Charlotte’s new-home industry continues to struggle because of several factors, including a weak economy, a poor job market, foreclosures, fears of declining home values and tight credit conditions, said Bill Miley, Metrostudy’s Charlotte market manager. “While it is likely that the market hit a bottom in terms of annualized starts and closings in the fourth quarter of 2009, and that single-family detached homes are in short supply in some Charlotte counties, demand for homes in 2010 will depend on job growth,” he said.
Local economic overview
Annualized job losses in the Charlotte area declined for five consecutive months. During the 12 months ending in December 2009, the area lost 35,900 jobs. Of these, 9,500 were in the construction industry, 9,200 in trade and 8,700 in manufacturing. The unemployment rate in the Charlotte metropolitan statistical area (MSA) was 12.1 percent in December.
“On the positive side, Electrolux, an appliance manufacturer, Premier, a healthcare services company, and Zenta Mortgage Services have all recently announced major moves into the Charlotte market. These companies will help to diversify the economy and strengthen the employment base,” Miley said.
New-home starts and closings
Charlotte posted 1,286 new-home starts during the fourth quarter of 2009. This was a reduction of 23 percent compared to the fourth quarter of 2008. The annual starts rate for the year ending in December 2009 was 4,907 units, 50 percent fewer than the 9,817 starts recorded in the fourth quarter of 2008. Annualized starts peaked in the first quarter of 2007 at 24,869.
Single-family quarterly closings totaled 1,939 units in the fourth quarter of 2009, 100 more than in the third quarter of 2009. This was the third consecutive quarter during which closings increased. Charlotte’s closings totaled 7,258 for 2009, which was 46.2 percent fewer than the 13,481 starts recorded in 2008. Annualized closings crested in the second quarter of 2007 at 24,522.
Total single-family inventory, which is composed of units under construction, finished vacant units and model homes, declined to 6,105 units during the fourth quarter of 2009, from 6,748 units in the previous quarter.
Based on the annual closings rate, there was a 10.1-month supply of new housing inventory (single-family detached, townhomes and condominiums) at the end of the fourth quarter, the same as at the end of the previous quarter. The months of supply remained constant even though total inventory declined, because of the drop in annual closings, Miley said. Six to eight months of supply is considered a healthy or balanced market in terms of supply and demand. Single-family detached homes, which comprise 82 percent of Charlotte’s new housing was at a 7.4-month supply for the total market area.
In the fourth quarter of 2009, finished vacant inventory (homes completed, but not occupied) totaled 2,647 units, a 4.4-month supply, the same as the previous quarter. Metrostudy uses finished vacant housing inventory as a fundamental indicator to monitor the health of the market.
“With economic indicators giving consumers mixed signals, we are left with uncertainty. Confidence in the future of the economy is a cornerstone to growth. Confidence is also a key to consumption. The assertive return of the U.S. consumer is an absolute necessity to any recovery, as two-thirds of the U.S. economy is consumer-driven. Layoffs have clearly slowed, but hiring shows few signs of accelerating, and jobs are at the heart of sustained recovery. Positive economic momentum will have a serious impact on the future growth of the homebuilding industry,” Miley said.
“North Carolina and Charlotte are attractive locations for businesses and individuals. The United Van Lines 2009 migration study showed North Carolina to be one of the nation’s highest inbound growth states. Businesses attracted to the region stimulate population growth and workforce increases, generating greater housing demand.”
For more information, visit www.metrostudy.com.