Unfortunately, the Lake Norman real estate market’s relatively weak late fall 2013 and January 2014 sales appear not to have been a fluke. We can blame it on the weather and the tightened mortgage requirements like the national pundits are doing. But we can’t blame it on a lack of inventory like parts of the US. Last month I emphasized that Lake Norman real estate sales “almost matched last year’s“. I am not sure, with double digit declines in February, that this description is still valid. Our overall home sales slowdown in Lake Norman is baffling enough but the biggest question I have right now is where in the heck did our waterfront and higher-end buyers go? And, is the impressive return of new construction a factor in our lower MLS numbers since many of these sales are not listed?
Let’s take a look at the February 2014 numbers from our Charlotte Multiple Listing Service for our Lake Norman Area 13 real estate market:
* All date is from the Charlotte Regional Multiple Listing Service
Some significant additional statistics for you:
- “Distressed sales” (Foreclosures (REOS), defaults, Short Sales) represented only 5.7% of Lake Norman’s total home sales which is down from from last month’s 13.6% and significantly lower than last January’s 29%. We only had 4 distressed home sales in February. The average price for distressed single family home sales was $359.875. Distressed active listings comprise only 2.7% of our total inventory of Lake Norman homes sale. Clearly distressed sales no longer play a significant role in our Lake Norman real estate market and this is very good news!
- Only 20% of our closed sales were waterfront homes which is down from 30.3% last month and well below our norm. The average sales price of Lake Norman waterfront homes in February was $805,203 which was about equal to last month’s. Our highest recent waterfront sales were last July’s $874,988 and June’s $990,693. In February our closed luxury housing sales were negligible. Our average price per square foot was $227.23 which was actually up from last month’s $219 and almost matched our peak of $229 last summer. Lake Norman’s waterfront home sales above $700,000 remain sluggish but the homes that are selling are getting relatively strong offers based upon their size.
- 9 new construction homes closed in February but I believe this does not reflect an accurate picture of new home sales since so many are custom or are purchased directly from the builders and therefore never enter the MLS. (In fact, this segment of the market may be skewing our Lake Norman home sales numbers quite a bit). The average listing price vs sales price of new construction single family homes, bounced back up to 101%! Clearly there isn’t a lot if ANY wiggle room on prices of new homes. We currently have 39 new construction homes under contract in the MLS. The average sales price in February was up, logging in at $460,800. With 132 new construction active listings Lake Norman actually has a 14.7 months supply of new homes listed in the MLS.
- 51.4% of Lake Norman’s February home sales were under $400,000.
- 68.6 % of the entire Lake Norman home sales in February were under $500,000. Clearly our lower price ranges are still dominating our housing market.
- Our “Under Contract Show” AND “Under Contract No show”/Pending sales combined total of 187 is about equal to last month’s. At 187, Lake Norman has 26.6% FEWER homes under contract compared to last year’s 255 at this exact date. This is the number that truly scares me for our short term market. I can’t see how we will get close to the 2013 sales numbers for at least the next few months. Good properties are selling, but buyers seem willing to wait for their perfect home since there so few “bargains” enticing them to jump off the fence.
A closer look at the chart:
- The number of Active Listings in Lake Norman is 8% higher than last February’s. Our absorption rate/months of supply of active listings today is 12.6 compared to last month’s 12.2 and December’s 8.08. Last May 2013 Lake Norman hit our post recession low of 5.9. Using the nationally defined goal of 6-8 months of supply for a balanced housing market, February’s lower sales definitely keeps us in the buyer’s market status. Low inventory has played a significant role in Lake Norman’s housing recovery as it has nationally and is what has been driving the price increases so we need to keep our low levels of inventory for the sake of the health of our Lake Norman real estate market. That said, we also need higher sales to return to a balanced market! One bit of good news is that the average number of days an active listing has been on the market dropped again by 1%.
- Under Contract Show (conditional sales), fell 13% when compared to this same time last year. These are homes that just went under contract (have an accepted offer) and still have financial and inspection conditions. They represent future closed sales most likely in late March/April/May. This number would indicate that our closed sales will log in well below 2013 numbers for the next few months.
- Pending/Under Contract No Show sales are a whopping 43% LOWER than last February’s making this the sixth month in a row of declines. These are the contracts that are past their inspection/due diligent periods and are just waiting to close. They are usually the best indication of closed sales in the next few weeks. Based upon this I predict that we will definitely not exceed 2013 closed sales numbers this month. FYI, Pending home sales are down throughout the US as well.
- The number of closed home sales in Lake Norman in February as of today and as stated above, was down 13% compared to last year’s. The average sales price dropped 17%. The good news is that the average days the homes were on the market dropped an impressive 17%. I find this fascinating. Clearly, the homes that are selling are selling quickly. It is almost like we have two parallel markets…those homes that might be dated or need a bit of work who take quite a while to sell and the “hot” properties that sell quickly.
