding upwards of 100,000 people every year. “With a projected 23.7% increase in population from 2014-2025, the area will soon hold a total of 2.8 million people,” according to HomeUnion, Inc. The area’s low cost of living and an increasing number of job opportunities are giving more and more people each year a reason to call the Charlotte housing market home, which bodes incredibly well for the Charlotte real estate investing community.
Data provided by Zillow
Sellers currently maintain leverage over buyers across the whole city. If for nothing else, prices have appreciated at a faster pace than the national average. However, despite recent increases, it appears as if there is still room for appreciation on the horizon. That said, investors who acquire real estate can still expect home values to increase, albeit at a modest pace. Perhaps even more importantly, however, is the influx of interested buyers looking to call the North Carolina city home. With a growing population and expanding job market, more and more people are looking for a home, and well-positioned investors should be able to provide them with what they need.
Charlotte Real Estate Market: 2016 Summary
- Median Home Price: $190,300
- 1-Year Appreciation Rate: 5.9%
- 3-Year Appreciation Rate: 22.5%
- Unemployment Rate: 5.1%
- 1-Year Job Growth Rate: 2.7%
- Population: 836,973
- Median Household Income: $52,916
Charlotte Real Estate Investing 2016
Charlotte real estate news was generally positive in 2016. Median home prices for the Queen City reached $190,300 in the first quarter, compared to the national average of $215,767. What’s more, appreciation and employment rates remained on par with the average. The differentiator between this city and the rest of the country ended up being its long-term value, as total equity gains far outpace the national average on a long-term basis, which the Charlotte real estate investing community loved to hear. Home affordability outpaced the national average, making the Charlotte housing market one of the more affordable markets in the nation at the time.
The first quarter of 2016 put up very similar figures to the national average. Still, the North Carolina city did surpass the nation in several aspects, including home affordability, new housing construction, and employment rates.
The unemployment rate was 5.1% during the first quarter of 2016, slightly above the national average. Compared to the previous year, unemployment rates improved 0.3%, while the national average saw a 0.5% improvement. In terms of employment, the job growth rate was higher than the national average, growing at a rate of 2.7%, compared to 2.0% in the first quarter. At the time, the North Carolina economy was stronger than the nation’s, according to the National Association of Realtor’s State Economic Activity Index.
Charlotte Real Estate Market: 2014 Summary
- Median Home Price: $203,600
- 1-Year Appreciation Rate: 13.0%
- 3-Year Appreciation Rate: 33.0%
- Unemployment Rate: 6.5%
- 1-Year Job Growth Rate: 2.7%
- Population: 792,862
- Percent Of Underwater Homes: 21.5%
- Median Income: $51,251
Charlotte Real Estate Investing 2014
Large-scale investors in single-family rental homes developed a reputation for scouring the city for opportunities. However, real estate investors had to learn how to deal with increasing home values, even in 2014. On average, homes were worth $203,600. However, despite continued appreciation, homes were below the national average. Homes across the nation appreciated 4.6% over the previous year, resulting in an average value of $212,267. Over the same time, homes appreciated 13.0%. By all accounts, Charlotte real estate news was positive in 2014.
Despite lagging behind the national unemployment rate in 2014, the local economy a bright spot for the entire housing sector. At the time, the city had an unemployment rate of 6.5%. The national average was 6.1%. However, local employment growth was strong compared to other markets. In just one year, the city improved its unemployment rate by 2.2%. Driven primarily by the trade, transportation, and utility sectors, Charlotte real estate trends buoyed an economy on the brink of surplus.
Charlotte Housing Statistics in 2014:
Charlotte County Map:
Have you thought about investing in the Charlotte real estate market? If so, what is it about the Charlotte real estate investing community that has you interested? We would love to know your thoughts on real estate in Charlotte in the comments below:
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