Charlotte Real Estate Insider

On August 26th, I attended a presentation given by the deputy chief economist for Freddie Mac. I thought I would share with you what I learned. Some of the keys points made by the speaker are below:

- Since Dec ’07, 227,000 jobs have been lost in the state of North Carolina. 62,000 (27%) of them in Charlotte. Prediction is that the Charlotte job market will rebound quickly due to its “growth phase” status and its success in winning business relocation.

- Interest rates continue to be at 50 year lows (around 5%). These rates will be gone (higher) by this time next year. We should be fortunate to be offered 30 year fixed mortgages – this product is only available in two countries, the US and Denmark.

- Single family home building has fallen 80% nationally since the 3rd Qtr ’05, the lowest level since 1946. Single family home building is down 77% from its peak in North Carolina and down 87% in the Charlotte metro area. New construction production was reduced quicker in Charlotte because large production builders saw the drop in other effected areas first and were more proactive in pulling the plug here in Charlotte; thus helping us to better manage inventory.

- Nationally, there is still a large inventory surplus in the market but its down about 30% since 4th Qtr ’08.

- Even in the current market, Charlotte home prices are up 24% on average since 2005.

Keep in mind that some of these stats are national indicators and real estate performance is still locally driven. However, we are in unprecedented times where global economic factors have had a broad effect on every market and every consumer. Overall, I remain very positive about the Charlotte housing market.

It would certainly be nice to see one of these high rise condos actually reach completion. Understandably, buyers are hesitant to put any money down on incompleted projects due to the risk of developer bankruptcy and subsequent loss of  their downpayments; as has happened on other condo projects. The Vue has seen a slow down in units sold largely due to this buyer concern and overall market concerns. If The Vue could near completion by next summer, I believe they would see a surge of buyer activity with its pending completion and hype surrounding the grand opening.

That said, less inventory is not necessarily a bad thing in this market but I believe for the overall image and growth of Charlotte, opening of The Vue would be a great  milestone.  

Tower was one of the few remaining bright spots in uptown’s faltering condo market.

By Kerry Hall Singe
ksinge@charlotteobserver.com

Posted: Tuesday, Sep. 01, 2009

Construction on The Vue, a 51-story uptown condo tower that kept on building as others stalled, will be stopped as of today because the developer hasn’t paid its bills, according to an e-mail sent Monday by the project’s general contractor.

It’s the latest sign of trouble in the center city condo market, where sales have plunged in recent years. The delay also illustrates the real estate market’s lingering weakness as lenders scrutinize projects more closely than in the past.

The e-mail to subcontractors, signed by contractor R.J. Griffin & Co.’s senior project manager and obtained by The Observer, said Griffin had not been paid for work done in July and, while it has been working with the owner and lenders to resolve the matter, œto date we have been unable to reach a resolution.

As a result, the contractor directed subcontractors to stop all work on the $275million-plus project effective at 12:01 a.m. today, according to the e-mail.

Calls to R.J. Griffin’s Charlotte office were not returned. The Vue’s owner, Chicago-based MCL Cos., declined to talk with The Observer.

At the work site, at Fifth and Pine streets, workers streamed out of the tower at the shift’s end Monday, carrying an assortment of items, such as ladders, buckets and drills, that workers often leave overnight. Workers with four subcontractors, and half a dozen Griffin employees, said they had been told that work might stop because of unpaid bills.

Employees also removed R.J. Griffin signs from fences and used cranes to hoist portable toilets and other heavy equipment to the ground from The Vue’s upper floors.

Michael Smith, president of Charlotte Center City Partners, said MCL’s president and CEO, Dan McLean, told him the project is not shutting down and that it is œworking through issues with lenders right now. Smith said he spoke to McLean on Monday afternoon, after The Observer called to ask about The Vue.

The condo tower is an important project for Charlotte, Smith said, adding McLean is an œexperienced developer and œI have confidence he’ll be able to work with his partners to bring a great product to our center city.

Two years ago, uptown Charlotte seemed about to burst with high-rise housing. Plans were announced for up to 20 projects.

Today, half a dozen high-rise residential projects have been completed inside the Interstate 277 loop. A 50-story tower planned for the EpiCentre has been halted by legal problems. The hulking, rusting skeleton of The Park, a proposed 21-story luxury condo tower that went into foreclosure before being finished, has become an unwelcome landmark.

As projects faltered, uptown promoters have pointed to work continuing on The Vue’s glass façade as proof that the uptown condo market, while weakened, has promising bright spots. Between 55 percent and 60 percent of the tower’s 409 units are under contract, the developer has said. The units are listed for $319,000 to $2million-plus. The company still plans to celebrate the building’s topping out this month, Smith said.

The developer had said purchasers were expected to start moving in next summer. The building’s amenities were to include a 3,000-square-foot workout area and a 1,000-bottle wine cellar. An outdoor deck would include a heated pool, tennis court and dog-walking area.

In the Charlotte region, home sales are starting to stabilize, but it’s mostly lower-priced houses and condos that are selling. Developers, meanwhile, are struggling to refinance as loans come due. Lenders have become more strict in how much money they will lend.

