More News About The Rental Trend

Earlier this week I wrote of the increasing activity in the rental market in downtown Charlotte.  I have come across some supportive information concerning the national trend of increasing rentals.  Go here to read the entire article.  It outlines the 10 best markets for Real Estate Investors.  There are several interesting points in the article.  Here is a quote that I find is extremely relevent:

"The results of the analyusis mirror two major economic trends: population growth and improving employment.  In the past decade, the South has seen the biggest jump in population, up 14.3% to about 114 million people according to the U.S Census Bureau.  The second most populated region, the West, saw its population jump 13.8% to nearly 72 million."

While this article focuses on investors buying property at bargain prices and turning them into rent producing properties, it ties in with my findings that the rental market is doing very well, and that the desire to move into an urban environment is stronger than it has ever been.

As difficult as the times may seem for us, the trend holds great promise for Charlotte and the entire Southeast.

Is Refinancing The Right Decision For You?

With interest rates still remaining extremely low, the thought of refinancing may make some sense to you.  Determine what your motivation is and move forward from there.  The prospect of reducing your monthly payments in this market may seem attractive, but it is a risk that things will improve in the near future. 

Remember, refinancing will end up adding at least closing costs and probably more interest on the loan to save you some short term out of pocket expenses. 

MSNBC has a good set of questions to ask yourself as you consider refinancing.  Go here to see the article.

New Hotel Coming To EpiCentre Replacing 210 Trade Condo's?

Back in February when Charlotte was named the host city for the Democratic National Convention, I made a number of predictions.  Here is one of them:

"It has already been announced that The Park will begin its reconstruction early this year. The new configuration of The Park will create over 100 hotel rooms in addition to over 80 condos. Its location between the convention center and the arena almost guarantees its success. I would also expect to see the Two Ten Trade site be reconfigured into a major hotel. Situated in the heart of the city and across from the arena, this site is begging to be completed. It will be a shame that the residential market will not be in a position to take it, but a hotel there makes sense."

Well, The Park, now called Skye, is a beehive of activity, and a number of rumors have surfaced that an announcement is forthcoming that the former site of 210 Trade Street will become the site of a major hotel, and that hotel chain appears to be a W brand.  The fact that the foundation is already there to support a 50 story building, an intensified construction campaign could have it built in time for the DNC in late August 2012. 

This bit of news will also cast a lot of attention on the cleaning up of the Transportation Mall, the site of a recent fracas following the closing of Speed Street.  There may even be renewed interest in relocation of the Transportation Mall, though that would be difficult.

Stay Tuned!

The Demand For Downtown Property Is Returning

There has been much talk lately about renting vs owning.  There are accompanying articles that talk more directly as to the nature of rentals, but this article is addressing more the demand side of what is taking place in the downtown Charlotte market.

I tried in vain to produce this information in a graphical format, but when I recognizing the difficulties of trying to size the graph correctly in this eZine, I decided to just include the table itself.  The graphs were all too busy and the data points would be too small to easily see.  The data is YTD 2011 for downtown Charlotte.

The nature of my study was to look at the downtown Charlotte condo market in three slices, Non-distressed, Distressed, and Rentals.  For the rental slice, I have taken out rentals that were in traditional rental buildings like the Tryon House on Tryon.  Also, all the data analyzed here comes from the MLS system.  It should be noted that there are sales and rentals that happen outside of that reporting structure.

All the data in this analysis is year to date.  So here comes my analysis!  The first five months of 2011 has delivered 258 properties either sold, leased, or under contract.  Projecting that out over a full year can be difficult because some months are stronger than others, but just using straight math it calculates to over 600 units in a years time!

Non-Financially Distressed properties are selling.  A large reason for that is that current owners are pricing their properties more in line with current market conditions.  It is difficult to sometimes look at our homes as an asset, but that is what needs to happen.  Proper pricing in a market like this one can, and sometimes does, lead to multiple offers.  I have seen evidence of units being sold for greater than the asking price, a sign of multiple offers.

Financially Distressed properties are selling at a rate of nearly 5 to 1 YTD downtown, and there are currently only 10 available.  The return to a healthier housing market will depend on the foreclosure problem being lessened. 

I will repeat that the rentals indicated here are not traditional Rental Properties, but individual units located in condominiums such as Fifth & Poplar, The Avenue, 400 North Church, ChapelWatch, etc.  They are the result of owners not being able to sell their property in this market, but finding a way to lessen the impact of the financial strain, or perhaps just waiting for a healthier real estate market to emerge before selling.

