The economy and its effects on Charlotte

[monsoon]

Again, do you have any data supporting this recommendation? I have no idea where you pulled 1992-1993 from or the 50% deflation of home prices in Charlotte...

[ChesterCopperPot]

You blew in here with a bunch of insults, so I don't really feel inclined to answer your questions. You have already demonstrated that you have no interest in what I post beyond using it to try and question my credibility. So, I am not going to waste my time with you. Next time you might want to consider that before you do so again, that is, if you don't get banned for the practice.

[Eastman]

We just got out neighborhood newsletter, which posts all the sells in the area for the year. This time they compared over the last four, and not too bad actually. What we are seeing is a leveling off in home prices, but nothing in the way of losses. Houses are staying on the market a little longer. Tried to find a 1940's all brick bungalow for $82,000 (92 pricing), but I couldn't. Maybe this time next year.

[monsoon]

.......

I had predicted a couple of months ago 50% deflation in some of these markets in Charlotte. This notion was scoffed at and derided at the time. My recommendation is that if you intend to purchase property in CLT, then look at comps for the area of interest as they were in 1992 - 1993 and don't pay more than that. (and even that might be a risk).

[Durhamite]

There was a big foreclosure auction of Charlotte properties at the Metrolina fairgrounds attended by a big flock of vulture investors. (I said they would come) The paper listed a few of the results.

• A $675,000 uptown condo went for $225,000. - 67%

• A $775,000 condo in South End went for $250,000. - 68%

• A $234,000 house near NoDa went for $135,000.- 42%

My prophecy is coming true including the one that says it is going to hit the more expensive places the hardest. Unfortunately, the bad news is the decline of this economy is just in its starting phases. The government has made a fundamental mistake in its attempts to fix it by spending trillions to prop up the broken system that destroyed it in the first place. Ironically Charlotte has benefited from those attempts as a great deal of that money ended with the two banks that exist in this city. If this had not happened we would be looking at an economic disaster in this city in terms of real estate.

[monsoon]

......

Technically, only ONE of the banks received government bailout money. ....

[Charlotte_native]

These are foreclosures and no one would be surprised that they sold low. That is how banks move foreclosures quickly. One or two dumped properties in any market doesn't mean a lot to be honest. I don't know of any area or market in Charlotte that won't have an example or two of a distressed sale like has been pointed out -- even in years past before the bottom fell out. I'm not making any assumption that property values across the board will rise or fall, my chrystal ball is on the fritz right now, but sales like these are statistically not relevant unless other properties begin to fall in value. As of now (again, not saying it won't happen) other surrounding properties haven't had any significant changes except in a few select areas -- primarily the neighborhoods the media is calling 'starter home' neighborhoods where large numbers of properties have been foreclosed.

These type of auctions and sales can actually help stabilize an area or neighborhood by getting the distressed sales and properties off the market quickly. The downside is it is mostly investors who buy so homeowner/buyers don't get these great deals, but it does take low priced inventory off the market. A good buyer or agent won't see these as good comparables when deciding what something is or isn't worth in an area because it is generally a single sale in a given complex or neighborhood rather than a set of sales or listings. More than anything a potential buyer will see the low sale and just be upset that they didn't get to buy it! They might hope for or want a deal like that, but if there aren't other scenarios where a seller must move a property quickly they'll be out of luck. One shouldn't assume all sellers are desperate or are willing to dump their properties. As has been discussed before on here, quite few former sellers have decided to stay put or become landlords rather than dump their home -- another example of inventory leaving the market.

[Charlotte_native]

Surprising stat for me: since uptown is often discussed in this thread, and values are often brought up, I thought I'd look and see how many properties have gone under contract in the uptown condo market since the turn of the year. As has often been pointed out, Spring is most often the busiest sales season for real estate most years, it is best to see activity during that period to decide how sales are going (as opposed to looking in late November, December, or January). Since the turn of the year 18 condos or townhomes have gone under contract -- that number is actually as high as would be expected in a typical year and higher than last year same period. Almost half were distressed sales of some sort -- 2 were corporate relos (where company moves their employee and subsidizes a low price or buys and resells), 3 were short sales (pre-foreclosure), and 2 were foreclosures. With two exceptions, and they were priced very low to sell, these properties are not priced much lower than previous sales or values. The properties with the highest drops were clustered on really one complex -- 5th & Poplar.

The one big surprise property to go under contract, a $3.9mil condo at The Trust (and in January a $3.2mil condo closed at The Trust).

[SmellyCat]

There was a big foreclosure auction of Charlotte properties at the Metrolina fairgrounds attended by a big flock of vulture investors. (I said they would come) The paper listed a few of the results.

• A $675,000 uptown condo went for $225,000. - 67%

• A $775,000 condo in South End went for $250,000. - 68%

• A $234,000 house near NoDa went for $135,000.- 42%

My prophecy is coming true including the one that says it is going to hit the more expensive places the hardest. Unfortunately, the bad news is the decline of this economy is just in its starting phases. The government has made a fundamental mistake in its attempts to fix it by spending trillions to prop up the broken system that destroyed it in the first place. Ironically Charlotte has benefited from those attempts as a great deal of that money ended with the two banks that exist in this city. If this had not happened we would be looking at an economic disaster in this city in terms of real estate.

[swh1972]

BofA also got tens of billions more via AIG which is another debacle that has yet to play out.

[monsoon]

Before you start patting yourself on the back about your prophetic skill, maybe you should give more than half the picture. Apparently each one of these properties had a story. ...

