If you live in Charlotte and have eyes, you've seen the apartment boom, with new, high-end units springing up like a plywood army surrounding uptown. I even wrote a column about it last week (the tl;dr version: Vacancy will go up this year and next, but we're not at a full-fledged bubble yet).
Here's a chart of data pulled together by the folks at CMD Group that shows the rocket-ship-trajectory of multifamily building in Charlotte:
As you can see, multifamily building permits cratered in the recession's aftermath, with fewer than 1,000 pulled in 2010. That's the lowest point in a decade. But demand rebounded swiftly: Permits passed pre-recession highs in 2012 and hit a new high last year, passing 6,600.
CMD Chief Economist Alex Carrick said he expects the boom to continue. The reasons are myriad: Millenials postponing marriage and kids while they pay off student debt, older empty-nesters downsizing from the big house in the burbs to an apartment or condo, a cultural shift back to walkable cities.
I asked Carrick if he thinks we're looking at a dangerous bubble down the road. What happens when all of those Millenials want to have kids and buy the house with the backyard, say in 10 years?
"That is a danger," said Carrick. "At that time, there might well be a whole bunch of problems, some empty, see-through buildings. But developers never worry about that. They know there's a demand right now."
"You can worry about 10 years from now," said Carrick, But everything changes so rapidly, you don't know what's going to happen."
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15 comments:
Umm, where is the chart?
anon@7:23am - I can see the chart.
I know I gripe about this all the time, but you have to make at least $200K a year to afford $5,000 a month for rent. It's hard to imagine that there are at least 10,000 such people sitting around waiting for a place to live to be built. I just had to downgrade to an apartment, and I had a miserable time finding a place I could afford on my $45K a year. I found one, and the neighborhood is OK, but the complex is a falling-apart piece of crap. All because the deveopers think no one making average money needs a place to live, but ALL the $200K-plus folsks do.
James, I highly doubt these places will cost near $5k a month. 1BRs in the area go for $1050-1500 for the higher end buildings. With all the new vacancies to come, there will be many concessions offered to new renters. There will not be 100% occupancy in any of these buildings so there will be A LOT of competition for the management companies to deal with.
Highly doubt? That's being polite. A simple search using google - a lot of kids are using it these days - shows an incredible number of very nice apartments in uptown and the surrounding neighborhoods for $800 to $3,000. I don't know if I'm being trolled and taking the bate but come on James, if you gripe about this all the time that means you haven't done basic research before your griping.
I still think renting has less to do with the lifestyle choice and more to do with too tough lending regs and too weak job market.
The facts are interest rates are under 4%. That's practically free money people..and staying single longer should have more Millenials choosing to buy to build equity. Plus, they could own for what they pay in rent.
There is zero balance with new construction. It is 100% apartments. Are we really to believe its because all Millennials have student loans or because one of these developments in a walkable hood cant be made for sale instead of for rent? It doesn't add up imo
There won't be a bubble if Charlotte continues to keep it's image as a good place for young, single people to live Uptown. When the young people get older and move to the suburbs, other young people will move in their place. It's the cycle of life in a healthy city with growing opportunities. It's up to the people living Uptown to keep the energy. Hopefully, this will reverse the trend of people leaving Charlotte, or North Carolina for other states. North Carolina is a popular state, it has mountains and beaches, people want to move here. I lived in China the last three years, and even people there heard about Charlotte. Mainly because of the NBA, because basketball is very popular there. But when you are a city with an NBA team, to people outside of America, Charlotte has stature and global awareness. Uptown Charlotte is the Emerald City of the Carolinas. It's an image that an outsider has. People looking for opportunities will want to come to Charlotte. People are attracted to places like that, and especially with all the new places around Uptown, there are going to be more things to do. Places (Central, Midtown, Noda) right outside of the 277 loop will have more opportunities for growth too, as the city is built inside out. Charlotte will look attractive, if there is a strong core of people with an urban mindset to live and work together.