The total number of Lake Norman homes under contract (UCS + UCNS) in the first week of each month are as follows:
- March 6, 2014: 187
- February 6, 2014: 185
- January 6, 2014: 155
- December 6, 2013: 197
- November 6, 2013: 207
- October 6, 2013: 207
- September 6, 2013: 218
- August 6, 2013: 264
- July 6, 2013: 271
- June 6, 2013: 293
- May 6, 2013: 316
- April 2, 2013: 290
- March 5, 2013: 255
- February 7, 2013: 219
- January 6, 2013: 184
- December 6, 2012: 197
- November 7, 2012: 214
- October 8, 2012: 218
- September 6, 2012: 206
- August 6, 2012: 228
- July 6, 2012: 234
- June 6, 2012: 235
- May 7, 2012: 246
- April 1, 2012: 227
- March 1, 2012: 178
- February 1, 2012: 155
- January 1, 2012: 134 (the lowest ALL year)
Here is a breakdown by price-range of our January 2014 closed sales in Lake Norman’s area 13-1 to 13-5:
- $66,500 – $199,999: 10+
- $200,000 – $299,999: 19+
- $300,000 – $399,999 7-
(These price ranges represented 51.4% compared to 47% last month.)
- $400,000 – $499,999: 13+
- $500,000 – $599,999: 7-
(These price ranges represented 28.5% compared to 31.8 last month)
- $600,000 – $699,999: 4+
- $700,000 – $799,999:4-
- $800,000 – $899,999: 2+
- 900,000 – $999,999: 1
(These price ranges represented 15.7% compared to 15% last month)
- $1,000,000 – $1,499,999: 2
- $1,500,000 – $1,999,999: 1
- $2 million+ : 0
(#Solds $1 million+ = 4.3% compared to 6% last month, 9.5 % in December, 4.5% in November, 3.1% in October, 5.7% in September, 4.7% in August, 11.2% in July, 10.4% in June, 4.4 % in May and 7.5% in April)
The most improved price ranges in February were the $100,000’s, and $200,000’s.
Higher-end home sales in Lake Norman
Or, should I say “what higher-end home sales”? What I found really fascinating is that of the 3 $1 million+ properties that sold, one was in Denver and one in Terrell which are both on the west side of Lake Norman. By far the largest segment of Lake Norman’s luxury housing market fall in Cornelius (in and around The Peninsula) and Mooresville (in and around The Point). There were no closed $ 1 million sales in either of these luxury communities in February.
As goes our higher end sales so goes our waterfront home sales. We currently have 335 waterfront homes actively listed for sale. With only 15 closed sales of waterfront homes in February that means Lake Norman currently has 23.9 months of inventory of waterfront homes for sale. Yikes! This is almost triple that of a balanced housing market. I am honestly baffled by the erratic nature of our waterfront and higher priced home sales in Lake Norman but there is no doubt that they have been weak since early summer. We currently have 52 waterfront homes under contract compared to 49 last month so there is a glimmer of hope but we need to see significant increases in the months ahead. The big question remains how many waterfront home sellers are waiting to list in our historically strong spring market? Will we be flooded with new listings?
10-Year Comparison of Lake Norman Home Sales By Month
* Please note that all of my numbers are for single family homes. They come from the Charlotte Region Multiple Listing Service and will not include sales that took place outside of our MLS.
** I adjust past months when I do the monthly update as a few more sales are usually input late by agents.
As you can see in our Lake Norman sales by month and year chart above, Lake Norman’s home sales for the 2013 exceeded 2012’s by 19.7% and were only -7.0% below 2007’s. There is absolutely no doubt that 2013 has been a great year overall for the Lake Norman real estate market despite the 4th quarter slowdown.
Our February 2014 closed sales were the second best since 2007. So far in 2014 we are 9.9% below 2013 sales. If you look ahead you will see we have some hefty sales numbers to meet in the coming months.
Summary and My Insight
- 2013 was a very good year overall for Lake Norman with a 19.7% increase in sales.
- Lake Norman’s single family homes average sales price per square foot increased again this month, this time by 3.4%.
- The average number of days a Lake Norman property took to sell was down 17%.
- Our inventory of active listings is increasing but not at an alarming rate.
- Our price per square foot did increase so our Lake Norman home values are stable and slowly improving overall. There are pockets of strengths and relative weaknesses which result in fluctuating average sales prices when combined for the entire Lake Norman real estate market. In addition, the lack of distressed sales has led to higher overall average prices. The “bargains” are all but gone. What I want to see is measurable increases in Lake Norman home sales in ALL price ranges.
- There are still pockets of “hot” home sales in the greater Lake Norman area, notably the off-water popular and moderately priced communities in Huntersville, Cornelius and to a lesser extent Mooresville where inventory is very low and multiple offers are not uncommon.