With respect to the laws of Supply and Demand, the most important considerations in real estate are motivation, motivation, and motivation!  How motivated is a property owner to reduce the financial burden of a property?  How motivated is a buyer to move into an urban market?  It appears clear that there is enough motivation to begin to bring us back to a stable market and a return to increasing property values.

2011 Projects To Be A Banner Year

Further analysis of the downtown condominium market shows that there has been a rapid increase in rentals from 27 in 2005 to 328 in 2010.  Couple this rental activity with sales activity and this year, 2011, projects to deliver 618 units in the downtown market, exceeding even 2007 the previous peak year.

The ratio of rentals vs sales changed in 2009 to be over 60% rentals.  There are several reasons for this.  The first reason was mentioned in the previous article, owners cannot sell their property for the value they perceive it to be, and renting is a way of pushing an eventual sale into what many believe will be a stronger sale market.  Secondly, many of the units in buildings that entered the market at its peak, Courtside,  Court 6, Fifth & Poplar, The Avenue, TradeMark and 230 South Tryon, were purchased by investors with the intent to use the property for rental.

This dynamic has cause concern among most of the Homeowners Associations downtown.  Renters generally do not share the same concerns that owners have for the general upkeep of the common areas.  A further issue is that many lenders view the percentage of renters in a building as a potential red flag once a mortgage application gets to underwriting.  In today’s credit market, lending has become much more restrictive than it was 5 years ago.  It is not uncommon to see a MLS listing from Fifth & Poplar with the caveat that indicates that only cash deals will be considered.

If you are wondering why an optimistic person like me is bringing some of this seemingly scary information forward, the reason is simple.  The demand to live downtown has never been higher.  Gas is taking an increasing amount of disposable income from people.  The auto industry is building its rebirth around smaller, more fuel efficient cars.  An urban life style of walking to work, entertainment, dining, and shopping, remains attractive.

The trend is clear.  I expect that rentals will cool off somewhat and sales will once again become the predominant path to living downtown, and a return of property values.

Nothing New At The VUE

Just a quick update.on The VUE.  I have heard no news at all from the developer, a blog that focuses on The VUE, or the courts that are considering an appeal that the developer has filed to support his request to sue for damages for people who decide to not close.  The case is not over yet.

Looking through the recorded tax records in Mecklenburg County show that 14 units through May 31, 2011 have actually closed.  The developer claims an additional 200 contracts are subject to close based on the court cases.

It remains a beautiful building, one that will not be duplicated again for at least 10 years.  The views are spectacular, and the amenities are luxurious.  There will surely be more to come about this property.

Bits Of Positive News From Various Sources

Listed below are a variety of news bits that address the state of the real estate market and the prospects for its improvement.  There was an article in the May 31st edition of the Charlotte Observer indicating that housing prices in Charlotte have declined an additional 6.8%.It is a shame that that a scare tactic like that is forcing buyers to be more demanding.  Consider that this is a buyers market and the number of financially distressed properties that have sold have caused sellers to reconsider their options.  Other articles in this issue address the fact that financially sound sellers are choosing to rent as opposed to sell below the true value of the property. • A report from the Housing Opportunity Index indicated that almost 75% of all new and existing homes sold in the first quarter of 2011 were affordable to families earning the national median income of $64,400. • “With interest rates remaining at historically low levels, today’s report indicates that homeownership is within reach of more households than it has been for more than two decades,” says Bob Nielsen, chairman of the National Association of Home Builders (NAHB) “While this is good news for consumers, home buyers and builders continue to confront extremely tight credit conditions, and this remains a significant obstacle to many potential home sales.” • Price declines will end and average U.S. home prices will stabilize by Labor Day. Prices in even the hardest-hit markets will level out by the end of 2012. That’s the latest prediction from the authoritative Moody’s Analytics and Fiserv, Inc, after an analysis of home price trends in 375 markets tracked by the Fiserv Case-Schiller Indexes. • Fiserv also reports that home prices are at pre-bubble levels, creating affordable housing relative to income which, coupled with a slowly improving economy, will finally end price declines. • However, while Fiserv and Moody’s project the national U.S. home price average will stabilize in the third quarter of 2011, a 3 percent decline is expected in the first half of this year. “The first step toward restoring confidence in housing markets is an improvement in consumer sentiment, which we expect will increase slowly through 2011 due to stronger job gains and a falling unemployment rate,” says David Stiff, chief economist, Fiserv. “As confidence rises, the decline in home sales that started in 2006 will, finally, come to an end.” • News released early last week that housing starts and permits were down. New homes are finding it hard to compete with all the great prices of existing listings out there. How could this be good news?  When new home construction slows it certainly hurts overall economic growth. However, construction of fewer new homes makes room to get rid of excess inventory caused by foreclosures. In other words, fewer new homes built represents good news as long as existing home sales continue to increase in strength. • The trend is up for existing home sales which have unevenly increased in six out of the last nine months. Americans continue to see a buyer’s market in housing, according to an April 2011 Gallup poll. Sixty-nine percent of respondents say now is a good time to buy a house.

