Home sales Mecklenburg county continue to fall, now for a third consecutive month, when compared to sales of the same period a year ago. While this is the second time that this trend has occurred (January through March saw sales volume declines as well), this is the first time that the consecutive declines have been double-digit. In September, home sales volume fell 13% (a trend that some blamed on hurricane Florence, which had very minimal impact in the Charlotte area) and now in October, home sales are down 11.3% to 1,513 sales.
Commensurate with a decline in home sales, home prices continued to show gains as the median home price in Mecklenburg county rose 7.8% to $248,500 with the average selling price increasing 8.4% to $308,874. It’s easy to point to the increased home prices and think that possibly everything is okay and that the volume could not be sustained (and there’s some validity to that). However, when you dig back a decade ago to the last time we had a housing shift in Charlotte, year-over-year sales volume fell in 2007 -23.1%, 2008 -39.47%, rose in 2009 to 25.9% but fell again -34.76% in 2010. During that same period, year-over-year average home prices rose from 2006-2008, fell in 2009, rose slightly in 2010 and slumped again in 2011. Median home prices didn’t start falling until 2008. Prices were indeed falling during this time however the decline in price did not appear in area-wide statistics for more than a year later.
Additionally, the impact of slower sales is resulting in (FINALLY) an increase in the month’s supply of housing inventory. Since 2012, the Charlotte housing market moved out of a historically balanced market (4-6 months supply of available homes) and has hovered at slightly more than 2 months supply since late 2017. Last month, housing inventories climbed 4.3% to 2.4 months, which is still absurdly low considering the population growth in Charlotte that’s occurring annually. Also, homes are staying on the market a little longer than a year ago, with the average time a home is on the market before receiving a contract is 36 days.
So what’s happening?
Well, a few things are contributing to the decline in home sales. First is the impact the iBuyers are having on the Charlotte market. iBuyers (investors that purchase homes for immediate resale like Opend*or and OfferP*d) acquired at least 77 homes last month in Mecklenburg county however they do not record their acquisitions in the MLS. If we use the figure of 77 units (and there are possibly more depending on how these groups operate), the percentage year over year decline drops to only -6.8%. With more iBuyers entering the market soon (Zillow among them), their sales will continue the decline trend until such time as they start adding their purchases into the MLS.
Also, rising mortgage interest rates are starting to factor into purchasing ability. In hindsight, mortgage interest rates were allowed to remain low for far too long, allowing home prices to escalate too quickly and now things are correcting. According to Freddie Mac, 30-year fixed rate mortgages hit a 7 year high last week at 4.94%. In practical terms, that would translate into a 5.15% mortgage for a consumer.
So yes, the Charlotte housing market is correcting from the run up in home prices over the last few years however the decline in home sales are being exaggerated by investors, who are not entering their purchases into the regional multiple listing system.