Are you seeing fewer cranes out there? Well, it turns out that construction in Charlotte is stagnant. That’s according to new figures from real estate data company CoStar looking at the first quarter of 2023. The numbers also show apartments and the industrial sector, which includes warehouses and distribution centers, saw their weakest periods in almost two years. So what’s going on? For the answer, we turn now to Tony Mecia of the Charlotte Ledger Business Newsletter for our segment BizWorthy.
Marshall Terry: So, Tony, what is the answer?
Tony Mecia: Well, Marshall, what you know, in Charlotte, we've become accustomed to seeing things being built all the time — apartment complexes, office towers, industrial buildings, retail shops. And it's sort of one of the stories of Charlotte over the last several decades is the growth. But if you look at the numbers, they've been down for the last couple of quarters, the last half a year or so. There's a lot of economic uncertainty. Financing costs are getting more expensive. Banks are getting a little more reluctant to lend money for construction projects. And so, you know, a lot of this boom that we've seen over the last few years is really slowing down. And as you mentioned, you know, across a lot of these categories, if you talk to developers, I mean, they'll tell you they're just ... they have a lot of plans. And we always hear in Charlotte about a bunch of different plans of companies doing different things. But the actual starting of the construction of the buildings has definitely slowed down over the last several months.
Terry: Well, what's the outlook here? Is construction expected to pick back up?
Mecia: I don't think there's anything imminent that is going to start back up quickly. If you talk to economists, and I talked to a few of them this week, a lot of them expect a recession toward the end of this year. They say it'll be a little bit of a lighter recession. This is a national recession. This isn't anything particular to Charlotte. But Charlotte is, of course, caught up in national trends. They say that eventually there will be a recovery. Lending will ease up a little bit. And, you know, we'll get back to where we've been accustomed to being in Charlotte. We do have population growth still. There is still demand and need for, you know, new buildings, housing especially, you know, apartments, townhomes. So, you know, it's not like this is going to be the condition forever, but it might be a little bit before things return to those "boom boom" times.
Terry: All right. Well, it's been a big week for bank earnings, and Charlotte banks seem to be doing well. What did we learn about the health of Charlotte's banks? Are we out of the banking crisis that we were talking about last month in BizWorthy?
Mecia: Well, of course, the big news in the banking sector over the last couple of months was the failure of a couple of well-known banks — Silicon Valley Bank being the one that got the most attention. And at the time, the thinking was that it actually was going to be helpful to big banks like the ones that we have in Charlotte, you know, Bank of America and Wells Fargo. And that has actually turned out to be true. If you look at the bank earnings from the last week or so. Bank of America beat analysts' expectations with higher earnings and revenues. And the same with Wells Fargo, you know, it's surpassed what analysts thought it was going to do, and its earnings and revenues were up. So it looks as though things are going pretty well with the big banks. You know smaller banks, I think, might be a little more open to question. I think most analysts wouldn't say we're completely out of any type of danger. But, you know, certainly I think results look encouraging for banks that have a large presence here in Charlotte.
Terry: OK. Well, shifting gears now, the Ledger reports Mecklenburg County is doing away with health insurance subsidies for dependents of retired county employees. What's going on there?
Mecia: The county in the last week sent a letter to its retirees that are on its health plan and said that it will end the practice of providing subsidies, in many cases, to the dependents of those retirees. The county said — it was a little bit unclear — but it said it has been the county's policy not to subsidize the health care premiums of the dependents of retirees, but that it had been doing that in practice over the last several years and that now it was going to cut that out. The Charlotte Ledger — we tried reaching out to the county to get a little bit more information on why they were doing that, how many people get affected, that sort of thing. We did not get answers to those earlier this week. We did talk to one woman who said that her health care premiums would go up by about $1,000 a month because of the change. We're still looking into that and hope to have more on it.
Terry: And lastly here, we've kind of got a good news-bad news situation. I guess it depends if you're buying or selling, but home prices are down again in the Charlotte region. Are we seeing the start of a lasting trend here?
Mecia: I think it's really sort of a continuation of a trend that's gone on for a few months in that you're seeing that the year over year median sales prices of homes in the Charlotte region has gone down. Now, it's not significant. It's 0.4% in March compared with March of 2022. But for a region that's been accustomed to ever-increasing home prices, it is a little bit different. And again, the culprit is thought to be higher interest rates, mortgage rates that are keeping a lot of buyers on the sidelines. You have a house and you have a current low interest rate. You might be very reluctant to go out and shop for a new house. And then with that less demand, you know, the prices fall. So in Mecklenburg County, we haven't seen a decline yet. The increase was about 3% year over year from March to March, but certainly a lot slower than the 20% year over year home price increases that Charlotte had been accustomed to.
Support for WFAE's BizWorthy comes from UNC Charlotte's Belk College of Business, Sharon View Federal Credit Union and our listeners.
