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Housing Prices Skyrocket Despite COVID-19 As Supply Remains Tight

David Boraks
New home construction isn't keeping pace with population growth in the Charlotte area, contributing to a shortage that drives up prices. Lower-end homes are seeing the sharpest price increases.

The coronavirus pandemic may still be a drag on parts of the economy, but home sales remain hot in North Carolina and nationwide. Strong demand from buyers and a shortage of houses for sale have sent home prices through the roof.

Real estate website Zillow reports that median sales prices nationwide have risen every week since May and are up 12.5% over this time last year.

In North Carolina, prices are up 10.8% in Charlotte and 13.6% in Raleigh compared with a year ago. Zillow senior economist Chris Glynn cites several factors:

"The first is historically low inventory. The second is extremely low interest rates. And the third is that households are reevaluating their housing needs in light of COVID-19," he said.

Both Raleigh and Charlotte have about half the number of houses on the market this year as they did a year ago, according to Glynn. So even though prices are higher, homes are being snapped up super fast - typically six days, versus 11 days a year ago.

If you're in the market to sell, the heavy demand is a good thing. But it's a double-edged sword, Glynn said.

"It is a great time to be selling, in that you may have multiple offers or a lot of buyer interest in your home," he said. "The counter side of that is that if you're selling and then immediately needing to buy a house yourself, then you enter that same very competitive market."

And that, Glynn said, is one of the reasons why there aren't as many sellers right now. Other reasons Glynn cited: general uncertainty related to the pandemic and the perception that "they might be better off financially by waiting a year or two and continuing to let prices rise."

110620 Housing v Pop Growth chart.jpg
2020 State of Housing in Charlotte report
Chart shows the Charlotte region's population is growing faster than housing units.

UNC Charlotte real estate professor Yongqiang Chu said the current home sales boom fits into a longer-term trend: New home construction isn't keeping up with population growth in places like Charlotte.

"I think we are seeing a lot of people moving into this region, which should not be surprising to most people. And so that's driving up a lot of the demand. And of course, in recent years even especially during the pandemic, there's also this trend of renters moving up to buy houses. That also increases demand for single-family houses or other kinds of owner-occupied," Chu said.

But all that demand pushes up prices, and that's bad news for lower-income buyers seeking affordability, said Chu, who runs UNCC's Childress Klein Center for Real Estate.

Homes at the lower-cost end of the market are rising in value at 14.5% a year - more quickly than any other segment, according to the UNCC center's 2020 "State of Housing in Charlotte Report."

"The market alone probably is not going to be able to address that problem because I think most of the profitability for builders is on the higher end. That's why they're going to that sector," Chu said. "So in the lower end, I think it will have to depend on policy or the government to subsidize developing lower-end homes."

The latest figures from Zillow show sales beginning to slow as winter approaches. That's typical, but the experts say that probably won't slow skyrocketing prices.