For anyone who has been in the market to move or buy a new or existing home since the summer of 2020, it’s likely been quite a rude awakening just how few options there are to choose from compared with just a year ago. A surge of new buyers seeking a change in scenery and space after months of being cooped up at home during the COVID-19 pandemic, coupled with fewer homes being listed for sale, has depleted what was already a shortage of housing inventory. It’s a primary reason (along with increasing lumber and material prices) why home prices—and home values—have soared.
This bottleneck of buyers has been a boon for home builders, particularly for builders in the Carolinas, many of whom have chosen to do the previously unthinkable: curb their sales teams and cap sales in popular new-home communities in order to better manage buyer expectations and their own lot supply.
In Charlotte, contracts for new-home sales grew 20% over the year prior in 2020, and, in Raleigh, sales grew 33%, according to Zonda’s tracking of production builder projects.
Production Builder New-Home Sales in the Carolinas
2019 | 2020 | YOY Change | |
Charlotte, NC | 11,892 | 14,272 | 20% |
Raleigh-Cary, NC | 8,661 | 11,528 | 33% |
Durham-Chapel Hill, NC | 2,631 | 2,467 | -6% |
Greensboro-High Point, NC | 989 | 1,403 | 42% |
Winston-Salem, NC | 1,166 | 1,340 | 15% |
| Burlington/Alamance County, NC | 414 | 603 | 46% |
Greenville-Anderson, SC | 2,977 | 3,737 | 26% |
Charleston, SC | 3,971 | 5,273 | 33% |
Columbia, SC | 2,880 | 3,343 | 16% |
Source: Zonda
At the same time, vacant developed lot inventory for new-home construction in both markets has shrunk to less than 13 months of supply, creating even more crowded conditions for builders trying to grow volume and market share. You could also add to that list more competition among themselves. In Charlotte, home builders ranked in the top 20 in new-home closings captured 84% of the market share in 2020. In Raleigh, the top builder list is less top-heavy with 66% of the market share captured by the 20 largest builders, but in some ways that is even more challenging because it also means there are more competitors chasing and bidding on the same land development deals, plus more options from which buyers can choose.
In a recent Zonda Builder Sentiment survey, nearly 90% of the builder respondents from Charlotte stated they were expanding their geographic search beyond their current Charlotte-area footprint. In Raleigh, 78% of builders indicated that they were already expanding their geographic search for land opportunities into additional markets due to the local land constraints and tight lot supply.
PulteGroup, for example, announced plans in January to expand into the Piedmont Triad area of North Carolina midway between Charlotte and Raleigh for what will be the company’s first project in the Greensboro market since the 1990s. Pulte is already within the top five builders in both the Charlotte and Raleigh markets, according to Zonda survey data.
Pulte isn’t alone in this newfound love for the Triad. Meritage Homes has also announced plans for its first Triad-area community opening in late 2021, and Raleigh-based Garman Homes jumped ahead breaking ground on its first product ever in the Triad in 2020. Others, like Greensboro-based Windsor Homes, are going the opposite direction and expanding into Wilmington and other parts of the North Carolina coastline.
“We are seeing a trend going into areas where land is cheaper and entitlements are easier and where they can get lots on the ground quicker,” says Brock Storrusten, vice president and director of the land development division at the Cary, North Carolina-based WithersRavenel engineering firm. “Everybody is buried in work right now.”
Even Apple is establishing itself in North Carolina’s Research Triangle area. The company recently announced that it will spend over $1 billion on a new campus that will employ 3,000 people working on technology including software engineering and machine learning.
Builders from the Charlotte region are taking a serious look at growth opportunities to their north, south, east, and west. “Builders in Charlotte are looking for development opportunities in outlying areas they might not have considered a few years ago,” observes Shaun McCutcheon, vice president at Zonda Advisory and a resident of Charlotte. “Places like Kings Mountain (west of Gastonia), Lancaster County, Lincoln County, and Rowan County are emerging as viable places to build because they are affordable.”
McCutcheon also notes that local builders are considering expansion into other second-tier Carolina markets, such as Greenville/Spartanburg, South Carolina, and Hickory, North Carolina. “Greenville is by no means a small MSA with over 1.2 million population,” he says, “and a few large public builders have entered that market in the past year, with more considering the move.”
Empire Communities, which acquired Charlotte-based Shea Homes North Carolina in February, is among those exploring new areas that their local team might not have considered before, says Mike Shea, regional vice president for Empire Communities’ Charlotte market. “Empire would like to grow its presence in Charlotte, and we are also looking to enter other markets, such as Greensboro and possibly the Greenville/Spartanburg area,” Shea confirms. “Both markets exemplify positive job growth and healthy housing markets.”
It’s a far cry from the knee-jerk reaction that some builders took in spring 2020 when they paused land acquisition deals and slowed development of new lots in an abundance of caution that the pandemic-induced recession might rob their future home buyers of their livelihoods and send the home building market into a tailspin.
But the strength of the North Carolina’s largest housing markets has long been supported by their relative affordability, high quality of life, and favorable migration trends, and those trends will likely only grow stronger as builders open up more opportunities for new-home buyers in the farther reaches of these markets.