- The number of distressed homes for sale are so low they are truly irrelevant and will not play much of a role in our Lake Norman 2014 sales. According to a recent Charlotte Observer article Charlotte foreclosure activity dropped 46% in September which is better than the national rate. Prices have increased enough overall that 83% of homeowners actually have equity in their homes again. Nationally, 23% of homeowners are underwater.
- New construction is definitely back. While we only sold 9 new homes last month through the MLS, we have 39 under contract and this doesn’t include custom homes and homes to be built in subdivisions. New housing communities as well as custom and smaller groups of spec homes are popping up all over Lake Norman. As I noted above, new construction homes are selling on average for 101%.
- Charlotte’s 2013 impressive home price gains have been linked to a significant number of investors taking advantage of low prices in “middle class neighborhoods” and turning them into rentals. They therefore have “inflated” prices. Since Lake Norman didn’t enjoy this surge, our sales are more reflective of a truly stable and slowly improving real estate market based on owner-occupied rather than investors and we are already standing on our own.
- Because of higher rental prices and low interest rates, it is now better financially for most to buy rather than rent.
- Homeowners who went through short sales/foreclosures several years ago are now re-entering the market.
- Economists at UNC Charlotte say that they expect North Carolina to have a strong 2014 in terms of both housing and jobs.
- Charlotte remains North Carolina’s top metro on economic-vitality index by “On Numbers”. Factors they consider are private-sector job growth, unemployment, earnings, housing price appreciation and construction and retail activity.
- Charlotte regional experts expect a 4-4.5% improvement in our GDP in 2014 led by transportation and real estate.
- Thanks to rising prices, there are an increasing number of homeowners with increased equity in their homes. In the US housing equity increased 30% this past year.
- Because prices are up in many states that feed relocating buyers to our Lake Norman area, more homeowners are able to sell and move than in the past 5 years.
- Not only has Lake Norman experienced a slowdown in the past few months but economists are now saying that there has been a “pause” in the national housing market’s recovery as well.
- Interest rates are expected to continue to rise in 2014 with some economists predicting they will reach 5% or higher by the end of the year.
- Tightening credits, tougher loan standards and increasing interest rates are expected to impede home sales in 2014
- The national housing market also fell in January according to the National Association of Realtors. In other words, we have good company.
- The average price of a closed home sale in Lake Norman fell 9%. This is both a reflection of the strength of our entry level buyers and the weakness in our luxury market.
- Our overall inventory of active listings in Lake Norman is high relative to our rate of sales. Today Lake Norman is in a buyers market unlike the greater Charlotte area and many parts of the country where the last number reported was 4.9 months of supply in January.
- From what I am hearing from many Lake Norman Realtors, spring will most likely bring a good number of new listings as sellers who have been on the fence jump in to take advantage of Lake Norman’s traditionally strongest season. This is good news for buyers but may help to keep prices in check if our sales remain relatively flat.
- Lake Norman’s average days a listing takes to sell, while dropping, is more than double the national average of 56 days.
- Our trade-up and luxury housing niches are still erratic and have yet to recover unlike the lower price ranges.
- Finding the perfect home has become more difficult because much of the older inventory has been picked over. Buyers who want perfection can’t wait too long to make decisions about new listings because the good homes and lots are selling quickly. Watching the “hot sheet” is once again a part of the buying process.
- On the flip side, higher-end properties are simply taking much longer to sell.
- I have concerns that many Lake Norman home buyers will see weak overall numbers and misinterpret them. It is critical to know your own niche because there are so many variables in the Lake Norman housing market. Don’t assume all price ranges and locations are equal. You might be facing multiple offers and/or picked over inventory or you might not.
My advice to Lake Norman home buyers has changed slightly. I still emphasize the importance of good locations and prioritizing your list of features you want in your home and lot. But, if you are looking in a “HOT” neighborhood and price range or if you can’t find your perfect, move-in condition home, be open minded about homes that need some work. If the floor-plan is good, perhaps having to do some painting, new flooring etc. is your best option. While your perfect home might come along, don’t wait too long and don’t dismiss a property if it isn’t perfect. Prioritize: Location, quality and depth of water (if waterfront buyer), lot and floor plan. Then, to determine a realistic price, use VERY RECENT comparable sales in your specific market niche. The selection may not be great but with interest rates near all time lows and prices low but rising it is a great time to buy. With less than 3% of Lake Norman’s current listings being “distressed sales” don’t expect a “bargain” to come along at an unrealistic price. Low-balling, except on distressed properties, really isn’t a great strategy nor will it result in a lower price.
Don’t focus as much on the price as on the future marketability of the property. A bargain that has incurable issues that will make it difficult to resale, really isn’t a bargain at all. Be smart!
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