This morning, I clicked onto the Charlotte Observer site before my appointment to find a story that non-profits were defaulting on construction loans to build affordable housing.  The observer article recounted that one group in particular, the Northwest Corridor Community Development Corp.. has defaulted on $700,000 in loans from the city after audits revealed the projects were mismanaged.  The group had already received $2.7 million from the city of Charlotte. 

This has me absolutely unhinged this morning.  Why would anyone build anything in that section of Charlotte and call it "affordable housing"  The Freedom Drive, Moores Chapel, West Blvd, and Mountain Island area of Charlotte are filled to capacity with new and nearly new starter homes that are now in default and some boarded up.  These homes sold as early as 2 years ago for $120,000 and now are for sale for between $30,000 - $80,000 depending on condition.  There are thousands of these properties available that are empty and need to be occupied and yet the city is funding groups to build more?!? 

Charlotte's working poor have been among the hardest hit with foreclosures.  Areas to the Northwest, Southwest, and the East and Northeast sides of town, that had heavy pockets of new construction starter homes, lead the city in foreclosures by far.  Flip open one of the dozens of binders filled with default noticed in the Special Proceedings office and you'll see that Charlotte's starter home market will continue to see record levels of defaults and continued bargains in the REO market for at least this next year. 

We're not alone in this by any stretch of the imagination.  Cities in California, Florida, Arizona, and Nevada have experienced a serious deflation in the prices of starter homes.  In Phoenix, some starter homes on their second round of defaults are selling for 24%  of their 2006 prices.  While Charlotte never experienced the same run up in appreciation that the bubble markets did, I am still finding properties in abundance for investors who are taking advantage of these all-time low prices.  In fact, some investors, burned by the stock market, are content to turn their properties over to the government for Section 8 and receive a far greater return than any bank or the market is paying currently.  With Section 8, the local government places a family in a home and will pay up to a certain limit to the owner each month.  The owner can elect to charge above and beyond that amount however at the prices of some of these properties, it isn't necessary. 

So while the city of Charlotte continues to waste all of our money building more homes unnecessarily, I guess myself and other smart investors will continue to ACTUALLY help the community by purchasing these properties, finding good tenants, and increasing the character of these communities. 

Charlotte NC Homes