The Beginning Of The First Ward Park

Dirt is being turned on the corner of West Eighth and Brevard Streets in the First Ward.  The UNCC Downtown Classroom building is nearing completion and is scheduled for a fall opening, and the accompanying parking deck and public park is about to begin.  This reshaping and redefining of this area will be a welcome change to the surface parking lots that have been there.  Go here for construction diagrams of the park's layout.

This park has been long delayed but signals a start to North Tryon activity that has the potential to reshape the First and Fourth Wards similar to the fashion that the Levine Museum Complex has reshaped the Second and Third Wards. 

The major difference between these two sections of the city is that there is a much higher concentration of residents already living in the First/Fourth Wards

The Sign Says Coming Soon!

Located on the northwest corner of West Third and Graham is a small sign that is announcing that the site is the future home of the Charlotte Knights.  While it is great to see that sign, how soon is coming soon?

I have tried to go through my usual contacts for some indication that activity is taking place, but have been unable to get any kind of update.  This much I do know.  Jerry Reese has run out of appeals on all of his various legal actions against the county, though he claims he is not finish yet. 

My belief is that the construction of the stadium will be underway by the time of the Democratic National Convention for these reasons.  A vote by the county will be coming this summer to decide whether to begin construction of the Romaine Bearden Park.  That should be an easy decision.  The Knights have a payroll of close to 70 people, they all pay taxes to South Carolina, a move to Charlotte will require taxes be paid to North Carolina.  Currently that area is not generating any tax revenue, whether property taxes or payroll taxes.

The empty space in the Third Ward between Tryon and the railroad tracks MLK Blvd and Fourth Street encompasses close to 20 acres.  By comparison sake, the Levine Arts Complex with the Duke Energy Center covers about 6 acres.  The Third Ward site needs something to kick start development, and a baseball stadium would do that.  The stadium will bring in excess of 500,000 people into the Third Ward covering over 70 events.  That kind of traffic draws development.  And finally, construction costs will never be lower.

Once this project gets underway, the level of activity will increase the desire of living in the downtown area, and since new construction is down, existing home prices will begin to stop their downward spiral and property appreciation will return.

How To Figure The Right Price For A Property

In buying or selling a property, there are some guidelines that can be helpful in determining a price. What are the comparatives?  While similar or nearby homes have a bearing on the price they are not always the definitive or decisive reason.  That said, getting comps sets the pricing bar as far as determining the fair market value.  Keep in mind, and appraiser sent by the bank will do a more detailed comparison to deliver to the bank what price the property should be worth. Recent sales are the key.  Going too far back and you might be viewing a different market.  If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can: How much can you comfortably afford? This is much more critical for buyers than for sellers. Prior to finding the house of your dreams, talk to a mortgage broker to see what you can qualify for.  Keep in mind also that the mortgage market is competitive, and rates can fluctuate.  Some lenders will have underwriting restrictions that need to be considered.  Bottom line is that your payment should be something you can live with. How many others are bidding on the property?  This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face.  Buyers should be aware of the competition that could exist for properties.  Even in today’s market there are properties that will command multiple offers. I can help you properly value a property, and keep your offer in front of a seller. How badly does the seller need to sell?  Buyers: Has the property you’re interested in dropped in value?  How long has it been available on the market. Sometimes a listing or a listing agent will indicate that the seller is highly motivated.  That is usually a sign that bargaining room is available. How badly do you want to buy, or sell, the place?  This is all about you – what is your level of motivation? It doesn't make sense to offer more than the list price just because you have become emotionally involved with it, unless you have more cash than you know what to do with. But within the range of the fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property. Sellers: think of your list price as the most powerful marketing tool at your disposal. if you really want or need to sell, get aggressive about setting your price as low as makes sense for your your home's value and local market dynamics to attract qualified buyers and help your home stand out against all the competition