Business

Allen Tate CEO says in-migration will support price appreciation; no bubble forecast

Photo by Marty Price

Jan. 5. By Dave Yochum. Pat Riley, president and CEO of Allen Tate Cos., says ongoing in-migration will continue to support home price appreciation in and around Lake Norman and Cabarrus in 2018.

“In-migration, on top of a limited supply of homes under $400,000, puts additional pressure on appreciation,” he said.

The dean of residential real estate in North Carolina said the diversity of our “economic profile” helps put the Charlotte real estate market on steady footing.

“When you put transportation, financial services, distribution, energy, defense, university system, airport, etc. on top of lack of organized labor, cost of living, neighboring mountains and beaches, we are a magnet and will continue to be,” Riley said.

There’s no bubble on the horizon, Riley said: “Maybe in the stock market but not here.”

Selling homes is a growth industry. Allen Tate reported $5.163 billion closed sales volume on 21,595 closings in 2015. In  2016: $5.45 billion closed sales volume on 22,194 closings.

“In 2017, we should be up 2 percent in closed units and up 4-5 percent in closed sales volume,” he said.

Pat Riley, president and CEO of Allen Tate

PAT RILEY

A lack of inventory is affecting home prices across the country. According to Zillow, housing inventory declined 10.5 percent in the 12 months ended in November.

According to the Federal Housing Finance Agency, North Carolina’s home appreciation rate was 6 percent; South Carolina’s, 7.2 percent. Riley forecasts an average increase of 5 percent in 2018, with greater gains at the lower and middle ranges, and smaller gains at the higher elevations.

Prices in Charleston, S.C., are “on fire,” driving up statewide results, he said.

Lake Norman area prices could pack on an additional 1 percent simply because of the lake.

“Remember, all price points are not going up equally due to supply and demand. Under $400,000, properties are appreciating much faster than the upper end,” he said.

Of course, as development burgeons post-recession, there’s less and less property left for new homes.

“That’s exactly why new construction is selling at a 19-30 percent premium,” Riley said.

Meanwhile, Baby Boomers are downsizing at an average age of 74, Riley said, “and not wanting to update the last 10 years of their homeownership life contributes to this lack of supply of homes.”

Slower new construction right now—about 60 percent of the peak a decade ago—coupled with boomers sitting tight, high in-migration and Millennials just settling into their first homes, mean inventory will continue to be tight in 2018.

“Tear downs will be a huge part of our future, no matter what price point,” Riley said. “Forty-two percent of properties out there are outdated and not feeling the love.”

Rising mortgage rates, he said, will actually help fuel the marketplace in the short term.

“High rents plus above-average appreciation plus interest rate movement equal ‘Get out of lease as soon as you can and jump on the homeownership wagon,’” he said.

Forecasts for mortgage rates*

Freddie Mac:………4.1 to 4.4 percent
Fannie Mae:………4.0 to 4.1 percent
Mortgage Bankers: 4.3 to 4.7 percent
NAR:……………… 4.2 to 4.5 percent

*(30-yr fixed)

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