NAR economist: Charlotte real estate prices could stabilize
Yun cites downward trend in inventory
Published: November 5, 2011
Time posted: 9:10 am
Tags: Charlotte Regional Realtor Association, Lawrence Yun, National Association of Realtors
There might be price stabilization in the Charlotte real estate market soon, the chief economist for the National Association of Realtors said this week.
Lawrence Yun, speaking Tuesday to 236 real estate professionals during a Charlotte Regional Realtor Association event, said new housing starts have plummeted from a 2007 high of 25,000 in Charlotte to levels not seen since the early 1980s, when mortgage interest rates were at 18 percent.
In 2011, about 5,000 new housing starts are expected in the Charlotte region, the same amount as last year, he said.
That downward trend in inventory is a hopeful sign that price stabilization is nearing, he said.
But he warned of a potential housing shortage in two to three years if homebuilders continue to be denied construction loans. U.S. builders have suffered a 70 to 80 percent decline in business, he said.
He said an increasing number of builders say they are seeing demand for new housing but banks refuse to finance new construction.
There is a growing population in the U.S., but there has not been an increase in household growth, largely because more people are living with family and roommates, he said. Yun said that will eventually change as consumer confidence grows, leading to more demand for housing.
Couple that with rising rent prices that will push some people into homeownership, and there could be a housing shortage if financing remains hard to find, he said.
Nationally, homeowners who bought in 2009 and 2010 after the Great Recession began have very low default numbers, he said. After 18 months, homebuyers who bought in 2009 had only a 1.2 percent and 1.1 percent default rate on their mortgages backed by Fannie Mae and Freddie Mac, respectively. Yun said 2011 was trending to have similar default rates.
That’s in stark contrast to homebuyers who purchased in 2007, when after 18 months 28.7 percent of Fannie Mae buyers defaulted and 22.3 percent of Freddie Mac buyers defaulted, he said. In 2008, Fannie Mae-backed loans had a 12.6 percent default rate and Freddie Mac had a 13.7 percent default rate, both after 18 months.
Yun also said cash-only real estate deals were at an all-time high in the U.S. and accounted for 30 percent to 35 percent of all transactions. That can be attributed to difficulty getting financing and investors who want to hedge against future inflation and housing shortages, he said.
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