Note: Our market forecast includes Charlotte data and data from its surroundings, including Concord and Gastonia, North Carolina.
Charlotte, North Carolina, is one of the hottest markets in the Southeast United States, making it an appealing market for real estate investors to invest in. This major regional business and financial hub has no shortage of employment opportunities, meaning it's an attractive city for many to work and live. Its broad economic infrastructure, coupled with great weather and rather affordable housing, make it clear why this market is seeing record demand. If you're looking to invest here, take a closer look at the local Charlotte market.
What makes Charlotte special?
Charlotte is the largest city in North Carolina, and the metro area is home to over 2 million residents as of 2020. The greater Charlotte area encompasses 15 different counties and three major cities, including Concord and Gastonia, with the Charlotte metro market being located in Mecklenburg County. Charlotte, also known as the "Queen City," serves as a major economic center for the Southeast United States, with a range of industries driving economic activity to the area.
The city was booming pre-COVID-19, but certain migration trends toward the Sun Belt have pushed even more people to the area, with Charlotte being the second-highest city behind Austin for inward migration from 2019 to 2020, seeing a roughly 8.7% change in net move-ins during that time.
Aside from its diversified economic makeup, Charlotte is home to the NFL's Carolina Panthers and the NBA's Charlotte Hornets, as well as several major colleges and universities.
State of the market
Charlotte, like many other major metro markets, was initially hit hard by the pandemic. Economic activity screeched to a halt in April and May 2020, slowly reopening over the remainder of the year. The start of 2021, however, is revealing signs of a promising future, as economic activity surpasses pre-pandemic levels and a surge of new residents flee to the city in search for housing. Below are three notable trends for the Charlotte market.
1. Real estate prices will continue to rise
Home prices have increased 12.2% year over year, unsurprising given the current housing market shortage and low interest rate environment, which is driving real estate up across the nation. This, coupled with Charlotte's low housing supply and strong economic drivers, means long-term demand will likely continue to drive real estate prices up over the next few years.
Charlotte's median home price is still almost $40,000 below the national average, which means investors and homebuyers are able to purchase more for their money, but if demand and supply don't eventually rebalance, this number will become increasingly unaffordable.
2. Multifamily build and rental prices may stall in the short term
Charlotte's price-to-rent ratio is just under 17, meaning it's more affordable for residents to rent than to buy. But Charlotte's rental market seems to be at a unique point where supply may be outpacing demand.
Rental vacancy is currently 8.1%, higher than the national average and far above normal ranges for the U.S. average. Despite the current spike in vacancies, rental rates have steadily increased, rising 3.9% year over year. However, this price should balance out when supply outpaces demand. Right now, 57% of residents own their own home while 43% rent. However, I believe the percentage of renters will increase as affordability becomes a long-term concern in the area.
3. Inward migration will hold strong
Charlotte, much like Austin, is becoming a major economic hot spot, with long-term employment opportunities for residents, substantiating long-term demand for both rental housing and real estate over the next several years to decades. Thankfully, the job market isn't fueled by only high-income earning jobs but instead has a mix of blue-collar jobs and higher income-earning opportunities providing a range of housing needs for its residents. This job mix as well as diverse industries will help keep prices more affordable despite high demand and inward growth.
Charlotte housing demand indicators
Charts courtesy of Housing Tides, an EnergyLogic company.
Here's a closer look at housing and economic indicators that give further insights into notable trends for the Charlotte area.
Unemployment in Charlotte has recovered nicely, down to 5.5% from pandemic highs and sitting below the national average. However, it's still above the normal range and historic averages over the past five years. In the first quarter of 2021, 9,900 jobs were added, but jobs are still 50,000 less than they were before the pandemic. Several large companies have announced their plans to open or expand new factories or plants in the area, including U.K.-based electronic vehicle company ARRIVAL, Bassett Furniture, and Scentsy, among others, which should add roughly 1,000 jobs to the marketplace over the next year.