By Susan Shackelford

The big message in the 2021 State of Housing in Charlotte Report is home prices and rents have risen dramatically during COVID-19, exacerbating an affordability issue in the market.

The average median price for a single-family, owner-occupied home jumped 16.3 percent from September 2020 to September 2021, said Dr. Xongqiang Chu, the director of UNC Charlotte’s Childress Klein Center for Real Estate, which prepared the report. Released at a virtual housing summit on November 17, the report focuses on an eight-county Charlotte region made up of Cabarrus, Gaston, Lancaster, Lincoln, Iredell, Mecklenburg, Union and York counties. Canopy Realtor® Association is one of six sponsors of the report — now in its third year — and supplies Canopy MLS data as part of the research.

Increased prices for single-family, owner-occupied homes is especially pronounced when comparing a month right before the pandemic with a month well into it. From January 2020 to September 2021, the median home price rose from $273,500 to $366,314 — a whopping 34 percent increase, according to the report. For housing-related costs not to exceed 30 percent of annual income, a benchmark for affordability, a buyer needed an annual income of $79,014 to afford a median-priced home in the market in 2020, the report said. The income amount was 4 percent higher than in 2019. Buyers at the lowest end of the for-sale market had it even worse. To afford a home in the lowest 10 percent of the price market, or the 10th percentile, a buyer needed an annual income of $50,617 — an 8 percent income jump over 2019.

Furthermore, economic pressure on these and other buyers is expected to increase in the near future as mortgage rates, which have been at historic lows, are expected to tick up. Driving recent price escalation is a simple matter of demand outpacing supply, Chu said. “Inflation is low, people want bigger houses (because of working/learning from home during the pandemic) and out-of-state buyers are moving here from high-cost areas,” he said of demand. “At the same time, we have limited supply, which was not just a problem during COVID. We had the same problem before COVID — the price growth was there. The annual growth rate in house prices has been steadily increasing. COVID just made things a lot worse in that regard.”

Days on Market for single-family, owner-occupied housing have dropped precipitously during the pandemic. While inventory was tight in January 2020 at 22 days, it plummeted to just three days in both June 2021 and July 2021. “What we are experiencing now is historical,” Chu said. “We have never seen this before.” The same could be said for homes being sold for above listing price. In June and July of 2021, 59 percent of single-family, owner-occupied houses fetched more than the listing price. “This tells you how strong demand was during Covid,” Chu continued. “This is also historical. We have never seen this number in history.” Furthermore, homes in this category at the low end of the market — under $150,000 and under $300,000 — have been a small and shrinking part of the mix, the data show, making it hard for many first-time buyers to afford a home.

In 2021, from January through September, homes under $150,000 represented only 4.39 percent of the market; under $300,000, 35 percent. Both figures reflected a marked decline from 2020 at 6.53 percent under $150,000 and 49 percent under $300,000. Chu noted condo and townhouse sales are also mirroring price increases of single-family, owner-occupied homes. Condo and townhome prices rose 16.4 percent from September 2010 to September 2021, roughly the same increase as single-family homes during the same period. For Days on Market, the condo and townhome market dipped to an average of only three days in May 2021. And units were selling at 50 percent above the asking price, on average, in June 2021.

In the rental market, prices have been increasing as well. In multifamily, median rent rose from $898 in 2010 to $1,390 in 2021, representing a 54.8 percent increase. Notably, the rise in 2021 was responsible for one third of the increase, the report said. Interesting multifamily breakdowns show the region added 114,348 units from 2000 to 2021 for a 104.5 percent increase over that time period. The figures capture data primarily for large apartment complexes. Mecklenburg is home to 73 percent of the region’s multifamily units, and one- and two-bedroom choices make up 84 percent of the region’s multifamily stock.

Similar data patterns held true with single-family rentals as with single-family and other owner-occupied housing (condos/townhomes). Median monthly rent for single-family rentals increased 26.7 percent from January 2020 to September 2021 — rising from slightly below $1,500 to nearly $1,900. The annual growth rate in single-family rents went up 11 percent from September 2020 to September 2021. Days on Market for these homes was 35 in January 2020 and only seven in both June and July of 2021. Chu sees the climb in rental rates as evidence prices of owner-occupied homes (single family, condo/townhomes) are not inflated. “It’s real demand,” he said. “I don’t believe this a bubble,” Chu continued. “It (the market) is driven by strong demand and extremely limited supply. Supply is extremely tight. I do not think prices will decrease but will continue at a high rate unless we can do something on the supply side.”

Demand is another story, he said. “I don’t think we can do much on the demand side, and I don’t think we should be doing anything on the demand side,” he said. “We want Charlotte to grow. The only thing we can do to alleviate the housing affordability problem is trying to solve this from the supply side — increase the supply of housing, (all sizes and types). Anything can help to accommodate the growth that Charlotte deserves.” He believes double-digit price increases for single-family and other owner-occupied housing will continue into the near future, but expects the rate of increase to slow from what has been experienced during the pandemic.

Asked how he sees the Charlotte market compared to competitor cities given the housing picture, Chu said: “Charlotte is still competitive — we attract business and people moving to the area. If we allow this trend to continue, at some point, people will say, OK, moving to Charlotte doesn’t make sense because housing there is really expensive. … We want Charlotte to grow, but we want Charlotte to be affordable.” With supply, Chu noted the region still has a lot of land. “We need to spend some time to make that land available for development, but that is easier said than done,” he said. He also noted he doesn’t believe foreclosures are a major factor in the market. “As long as house prices are increasing, why do you want to leave your house?” he said. “The worst thing is that if you can’t make the payments, you can sell your house.”

After Chu’s remarks, Canopy Realtor® Association President David Kennedy was part of an industry panel discussion. Reflecting on the report, Kennedy said: “It is watershed market, and the turning point is based on the nationwide demand to live in Charlotte and the flexibility of people to live and work here. The lowest 10th percentile of the market is especially challenged.”

Read the 2021 State of Housing in Charlotte Report