In Charlotte Housing Market, Builder Incentives to Buyers Not as Prominent
One of the most attractive aspects of a buyer’s market to those seeking a new home? Builder incentives being offered around the nation.
While such deals are also on the table around the Charlotte housing market, the buydowns and offers of free monthly mortgage payments are are nothing like the discounts being offered in other parts of the country - which can be as generous as a free swimming pool or cash offerings up to $100,000.
“We feel Charlotte is still a strong market, and so we don’t have to give the same incentives here that we would in other markets,” says Michelle Scott, Shea Homes spokeswoman in Charlotte.
In October, the builder was offering mortgages with 4.5% financing for the first year, based on 30-year mortgage rates that stood around 6.3% - but “we are are not reducing the value of our homes,” she says.
“Charlotteans buying homes from merchant builders are getting a deal - but the price cuts and incentives are not as severe here as in other markets,” says Ray Killian, a partner at Charlotte-based Simonini Builders.
A stronger housing market: The Carolinas, Texas and Georgia are among the few bright spots in the country’s weakening housing market. Nationally, new-home sales fell 14.2% for the year that ended in September, while the median price of a new home in September decreased by 9.7% from a year earlier.
In Charlotte, however, the number of permits for single-family homes increased by 8.46% during the first nine months of the year from the corresponding period in 2005. The number of permits issued in a month never exceeded 1,000 last year, but the monthly total topped that figure four times in 2006, most recently in August with 1,002.
Killian says Charlotte is benefiting from a steady annual price increase of 6% to 8% during the last five years. Other areas of the country that have seen dramatically higher increases are now experiencing steep declines, causing people to be hesitant to apply for any home mortgages if the investment won’t pay off.
Ironically, it’s due to that local strength that new-home buyers in Charlotte are going to see “very aggressive” moves by builders to grow market share in 2007 - and additional incentives, says real estate consultant Chuck Graham.
Graham says there’s growing pressure on national builders to pick up sales to make up for the volume lost through overbuilding in some markets. And Charlotte, with its strength, is a key place where they are focusing those efforts.
“There are inventory issues in a number of markets, and the national merchant builders are saying, ‘Get me the numbers out of the Carolinas and Texas’ to shore up their other offices,” Killian says. “They want to drive sales here because the market is good and strong. They’re trying to buoy up their balance sheets and liquidate assets.”
The influence of national builders: Graham and Killian agree because national builders such as Beazer Homes, Centex Homes and Pulte Homes - all with a presence in Charlotte - are publicly traded, they are sensitive to the demands of Wall Street investors.
“What Wall Street likes is predictable sales volume and profits - they don’t want fluctuations,” says Bernard Helm, president of Market Opportunity Research Enterprises in Rocky Mount. “But that’s difficult to achieve in the home-building industry.”
Builders that are privately owned (such as custom-home specialist Simonini) are not subject to that kind of pressure, so they “take a more studied approach,” Graham notes.
Indianapolis-based C.P. Morgan Co. Inc., which is private, is not offering incentives. “It’s not part of our business philosophy,” says spokesman Randy Truitt. “We emphasize our pleasurable buying experience and price our homes from the start at the best possible price so we don’t need to adjust.”
Centex Homes leaves the incentives to its in-house mortgage provider, CTX Mortgage Co., which is offering buyers three months’ liberty from home loan payments.
But, Andrea Anker, director of marketing in Charlotte, says, “We’ve always had special pricing on aged inventory. We’re not having a fire sale. There’s a lot of one-on-one work done by our loan officers to find out what the hot button is for an individual buyer.”
She adds the Charlotte office is on track to have its best year ever in 2006, topping 1,000 home sales.