That is called gravity. Charlotte’s real estate market stopped defying it with an official fall in home prices for the first 12-month period since 1991. Yet still the happy talk continues.
Wachovia economist Mark Vitner has become the official house organ of the Uptown crowd, still touting Charlotte’s exceptionalism.
“Charlotte is still holding up better than any other market. I think our economy is very resilient,” Vitner tells the Uptown paper of record.
As we’ve pointed out for months now while holding that local single-family housing is headed for a 10 to 20 percent correction, comparisons to what is going on in other markets is irrelevant. Especially if you are going to ignore the re-lo impact on Charlotte’s market, as Vitner and virtually every real estate cheerleader in town does.
Charlotte was — and is — known nationally as a re-lo heavy market. In recent years new home builders built on spec to supply a seasonal cushion for corporate transfers into town. Better still, many of those folks transferring in were coming from Massachusetts, California, Florida, DC, or New York. Places with much higher real estate values — and often much higher property taxes. Buyers were drunk with home-buying cash. It was a perfect storm for QC real estate.
That is over. For now. Perhaps forever.
Those buyers who are showing up from out-of-town probably just took a loss on their previous home and are not in a spending mood. This is a drag on the Charlotte market, particularly at the high-end. Then there is the ongoing credit correction, which has greatly reduced the amount of house any given income segment can purchase. This is another macro issue that Uptown cannot spin around. Oh, $4 a gallon for gas. Another macro squeeze on household budgets.
Then we get to personal income, actual jobs, which is where Charlotte — up until now — has been strong. But should Wachovia get bought, shed 3000 to 5000 jobs locally or US Airways just tap out and kill another 5000 jobs, or how about both, things change. That is a gloom-and-doom scenario to be sure, but not impossible. And people understand that and adjust their economic activity accordingly.
For these reasons, continued downward pressure on local housing market should be expected for the next six to 12 months. At least.
Bonus Observation: A contributory factor in local housing weakness has got to be financial sector woes which have nuked all the six-figure bonuses for the bankers and brokers. That was trade-up or renovate money and it is gone. Has got to be felt downstream by contractors as well. From the looks of it South Charlotte has compensated for the loss of new custom pools, kitchens, and laundry areas with huge-ass “hybrid” SUVs.
Update: Here’s a fun headline from Bloomberg, Texas Real Estate Slump Lets Mexicans Take It Back. That’ll end well.
