Back in 2011 and 2012, Charlotte was the focus of a number of articles that detailed how the local real estate market was favoring buyers over renters. At the time, home prices were still in the post-recession doldrums, and mortgage rates had simultaneously plummeted. Lenders were also beginning to move away from the very stringent standards that went into effect as real estate values first dropped in 2008 and 2009.
Rising Home Prices
Since then, upward pressure on both home prices and mortgage rates has altered the equation to a degree. Many Charlotte residences have increased 15-20 percent in value over the past two years. Historic low mortgage rates in 2013 have moved up a point or so, although the standard 30-year mortgage rate still remains at a very modest level, in the mid-4s.
Interestingly, inventory still remains tight in mid-2014. One might surmise that many homeowners have been staying put after refinancing their mortgages to take advantage of historically low rates. Many of these homeowners have stable employment in the metro Charlotte area and, more often than not, they are not all that motivated to move up to more expensive homes.
Current Rental Costs
However, rentals continue to be more expensive in Charlotte than in many other major metropolitan areas. In August 2014, the average apartment situated within 10 miles of Charlotte rented for $908. Specifically, one bedroom units rented for an average of $803, while two-bedroom apartments went for an average of $916. Inventories of these rentals still remain low, which tends to keep rates up.
In comparing July and August data regarding one, two, three and four-bedroom units, interesting trends emerge. Three-bedroom units, on average, rent for more in August than they did in July. However, rents have declined for one, two and four-bedroom units. The most substantial decrease in average rents is found among the one-bedroom units.
The overall rental market in Charlotte may be somewhat pricier because of the dynamics of the local job market. There are increasing numbers of jobs, and a decent percentage of these are better paying jobs. This therefore attracts those from outside of the metropolitan area, and many of these relocating employees start out by renting.
Rents Still High Enough To Encourage Buying
In conclusion, despite some slight reductions in Charlotte rental costs recently, rents are still higher here than in some similar-sized real estate markets in the country. This reality may tip the balance in the buy vs. rent debate in the Charlotte area. The purchase of a home has always come with potentially significant mortgage interest deductions, and this helps to tip the balance even further.
The potential for further appreciation in residential real estate values is also typically factored into one’s decision-making process. At this point, in light of steady increases in home values for some time now, a reasonable number of prospective buyers may believe that the prospect for further appreciation in value remains, and they may want to position themselves to benefit from future price gains.