As I was explaining to Sarah and my other clients why finding a house in Charlotte is so tough, I thought, why not share this with everyone?

So, here at The Finigan Group, we’ve decided it’s high time to tackle the big question at hand: why is there such a drastic dip in the availability of homes, not only here in Charlotte, North Carolina but also across the United States?

Not just that, we’ll also review some innovative solutions that could potentially improve this prevailing housing crisis.

For those of you who regularly follow our Charlotte Housing Market Updates, one key reason why the housing market remains red hot is the exceptionally low levels of housing inventory.

Here in Charlotte, the average home price has shot up by 29% since January, even with mortgage rates sitting at around 7%.  And to answer the big question – why such low housing inventory? The answer lies in a few key reasons.

1. Lack Of New Construction

2. Demographic Trends/ Changes

3. Discouraged Homeowners

4. Institutional Investors

5. Restrictive Zoning Laws

6. Potential Solutions

1. Lack Of New Construction 

2. Demographic Trends/ Changes

The second key factor contributing to our low housing inventory revolves around demographic shifts and a spike in household formations. Currently, millennials are the largest generation in the U.S., and they’re stepping into the housing market in droves. They currently make up a whopping 43% of home buyers, the largest portion compared to any other generation.

This situation is stirring up a perfect storm. On one side, there’s a considerable reduction in home constructions, and on the other, there’s a massive influx of millennial buyers in the housing market.  This combination has led to a significant spike in demand, all while we have steep fall in supply.

Over the span of eight years, from 2012 to 2020, a staggering 15.6 million new households were established. Moreover, in 2022 alone, more than 2 million households were formed – the highest in the past decade.

Meanwhile, only 11.9 million new homes were built during that time. As a result, by the end of 2022, we were faced with a housing deficit of around 6.5 million homes. 

4. Institutional Buyers 

The fourth factor playing into our low housing inventory is the influx of institutional investors acquiring available real estate. These institutional investors are generally large corporations or hedge funds, snapping up thousands of homes throughout the United States. Their goal is to purchase a home cash, and hold it as a long-term rental property.  

This phenomenon is no small matter. In 2021, these investors made up 13.2% of all U.S. home purchases. The issue is even more pronounced in the Charlotte area, where these investors have represented over 30% of home purchases in recent years.

This not only reduces local supply but also ramps up demand, as individual home buyers have to compete against cash offers. Moreover, institutional investors, once they own these properties, don’t tend to sell as often as regular homeowners do.

5. Restrictive Zoning Laws

6. Potential Solutions To Our Housing Shortage

Are we doomed? Maybe not! While we don’t know what the future holds, there are a number of scenarios and steps that could ease the housing shortage in upcoming years!

1. Zoning “Find the Missing Middle” : A recent zillow survey found broad support for the “missing middle” homes in residential neighborhoods. They found that even modest densification measures, like allowing 2 units on 10% of single family lots in large metro cities could boost housing supply enough to slow home price appreciation.

2. De-Incentive Investment: We could create legislation that restrains institutional investors from purchasing homes.  We could also lower capital gains tax temporarily to incourage mom and pop investors to sell

3. Incentivize New Construction: We could create financial incentives that would encourage builders to build new homes that are within reach of many first-time home buyers.  The possible incentives run the gamut from federal supports and subsidies to better terms on construction loans to fewer local regulations and restrictions that sinificaltnly add to builders costs.

If you have a mortgage, your property taxes will be escrowed. Your mortgage lender will take a small amount every month to pay your taxes and homeowners insurance on your behalf once a year. If this is the case you don’t have to budget for these, they will be included in your mortgage.

When you’re shopping for homeowners insurance you should do your homework. The #1 mistake I see homebuyers make is that they don’t talk to a professional insurance agent right from the start. Right when your offer is accepted you should begin talking to homeowners insurance representatives. This will give you time to make sure there are no historical losses or claims that have never been fixed. You’ll also have more time to obtain a better idea of what type of insurance is best for you to cover those emergencies. This is very important in case anything happens, you’ll have the right insurance to cover it.

The Future Of The Housing Market

Personally, I believe that we’ll be grappling with this inventory shortage in the housing market for the next decade or so. There’s no quick or easy fix to inject more homes into the market—homes take time to build. Therefore, it’s likely we’ll see a gradual shift over time if we start making the right moves now. As long as this inventory shortage persists, the market will likely remain red hot. Essentially, it’s a classic case of supply and demand.

The demand in the greater Charlotte area is strong, and with Generation Z now starting to buy homes, we’re looking at even more demand on the horizon, while supply remains an issue.

I believe the next significant shift we could see in the housing market will come when mortgage rates begin to fall. Although the Federal Reserve has hinted that it may not start reducing rates for another one to two years, once they do, many potential homebuyers and would-be sellers who have been waiting for lower rates will likely enter the market. This will not only boost demand but also increase the supply of homes as homeowners who refrained from selling over the past few years due to high rates will also start to sell.

If you are considering buying, selling, or investing in real estate myself and my team would love to be your real estate resource of choice. Feel free to call, text, or email us today! We would love to discuss your personal goals and identify the best plan of action to help you achieve your goals.

Visit Us:

3440 Toringdon Way, ste 205

Charlotte NC 28277