®’s Ratiu sees ‘vibrant’ Charlotte; addresses inventory, affordability challenges

By Susan Shackleford

In a lively dialogue with 2021 Canopy Association President David Kennedy, George Ratiu sketched a largely positive picture of the Charlotte region’s residential housing market.

“Charlotte has a vibrant economy and is well diversified,” said Ratiu, a senior economist at® and the keynote speaker at the Association’s 2021 Installation and Economic Outlook on January 27. More than 600 people signed up for the online event, which also featured remarks by Kennedy (see sidebar) and by outgoing president John Kindbom.

Ratiu noted the large number of people relocating to the Charlotte region despite the pandemic. “Over one-third of demand in 2020 came from out of state,” he said, noting that people were attracted by jobs, affordability, good weather and quality of life.® has rated Charlotte the No. 3 market in the country for 2021. “I expect that (strength) to remain beyond 2021,” Ratiu said. “Charlotte is well positioned. Whatever recipe you have for success, it is working. Tweak it for improvement, but don’t mess with it.”

The housing market’s challenges are ones being experienced by many other populous areas across the country: low inventory of homes and lack of affordability for low and moderate income buyers. The two challenges are often interrelated.

When Kennedy asked Ratiu “the most significant head wind to affordability,” Ratiu responded, “Hands down, it’s supply — the number of homes, specifically new homes.”

A® analysis shows a supply shortage developed from 2010 through 2020 when household creation outpaced homes being built. The gap? Four million homes. And most of the homes that were built over that time, Ratiu continued, have been at the luxury end of the market.

He believes relaxing zoning restrictions and providing incentives to home builders are needed to expand supply. “We need to lower the barriers to development,” Ratiu said. “The one that ultimately seems to drive the boat for many places is the issue of zoning. Zoning can restrict density and size and put a lot of burdens on developers in terms of assessment fees. This could be adjusted … and can be done thoughtfully. Many places worry about sprawl. You can pace it (the adjustments) without being overly restrictive.”

The low supply is curtailing the ability of millennials, the largest buyer age group, to purchase homes. “They are really suffering from high student debt, but many have been disciplined financially and the main challenge is finding the right home at the right price,” Ratiu said.

This hurdle for millennials will only grow in coming years unless housing supply increases. “We have five million millennials turning age 30 every year for the next three years,” Ratiu said. “There is tremendous demand in the market. Millennials have embraced homeownership like other generations; they just had to delay it because they couldn’t afford it, graduated later, are having kids later, etc. — a lot of decisions were delayed.”

Ratiu said FHA loans, seller financing and financial help from family and friends are creative ways millennials can finance home purchases. The 20 percent down payment required by some conventional lenders is difficult for many millennials to attain.

Millennials are expected to be among buyers looking in suburban settings, fueling the comeback of the suburbs in many cities “The oldest millennials are entering midlife; they are around 40, and with the influx in the suburbs, they are seeing property prices rise,” Ratiu said. “Today’s suburbs are not our parents’ suburbs. We have seen the emergence of the suburban downtown, with a mixture of office, condos, retail, green space and access to transit.”

In addition to the suburban trend, Ratiu sees working from home will continue indefinitely, rating it “steady” for 2021.

“Let’s acknowledge that remote working came of age in 2020,” he said. “In the 1990s with the birth of the internet there was the promise that someday we could work from anywhere. It turns out in 2020 that became the reality. (But) I don’t see that as being the new normal (after the pandemic). The hybrid model is what I see — two to three days in an office setting and the remainder remote.”

The benefits of working remotely were proven in 2020. he said. “People have saved a tremendous amount of money by not commuting, and employers have discovered that with all the time we’ve saved, we actually worked more. All these things added together paint a picture that remote work will become a recruitment and retention tool. I see this as driving not just office and employment but also housing demand.”® studied the housing views of consumers during the pandemic in 2020 and found that they want homes with more space, more outdoor areas and better amenities. “I think this will drive real estate going forward,” Ratiu said.

More broadly on the national level, he predicted interest rates will remain steady in 2021 and the federal reserve will continue to support the economy during the pandemic. “The economy fell off a cliff in 2020; we had at least a three-month yawning, or gap, in the economy,” Ratiu said. “The fed has been committed to make sure (a) bridge across that canyon is fully built so the economy in 2021 is on better footing.”