Competition is for Sissies: Buy Straw Hats in Uptown Charlotte

 

 

 

 “Buy straw hats in the winter because summer will surely come.”

Bernard Baruch

 

The competition for Charlotte-area homes is relentless from the buy-side.  One local statistic really drives home the point: there is currently an 18-day supply of homes for sale (and 120-days worth is considered a healthy market)!  That’s badly seller-skewed.

 

And I saw a Linked-In post last week from a member of our local Realtor Association, Jonathan Osman:

 

There are now more than 13,788 Realtor members in our local association of Realtors… and only 1,633 homes for sale in a 7-county region surrounding Charlotte.  Happy Monday everybody!

 

That’s a lot of agents and buyers fighting over a few pieces of cheese.  And that doesn’t even factor in the i-buyers like Zillow, OpenDoor, and real estate investment hedge funds that have non-licensed agents scouring the market for unlisted homes to buy.  If they are not consistently buying a large quantity of homes, they are not doing their jobs.  Supply versus demand is in full effect- Prices continue to climb!  20-30 offers per listing coming in fighting for attention!  Competition is fierce!

 

But there seems to be a bastion of discounted properties located right in the heart of Charlotte in the 28202 zip code that sit undisturbed- Uptown condos!  They’re nicely adorned living spaces located in beautiful, tall buildings in what was considered prime real estate.  And no one seems to have any interest in them as prices drop.  OpenDoor has no current interest and Zillow’s instant offer is at a steep discount to market price. 

 

So why is this packet of Charlotte real estate getting the cold shoulder?  I can foster a few guesses:

 

I.                    “It’s the pandemic, stupid!  Everyone is “Zooming” from home and Uptown (and downtown areas in cities everywhere) are obsolete now.  Who wants to live in the City when you can be in your PJ’s in the ’burbs?”

 

Rebuttal:

1. The suburbs (and home) can enjoy their time in the sun.  Cities are still cool and have lots to do.  Companies still value in-person collaboration.
2. Huge organizations (Bank of America, Wells Fargo, Duke Energy, Carolina Panthers, etc.) don’t have billions of dollars in leases and real estate office holdings that are going to sit empty one more minute than they have to.  When things are thought to be feasibly safe, doors are opening.
3. Here’s the path to never getting promoted at work: when the Uptown office opens up and the option comes to work from home or go in, take the home option and continue to work by video.  All top leadership will be required to be in the office, so your co-workers will enjoy lunching and working closely with the decision-makers in-person.  I wonder who gets promoted… The person who they laugh with at the water cooler or the person they have to sit through yet another Zoom call with to see and never seems to be around?  Hmmm…

 

 

II.                It’s tougher to cash flow condos with high monthly HOA fees and, to boot, rents seem to be lower.

 

Rebuttal:

1. True that on the HOA fees to a point.  Just keep in mind a few expenses that HOA fees save owners from paying: buying a new roof, monthly insurance, exterior house maintenance, pest issues, water/sewer bills (when vacant), and the threat of vandalism.  The actual hit is lighter than it seems.
2. Rents are lower because the demand is not there right now to live in Uptown Charlotte with offices largely closed.  But that’s why investors buy those straw hats in the winter! 

 

 

III.             There are a lot of Uptown condos for rent.  There have not been any new Uptown condo buildings built in over a decade, but many apartment buildings have been.  That’s a lot of rental competition!

 

Rebuttal: 

a.       True.  But the rental price points on the newer apartments are higher (and need to be due to higher land/construction costs when they were built and investment cash flow required for the financial institutions who own the buildings).

b.      The newness factor has largely worn off and now the older units for rent are on largely equal footing (most with better locations)

c.       There are not many Uptown units that can actually be owned.  To your point, no condo buildings for private owners have been built for over a decade.  At some point as renters come back to Uptown, they will want to be owners and have limited supply to choose from.

 

Competition is for sissies!  Investors may want to buy the unpopular Uptown condos now and then wait to reap the benefits in the summer when straw hats are back in vogue.

 

Happy Landlording!