The market value of Charlotte, NC homes rose by 0.6% in July compared with June, according to the Case-Shiller home price index released Tuesday by Standard & Poor’s. “Wow”, you say, “0.6%…that’s….underwhelming”. Well in the case of a $200,000 home, then officially that is $120. Annualized, you just made $1,440. The good news is that house values in Charlotte did go up. There are many cities in the U.S. which are feeling the continued effects of a price ‘free-fall’.
The better news to remember is the Charlotte in the headlines over the past year for its lack of free-fall. Imagine yourself for a second in Miami or Phoenix. At first, you are happy…because it is nice & warm in those cities right now, whereas it is 40 degrees and raining at the moment. Now think about your property being worth 68.6% of what you paid for it a year ago. The price changes in each some hard-hit cities over the past year, based on the Case-Shiller data for July include: Las Vegas, down 31.4%; Phoenix, down 28.5%; Detroit, down 24.6%; Miami, down 21.2%; Tampa, Fla., down 18.4%; San Francisco, down 17.9%. Charlotte, in comparison is down only 9% over the past year. Now take a look at your stock portfolio. Yes, we have seen some recent gains in the past 6 months. But most things in your portfolio are still off by about 30% from this time last year, aren’t they?
The answer is that before the bubble burst last year, real estate in the Charlotte area was generally undervalued. Cost of living is low and the medium home price is lower than average. Charlotte was passed over by many national investors for more exciting cities. These investors got what they asked for…plenty of excitement! Almost like a roller coaster, really…shaped like a downward spiral.
In Charlotte, we have the theme park Carowinds, and they have a ride which I believe is called Drop Zone. This ride brings you up to the very top, lets you sit there for a few seconds, feet dangling in the air. Then, all of a sudden, it feels like the bottom falls out and you are free-falling right next to your neighbors, relatives and friends. Many real investors outside of Charlotte are feeling like they have experienced the Drop Zone over the past year. As a fellow real estate investor, I have been pained by this 9% drop. But 31% in a year?! I feel fortunate that my investments have not been playing on the Drop Zone.
If you bought in Miami at the height of the market, you paid on average $380,000 for a house. This same house today in Miami is worth on average $216,000. In Charlotte at the height, you paid on average $167,000 for a house. Today, that home is worth on average $158,000. The summary: (1) The initial buy-in was significantly lower in Charlotte, (2) The short-term value decrease in Charlotte is relatively slight in terms of dollars and percentage, and (3) The current value is still significantly lower in comparison. THE THIRD POINT IS THE MOST IMPORTANT POINT…the current value represents today’s buy-in price.
Time to buy some affordable, reasonable, well-valued real estate! Buy in Charlotte!