[49er]

This isn't just a downtown problem. There is a home up the street from me on Mckee Rd in South Charlotte that originally sold 3 years ago for over 800k. Look it up, mls 818871. It's now u/c for 409k or less. Inflated real estate was all over the city, not just the Center City.

[Eastman]

This isn't just a downtown problem. There is a home up the street from me on Mckee Rd in South Charlotte that originally sold 3 years ago for over 800k. Look it up, mls 818871. It's now u/c for 409k or less. Inflated real estate was all over the city, not just the Center City.

[Charlotte_native]

This isn't intended as any prediction. Who knows (none of us really) where and how things will pan out -- but ask someone you know who works in real estate if you do know anyone. Everyone I know in the business is suddenly busy. Very busy actually. Now, this makes no implication as to whether this might be the normal spring thaw when business always picks up in normal years, but even so it would be better than last fall which did not have its normal bump. It also might just be people deciding to get out and see what good deals there are to be had, but that in itself would be a step towards improvement. Bargain hunters are still buyers and money circulates when things move.

I personally believe that many, including people I know, are dipping their toes in the water to see if they should get off the fence a make a move. $8000 tax credit, annual write-off for home ownership, seriously low interest rates, and great home prices might have created a perfect storm for buyers. Maybe just for a month or two, but real estate companies citywide have been getting increased traffic.

EDIT: tough part -- waiting the 2 - 3 months to see how much increased traffic translates into actual sales -- it will take that long for the sales if they occur to be posted.

[monsoon]

When prices fall (readjust) to the new economic realities of the USA, then there will be increase sales. Increase sales however doesn't mean prices still won't fall. There are no sales now simply because real estate is priced way too high vs. real worth.

[Charlotte_native]

Received a forwarded email for job postings today for GMAC's move (or increased presence) here today. It was being circulated by the Southend Business Assocaition. I've heard a few comments about this here and there -- overall it seems people are generally happy to hear a little good news.

Top that off with a report that has come about about national home sales spiking surprisingly in February. This seems to correspond to what appears to be an increase locally as well. Housing starts and permits are up for the first time in many months as well. Though the DOW dipped again today after two weeks of overall positive, it seems that there are a few rays of sunshine.

[southslider]

The latest post on HipHoods blog links to a home sales report showing in-town neighborhoods holding their own. Though far from the 100%-plus appreciation of 10 years or even 50%-plus appreciation of 5 years, just having some appreciation in the last year is good.

But it also shows some warning signs for Charlotte. Many neighborhoods in the "middle ring" have had double-digit depreciation. Many of these are older, cul-de-sac-rich, sidewalk-poor subdivisions, at risk of becoming "suburban ghettos," an emerging trend nationally.

[Eastman]

The latest post on HipHoods blog links to a home sales report showing in-town neighborhoods holding their own. Though far from the 100%-plus appreciation of 10 years or even 50%-plus appreciation of 5 years, just having some appreciation in the last year is good.

But it also shows some warning signs for Charlotte. Many neighborhoods in the "middle ring" have had double-digit depreciation. Many of these are older, cul-de-sac-rich, sidewalk-poor subdivisions, at risk of becoming "suburban ghettos," an emerging trend nationally.

[Charlotte_native]

Oh yes. I believe this could reach crisis level and already is in some areas. Take homes that are poorly built, sell them to people who can't afford them, mix in family instability and you have a perfect recipe for neighborhood failure. Because there is not much to restore I can see whole areas

just being bulldozed.

[monsoon]

The failure of this economy is really based on just one thing. Debt financed consumption. The ultimate in debt finance consumption is unneeded real estate. The important word in that last sentence is Need. We have based entire industries on this over the last couple of decades and especially since 2000, and have foolishly added these numbers to the GDP which made us think we were wealthy.

If one believes this, and one takes an honest appraisal of what has been built in this city, then Charlotte is in pretty bad shape. This is in both what has been built here, and more importantly and possibly unique to Charlotte, how a big percentage of people earned their living here. This house of cards is collapsing now and it will be felt in losses in all of this unneeded real estate, the paper wealth disappearing that was based on it, and in losses in jobs related to the industries that created it.

However we are not yet at the point of admitting it so I suspect that we will continue to look at irrelevant signs and portents this fact is not true or that we have seen the worst of it.

When will we know the recovery is starting? That day will come when the people in charge ask for changes that are going to cause real pain. As I said we are not even close to it yet.

[gman430]

Top that off with a report that has come about about national home sales spiking surprisingly in February. This seems to correspond to what appears to be an increase locally as well. Housing starts and permits are up for the first time in many months as well. Though the DOW dipped again today after two weeks of overall positive, it seems that there are a few rays of sunshine.

[Charlotte_native]

Stock market is now in the negative even with two good economic reports. You can't have rays of sunshine on a cloudy rainy day.

[monsoon]

Another one of Charlotte's Fortune 500 companies is hitting the skids. Sonic Automotive, which is set to release financial results today, has indicated that it might have to use the bankruptcy laws to fix it's debt problems. Of course if they had not leveraged themselves as they have, this would not be necessary. Sonic Automotive is headed by Bruton Smith.

This news came out after the stock market closed yesterday. I suspect the market will be quite brutal with them today given that Smith as indicated that bankruptcy is an option.

[Charlotte_native]

I hate to say it, but I doubt a lot of locals will feel very sorry for ol' Bruton. He didn't win many friends over the years, but especially when he made Cabarrus County bow down to him last year! I guess that swagger may be just a tad off these days.

[monsoon]

Mecklenburg jobless rate is now above 10%. This is the U3 measurement which understates the real problem. Most likely the U6 rate for the county is closer to 15%. The metro area is suffering from a significantly higher unemployment rate.