At The Vue’s uptown sales center Monday, sales associate Rob McCrorey said he was told to œstand pat and that his team was continuing to sell units.

œWe’re in no worries as of yet, he said.

One subcontractor told the Observer he was due more than $100,000 for two months of work. He said he went to the site Friday to pick up his paycheck only to be told there wasn’t any money. Workers said they did not want their names used because they didn’t want to lose future work with the contractor.

Some subcontractors said they haven’t noticed problems. Plumbing contractor Mitchell Mechanical, for example, has been paid regularly, company Vice President Jeff Jones said. As of late Monday afternoon, he said he was optimistic about the work being finished.

Based in Atlanta, R.J. Griffin has built nearly 26 million square feet of multifamily residential space in the Southeast since 1992, according to the company’s Web site. It is also building a $138million, 50-story tower in Atlanta.

MCL specializes in developing, building and marketing residential and retail centers in urban markets and has projects from New York to Las Vegas.

A work stoppage at The Vue would not be MCL’s first project to hit snags.

In June, the developer said an Atlanta condo project, the 21-story Skyline at Lindbergh, was being put on hold until financing could be secured. Staff writer Kirsten Valle and staff researcher Maria David contributed.

Please click on the link below and take a look at the RISMedia article “Top 10 Cities for Business”. More great news for Charlotte!

http://rismedia.com/wp/2007-09-24/top-10-cities-for-business-from-marketwatch/

We are having a strong year here in Charlotte. Yes, we are being effected by national factors outside of our control particularly the woes of the mortgage industry. These factors will have an effect on short term performance, however, our appreciation is up vs. last year and we are on pace to have our second best year in # of units sold (’06 was out best year).

As a follow up to my last update, I thought I would share some figures to add some perspective to our actual results vs. what you hear in the media. Below are the total number of singles family homes (homes & condos/townhouses) that were sold through the Charlotte MLS in the Jan-Aug time period from years 2004-2007.

2004: 21,722

2005: 25,370

2006: 29,786

2007: 28,892

So, we are currently on pace to have our second best year in units sold. ’06 was a record year so to be as close as we are to last year’s levels is encouraging. Not many markets throughout the country have performed like Charlotte or are projected to see such high levels of future growth.

There has been much in the news recently about the current state of affairs in the banking/mortgage industry. I want to assure you that fundamentally, the Charlotte market is still very healthy and trending above national. We continue to see individual/personal as well as corporate relocations to the Charlotte market. Overall, our year over year appreciation rate is in the 5% range. Unfortunately, we are encumbered by national factors that are out of our local control. As I have previously addressed, one of these factors is the inability of people moving to Charlotte to sell the homes where they are moving from thus forcing them to sit on the sidelines. Other markets throughout the U.S. have felt a significant pinch over the past year and that has effected Charlotte from a demand standpoint.

The other major factor is the state of the lending industry. Due to the increased national foreclosure rate and the inability of home owners to repay their loans, many lenders have suffered financially and have in fact filed for bankruptcy. Consequently, the lending community has quickly moved to tighten up on their lending qualifications in order to minimize their future risk. So, many potential home buyers who were able to qualify for loans 45-60 days ago under less restricted guidelines now cannot qualify due to the heightened standards. This has contributed to the reduced demand by reducing the available pool of buyers.

In time, the lending community will begin to loosen up on their qualification guidelines but it will be a very long time, if ever, when we see things go back to the loose standards that we have become used to over the past few years i.e. 100% financing, aggressive investor loans, etc.

Despite what you hear in the media, the sky is not falling. Its a great time to buy in Charlotte. Interest rates are still near all time lows and we may see further reductions in the short term. From a selling standpoint, although homes may take a bit longer to sell, only strong and qualified buyers will be vying for homes. Proper pricing and impeccable property condition are extremely important in today’s market. Charlotte is a destination city near the top in growth and expansion.

As we all know, job growth is a tremendous factor in market growth. Take a look at the article featured in Expansion Management below  ”Top Cities for Business Attraction” where Charlotte ranked # 2 in the nation on the “city list” and Mecklenburg county ranked #1 on the “county list”. This is outstanding news for Charlotte!

Many people have asked me about the recent Charlotte Observer article “Slumping Housing Market Hits Charlotte”. Yes, we have seen a slight slow down in sales volume, however, this is largely due to economic factors outside the Charlotte area. As the article correctly points out, the biggest detriment to our housing market is the inability for people relocating to Charlotte to sell their current home. For example, there are many people who want to move here from Florida but since the market has cooled in that area they are not able to sell their existing homes. Therefore, they cannot buy a home here in Charlotte thus effecting our volume. This is an economic factor outside of the Charlotte economy that nonetheless effects us locally. Although our volume has declined, our overall appreciation has increased by over 4%.

Remember that any slowdown that we have seen is the result of outside influences. The link above says alot about our local economy. With job growth comes more people and more people create greater demand for homes…

Welcome to Jim Crowley’s Blog! This blog will provide you with valuable information, tips, and general insight into the real estate market in Charlotte.