Population growth, owners holding onto homes triggers home inventory shortage

Realtors and buyers are becoming more resourceful and creative in order to find properties in light of a continuing dearth of housing inventory.

Realtors are dealing with a 3.9-month housing inventory by having open houses, like the one pictured here in East Charlotte, knocking on doors and taking other steps. Photo by Mark Abramson.

The area’s growth and homeowners’ reluctance to sell have caused a shortage in available houses for sale, resulting in a 3.9-month inventory on the market.

Realtors have begun going door to door to find sellers, mailing flyers to homeowners, and organizing more elaborate open houses, said Nancy Braun, owner of Showcase Realty. Her company’s open houses, which include raffles for gift cards, a mortgage professional to qualify buyers, food and plenty of signage, draw homeowners in from the neighborhood, and that may encourage those people to sell their homes, she said.

“We have to be creative. We have to search out properties not listed on MLS,” Braun said.

The inventory is the lowest it has been since at least January 2005, when the Charlotte Regional Realtor Association (CRRA) started tracking it.

It has been there for much of the year, creating a seller’s market. An inventory of six months is considered to indicate market equilibrium. The Charlotte area’s inventory is well below the national level, which was at a five-month supply in June, the National Association of Realtors reported.

According to the CRRA, in July 2014, the regional inventory was at a 5.3-month supply. The average for last year was five months.

CRRA President Maren Brisson-Kuester said she doesn’t believe the low inventory signals any deep-set problem in the market, and that based on the number of recent new listings, she said more houses are hitting the market.

“If we were down below two months of inventory I really might be anxious,” said Brisson-Kuester, who is also a broker with Cottingham Chalk Hayes Realtors. “We are not so far low, and it is helping to correct our market, but in a very conservative, healthy way. We aren’t seeing prices skyrocket.”

Opening the house

The market has been steadily improving since the recession, and a low inventory of available houses for sale is helping to drive home prices higher.

According to the CRRA, the average sales price increased to $255,125 last month from $241,485 in July 2014. The median price climbed to $202,500 from $192,000 in July 2014.

Zanthia Hastings, with Re/MAX Executive Realty, said that to combat the lack of houses for sale, she also is holding more open houses, and she believes that is something Realtors are turning to more and more.

Hastings and Braun said the lack of houses for sale also means they are representing more buyers than they have in the past. One advantage to representing buyers is that it is cheaper to drive those clients around to find houses than it is to advertise and market a for-sale property, Hastings said.

Hastings has also been contacting previous clients to see if they would be interested in selling.

For sellers, the lack of supply has allowed them to capitalize on bidding wars.

The owners of a Plaza Midwood house, for example, turned down a bid that was more than $7,000 above the asking price of slightly less than $200,000, said Leigh Anne Forlidas, a Realtor with Showcase Realty. The figure for the bid that was ultimately accepted was not available because the sale hasn’t closed.

‘Like a showdown’

Brittany Taylor and her husband, James Taylor, know all about the bidding process. The Taylors moved from Durham for James’ new job as sales supervisor for Albert’s Organics. Finding a house was very tricky and tense at times, Brittany Taylor said.

The Taylors bid on three homes before they bought a 1,500-square-feet three-bedroom, two-bathroom residence in Raintree for $179,500. The house they bought was on the market for about 40 hours. Their Realtor, Forlidas, called them when the house became available and convinced the sellers to accept the offer.

“Anything under $250,000 is selling like hotcakes,” Braun said.

Clients of Braun’s, Frank Lott and his wife, Maddi, learned that houses above that price can also be hot sellers. They bought a five-bedroom, four-bathroom, 3,100-square-foot home for $390,000 in Tega Cay, South Carolina, on which they bid $1,000 over the asking price. The house was on the market for only a few days and the Lotts moved in earlier this month.

“It was getting very frustrating,” Lott said about his family’s house search.

The Lotts and Taylors said that getting outbid repeatedly caused them to up their price range. The Lotts went up from their $350,000 limit and the Taylors increased their limit from $200,000 to $250,000, before finding one lower than their original limit.

Both families said they decided not to get into a bidding war on every house they were interested in.

“Every second of the process was like pins and needles,” Brittany Taylor said. She said that when they looked at the house they ultimately bought, “there were other people in the house looking at the house, and that was something I have never seen.”

It wasn’t uncommon for the Lotts and Taylors to see Realtors and their clients lining up for a chance to look at a property.

“It was like a showdown. It was a face off,” Taylor said about her family’s homebuying experience. “Realtors would be eyeing each other. It was intense. It was definitely a thrill ride.”

Supply and demand

There are a number of reasons the inventory is low, said Mark Vitner, a managing director and senior economist with Wells Fargo in Charlotte. A rapidly growing population and reluctance by some homeowners to sell are the key reasons.

From left, Showcase Realty owner Nancy Braun (in black) shows a house to Nancy Anthony and Cassandra Gill, Anthony’s daughter, during an open house. Photo by Mark Abramson.

Charlotte’s population is projected to grow by 71 percent between 2010 and 2030, a United Nations report indicated.

Stringent underwriting standards and stagnant wages have made it more difficult for sellers to come up with down payments, afford moving expenses and qualify for a mortgage. Many homeowners are waiting for prices to appreciate enough for them to recoup equity lost when house prices tumbled during the recession.

Real estate information provider RealtyTrac reported last month that 7.7 percent of mortgaged homes in the Charlotte region were seriously underwater, meaning the amount owed on their home was at least 25 percent higher than the market value of the property. That rate has been falling since peaking at 29 percent in the second quarter of 2012.

Inventory could be further reduced if millennials, who have been delaying homeownership longer than other generations and spurring an apartment construction boom, reach a point where they are more likely to buy, Vitner said. Some real estate analysts expect that to begin happening relatively soon.

Inventory is particularly strained closer to the city center, Vitner said, where people increasingly want to live. Land near the city is limited, however, leading to denser infill construction projects and the redevelopment of older properties. The inventory in the city of Charlotte submarket was at 2.7 months in July and in Mecklenburg County was at 2.8 months, according to the CRRA.

In the suburbs, new construction is strong for active-adult communities, in which buyers generally must be 55 years old.

“It’s going to be tough for the supply to increase because sales are likely to rise just as fast as a new supply,” Vitner said.

Homebuilder Alan Simonini, owner of Simonini Homes, said he is always looking for land near the city on which to build, even if it means tearing down existing houses.

Simonini is doing some infill projects to capitalize on buyers’ longing to live near the city center.

“We check the inventory quarterly. It’s the lowest it has been in a long time,” Simonini said. “It’s a good time to build homes.”