government is supporting liquidity for lenders and mortgage interest rates are near all-time lows. Many government loan programs now exist to help homeowners modify their loan and keep their homes, which will help keep foreclosures down. Housing inventory supply is still tight compared to demand, which puts upward pressure on prices. Charlotte 2-3yr Forecast: -3 percent to -10 percent Disclaimer: The variability around this forecast is wide, and it’s dependent upon data available as of mid-April 2020. The severity and duration of the COVID-19 epidemic, as well as the response of the public and policymakers, continues to change daily. RENTAL RATES As of February 2020, the average three-bedroom, single-family rental home in the Charlotte MSA is $1,400/mo. Raleigh MSA rentals in the same class are $1,495. Charlotte three-bedroom SFR rents range between $1,100 to $1,800. South of downtown, Charlotte has the highest cluster of prices between $1,500 to $1,800. North of downtown rents are between $1200 to $1,500. The outside edges of the MSA range between $1,000 to $1,300. Metro area one-year change for a three-bedroom detached SFR is up only 5.5 percent, a $70 annual increase. In comparison, Raleigh MSA rents are up 4.3 percent with a $60 year-over-year increase. Charlotte ranks 11th in the U.S. for five-year SFR rental price increases at nearly 35 percent in the MSA. Raleigh’s rents have increased 23 percent in the same five-year span. Some areas to the north of downtown Charlotte area have appreciated up to 40 percent, while the higher-priced areas to the south of downtown have risen only 15 percent to 20 percent. The rapid
growth, population and jobs in higher paying industries are driving demand and quickly raising prices. The overall rent-to-income ratio of the Charlotte MSA comes in at 27.2 percent, a few points lower than the national average of over 32 percent. However, areas near downtown can have elevated rent-to-income ratios between 30 percent-40 percent. High rent-to-income in the MSA is just over 45 percent, with the lowest at 16.5 percent. WHERE DO RENTS GO FROM HERE? The Owner’s Equivalent Rent of Residences CPI provided by St. Louis FED shows the only recessionary period since 1980 that measured any drop in rental prices was during the 2008 Recession, and it was only one percent nationally. During the 2008 Recession in Charlotte, RentRange measured SFR rents decreasing from the peak of $1,020 down to $965, a 5.7 percent decrease in rents between the July 2008 peak and the January 2010 trough. Adjusted for seasonality, Charlotte only receded three percent overall. Rents remained range- bound seasonally between $970 to $1,000 until breaking above the range in April 2012. CHARLOTTE RENTAL RATES PREDICTION 2020 Rental rates will see limited growth through the rest of the year. Demand may be lower since it is easier to re-sign a lease for one more year. Charlotte Forecast: 0 percent to 3 percent price increases CHARLOTTE RENTAL RATES PREDICTION 2021-2023 Rentals have historically held their value during previous recessions, but they did trend
slightly lower in the Great Recession period. The last five years have provided nearly seven percent year over year gains, and Charlotte is due for a cooling period to allow job growth and wages to reconnect price support. High rental prices in overvalued areas will see demand and price decline. The market needs more affordable rentals and stable rents. Charlotte 3-Year Rent Price Forecast: -5 percent to +5 percent CONCLUSIONS Our forecast for the near and long-term is that Charlotte is still a good place to invest, even with the challenges caused by COVID-19. It is a rapidly growing metropolitan area, especially for its scale. It has proven its ability to bounce back quickly from economic downturns and has provided steady appreciation for long-term buy- and-hold real estate investment strategies. After a pause in 2020, Charlotte should continue to attract new businesses and residents, helping the local economy continue to expand. More jobs will increase the city’s diverse job market and lower unemployment into the foreseeable future. Inward population migration will support demand for real estate for people looking to rent and buy. Home and rent prices have recently surged ahead of average incomes, however prices are still relatively affordable compared to other large metro areas, and low interest rates help overall affordability. •
Fred Heigold III is the senior data analyst at Altisource / RentRange®, an industry leader in market data and analytics for the single-family rental housing industry.
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