Lake Norman Real Estate Reflections
By Abigail Jennings
President of Lake Norman Realty
The new year is upon us again, and for me that means, among other seasonal rituals, reflecting on the real estate market last year. After all, understanding what just happened is often the best way to prepare for what comes next. Read on for my thoughts on the real estate trends and takeaways of the past 12 months, as well as what we might expect in 2023. And to help Lake Norman property owners know where they stand in this evolving market, this year’s report is only based on sales data from existing homes, or “resale homes,” and excludes land, commercial, and new construction. The moral of this year’s report is: don’t judge a book by its cover, or in this case, the graph below, which isn’t exactly what it seems.
Existing home sales in LN over the past ten years
Since the peak of the pandemic-fueled home buying frenzy in June of 2021, existing home sales in Lake Norman have been steadily declining, falling to 2017 levels by the end of last month. But is this cause for alarm for property owners? Definitely not, as there are many nuances within these numbers that tell a different story for those lucky enough to own real estate in the Lake Norman region.
It’s not like last time
In the dark days of the Great Recession, the market was flooded with homes for sale in all price ranges, which remained unsold for months on end. In comparison, our 2022 market saw fewer homes for sale, and once they entered the market, they sold very quickly. The current statistic for median days on the market for existing homes in Lake Norman is only 6 days, just one day more than this time last year (see graph below). The million-dollar-plus category is slightly higher but still drastically lower than in 2020.
Another important indicator is the ratio of what sellers are asking for their property and the final sales price. This is often referred to as the list price to sales price ratio. The higher the percentage, the stronger the market. Lake Norman sellers received 99.4% of the asking price overall for existing home sales, and 100% for homes under one million in 2022.
Does the dip in home sales mean a dip in home values? Not in this case, and in fact, quite the opposite. The median sales price for existing home sales in the Lake Norman region ended the year at an all-time high of $611,000, up a whopping 19.8% from last year’s $510,000, and up nearly 30% when compared to 2020.
Still a seller’s market
These stats are not signs of a gloom and doom market but instead demonstrate a market dominated by high demand and in need of additional housing opportunities. Nowhere is this more true than at the lower end of the price range, where average buyers need it most. The supply of homes for sale in the Lake Norman area remains extremely low, with a mere 1.4-month supply of homes overall, and only a one-month supply of homes under $500,000. The simple rules of supply and demand have kept home prices from falling, and most sellers remain in a very strong negotiating position.
Severe Shortage Under $500,000
When taking a deep dive into 2022 sales trends by price range, one very interesting dynamic jumps out. The upper market experienced relatively flat numbers, however, homes under $500,000 saw a dramatic 43% drop in the number of existing homes sold. A first thought might be that rising interest rates are responsible for declining sales in this price range. Although rate hikes certainly impact affordability for buyers with tighter budgets, this is unlikely since sales in this range were already declining before interest rates began to rise.
The more likely reason for this decline becomes apparent when we compare sales and new listings entering the market, which are trending in almost parallel paths. This suggests that these declines are simply due to new listings not meeting the pent-up demand of legions of eager buyers in the Lake Norman area. In addition, some would-be sellers are waiting to list until they can find their perfect new home, which can take a while in a market characterized by limited supply.
In other words, falling sales are due to a lack of availability, not demand. And with fewer homes under $500,000 entering the market than in previous years, the decline in sales for homes under $500,000 will likely continue in 2023. When comparing the two charts below, the price range trends for both new listings and new pending sales mimic each other, demonstrating the source of the decline is most likely connected to availability versus demand.
Population growth is on the rise in our area, and in addition to local buyers interested in making a move, newcomers from around the country want to find their piece of paradise here too. The Charlotte metro region was recently ranked as one of the six fastest-growing markets in the US. In addition, the Lake Norman real estate market made headlines in the Wall Street Journal last month, bringing even more attention to our beautiful region. Newcomers who successfully relocate here are often followed by family and friends, adding to the pool of buyers seeking homes, which is growing faster than the supply of homes can be replenished.
Unfortunately, this popularity creates more demand for new development, which threatens the survival of our region’s beautiful open spaces. Clear-cutting for new developments destroys tree canopies, wildlife habitats, and sometimes historic properties, and although it answers a call for new housing, it can erode the very character that attracted people in the first place.
To create new housing opportunities, creative thinking is needed. Utilizing small-scale single and multi-family new construction in infill locations is one way to retain the character and add more housing units. Helping to preserve our most special places through property owner initiatives such as conservation and preservation easements is another way to protect the landscape for future generations. However, when easements are not in place, the next best thing is for the public to use their collective voice to work with local governments to find the best outcome. Sometimes give and take is needed by both sides to ensure thoughtful solutions to the growing pains our region is facing now and in the future.
In conclusion, my message for real estate at the lake for 2023 is to keep calm and carry on. We’re very lucky to be in a very special place on the globe with limited supply and great demand, which any economist will tell you is a very good equation. Together, we can be the change for our region and encourage smarter growth that beautifies and protects our Lake Norman home.
Lake Norman Realty is an investor of the Iredell Economic Development Corporation.