James, completely agree with you not everyone in charlotte is earning $100,000 plus. Many professionals are around your current pay grade and unable to afford living in units that are $1,500/month. The Market needs to have some level of flexibility that allows single professionals afford to live in center city. To the anonymous comment made on Feb 12 at 8:51 - I've used Zillow, Craigslist, and other websites to search for places to live Uptown and yes a unit might show up for $850 but many have added cost attached to them making the rent jump an extra 100 to 200 dollars. I'm assuming your pay grade is well above James' 45K/yr.
I worry about the construction quality of the apartments being built and so many built in the same location at the same time. They'll degrade at the same rate.
I am a homeowner in Windsor Park in East Charlotte. It's a transitioning neighborhood - but one where you can buy a home if you're earning $50K/yr without having to live waaaaaay out. My mortgage is about $550 a month and allows me to save for retirement and I am not "house poor". Plus, I have a nice yard with mature trees and don't have the NoDa or Plaza Midwood price premium (yet). Come be my neighbor!
Thanks Ely. This is a great chart that makes it very easy to visualize the growth of multi-family units in CLT!
As for some of the comments: With respect to affordability, these units will be in the range of $1,000 to $1,500 (I am not entertaining a direct response to the $5k comment). While I agree that this is too high for most young professionals, it also creates a new downward pressure on existing units. If the brand new units go for $1,500, then the 2 year old units go for a bit less, and the 4 year old units a bit less than that. If your primary concern is cost to live Uptown, you should welcome the "bubble" as over building will apply significant downward pressure on rental rates.
As for rental units versus owned units, this is clearly a combination of a number of factors, and any attempt to explain it with one factor is incorrect. There is a clear shift in the mindset of younger people to be more urban centered and more transitional with respect to location. More people are willing to live here for a few years, then NYC, then ATL, etc. Less people expect to remain permanently in their first place of residence. While owning may be as affordable as renting based solely off of monthly payments, there are still closing costs, taxes, insurance, PMI, down payment, and other considerations that must be weighed. If you do not plan to stay in that neighborhood for 3-5 years at least, it is likely better to rent. Also, people focus too much on the back end of financing, while ignoring the front end. Currently, the back end (mortgage loans) is still very favorable to the gainfully employed with good credit history. Those people with suspect credit or new grads with little to no credit my find loans hard to get. Those that have worked for a few years and have good credit and employment history, have a great opportunity to buy. The FHA's first time homebuyer program only required 3.5% down. However, the front end of financing, i.e., financing construction of for sale condo units, remains very difficult to obtain. Much of this is continued hangover from the recession as lenders and bond holders took huge hits on failed condo towers (The Vue, The Park, etc.). Apartment buildings fared much better, and they are therefore seen as a safer investment. Additionally, Fannie Mae and Freddie Mac guaranty large multi-family loans, allowing lenders and bond holders to offload a huge portion of risk for that product. This lowers the rate dramatically, particularly when compared to the rates required for a loan on for sale units.
-G
I have one year left before I graduate with an undergraduate degree in engineering. And I can tell you that 3 years ago I would've laughed if someone asked if I was going to stay in Charlotte. Now, if I find a job near uptown, I plan on living in uptown or south end or noda for a year or two. A lot of friends have already done/plan to do the same. There's definitely demand.
The good news is that Charlotte's downtown boom may avert the problems had by Atlanta. Its outer loop road pulled people and energy out from the center and into outlying edge cities. Lots of traffic around the edge, with downtown for the most part being hollowed out. Much to do during the day, but at night the City goes dead, time to leave town. Our loop road was just completed. Here is to hoping.
I approve of your new more reasonable verifier program. The last one felt like a cross between a Rorchach and an IQ test. I failed it repeatedly.
Most cities consider it a luxury to live uptown. I'm not sure why one would expect that it should be affordable. That's why we have suburbs.
G,
Buying vs renting.. If it were a mix of multiple factors , wouldnt it make sense there would be a mix of apts vs condo construction, however slight that mix may be? But it's All apts. It strikes me as beyond coincidence that All 20 somethings lifestyle, purchase power, and outlook fall into the renters group.
Also, a 3-5 year stay used to be long enough for some first time condo buyers to want to buy a place to try to turn a profit. But now there hasn't been enough of these first time condo buyers in the past 8 years combined to warrant one new condo project?? I still think todays lending and US economy are the primary factors.
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