ON THE LEVEL: David Hoffman: Viewing real estate through an economist’s lens magnifies business

24 Feb 2015 · DHG

From The Mecklenburg Times By: Roberta Fuchs David Hoffman is a real estate broker and owner of The David Hoffman Group Inc. Since starting in real estate in 2005, he has consistently ranked as one of the top real estate brokers in North and South Carolina, as well as in the top five percent of all real estate brokers in the United States and Canada. With 18 agents on board, The David Hoffman Group has offices in Ballantyne, Huntersville, SouthPark and, most recently, Charleston, South Carolina. His company, which has partnered with Keller Williams Realty to expand operations and services, closed $56 million in real estate in 2014. That’s nearly double the amount in the previous year. Before moving to Charlotte a decade ago, he worked as an economist on tax policy, with work featured on Fox News, ESPN’s SportsCenter, and NPR. He has also been published in many major newspapers and magazines, including The Wall Street Journal, The Washington Post, the Los Angeles Times, and The Miami Herald. Hoffman graduated from George Mason University in Fairfax, Virginia, with a bachelor’s degree in economics. Hoffman, 35, and his wife Jessica live in Marvin with their son, Kane. Hoffman recently sat down with The Mecklenburg Times to offer his point of view on the current real estate market in Charlotte.

What made you decide to go into real estate? I moved to Charlotte 10 years ago. I was an economist in Washington, D.C., and I was the expert in the taxation of nonresident professional athletes. I had a full ride to law school at the University of Maryland and had a bunch of athletes who wanted to work with me. I had worked on their behalf in fighting this tax. Then my mother passed away of multiple sclerosis. The morning of a big speech I was going to give at a sports and entertainment law conference, I came across a reminder card for an MS walk and I emailed the dean and said, “I can’t do this,’’ and that I had to do this for my mom who had just passed. The next day I realized that this must not be my calling. So I bought a town home in Huntersville sight unseen. I didn’t know anyone except for my agent. I considered selling real estate in northern Virginia, but I felt like I needed a fresh start and wanted to get away from all the terrorism and sniper shootings, the cold weather and the high cost of living. I fell in love with Charlotte. As an economist, I had looked at different markets throughout the country and I really liked the warm climate, the low cost of living and the diverse workforce, with no one job sector having more than 12 percent overall. It was a lot of faith. It worked out. I was an individual agent for eight years and then two years ago started The David Hoffman Group and partnered with Keller Williams International.

What do you do on a day-to-day basis? I’m the owner, but I’ve been selling for 10 years so I’m still very much in the business. But I can only help so many clients at once. So I handle the analysis, staging and negotiating on the listing side. With buyers, sometimes I’m the one showing the homes. Other times I do the analysis and the negotiating. I’m as involved – or not as involved – depending on the client’s need.

Do you cater to any particular socioeconomic client? We never have. We help buyers with $50,000 condos, $5 million estate homes, $10,000 pieces of land and $9 million pieces of land. We’ve gotten national attention for helping people flip homes. We help people with long-term rentals and help others rent homes. We help people from all walks of life. The majority of the flips we’ve done have been in east and west Charlotte, in some lower-income areas that are thriving and improving. We’ve got homes under contract for $1 million and under $100,000, from estate homes to tear downs.

You’ve recently expanded your operations to include Charleston. Why? Charleston is one of the top second-home destinations, not just for the Charlotte area, but for the whole country. There’s an opportunity for anyone who wants to live on or near the beach. It’s got a pretty strong economy. From a real estate perspective, there are so many people from Charlotte that want to be there, and it’s a really transient market. It’s something that I wanted to do for a long time. Now that I’m working with Keller Williams International and its expansion model, it’s now affordable to do it. It’s kind of like having keyman space, but you get the broker-in-charge, the office administrator and the receptionist (from Keller Williams).

What have you seen in the past year or so in the local housing market in Charlotte? I’m glad you said locally because real estate really is microeconomics at its finest. Every community is different from the next. I’m seeing inventory continue to shrink. I’m seeing 6 to 8 percent appreciation, in some areas I’m seeing 15 to 20 percent and in other areas only 2 to 3 percent. I expect this year it will continue to go up. We’ll see a little stagnation over the winter months and in late 2015, but it will pick up again next year. I expect that for the next two to three years, and then we’ll see some leveling off. We’ll probably go into a 12- to 18-month recession. Every seven years you get a recession, so I just expect it again. We’ll probably lose about 15 percent of the growth that we’ve had, but if we’re growing at 6 to 8 percent over the next three years, even then, compounded, that’s a 25 to 35 percent growth. Even if we lose 10 to 15 percent, we’re still going to end up better off than we are today. And then we’ll start growing again. It’s a very healthy market. People from other parts of the country are moving here in droves. They realize it’s one of the least expensive places to live for what it has to offer. This is from a cost of living, salary and quality of life standpoint. There are a lot of options for good jobs.

You believe 6 to 8 percent is a healthy rate of appreciation? Yes, because I expect inflation to be at 3 to 4 percent. Real estate is the best hedge to inflation. You want to buy today commodities that won’t go away after time, such as a house, which should appreciate at least at the rate of inflation.

To what do you attribute home-price appreciation in the Charlotte area? An influx of people who are moving here for jobs. They’re from all walks of life. So if even one job sector went down, there are so many other opportunities for jobs. It’s also the high quality of life. We’re the half-back state, with a lot of people who were looking to retire to Florida and then coming halfway back to retire in North Carolina.

So appreciation is being driven by low inventory and high demand. Why do you think there is such low inventory? When I moved here 10 years ago, I was attracted to the fact that we had healthy growth. Living in Washington, D.C., like many major cities in the early 2000s, there was no inventory so prices spiked. In Charlotte, we still had land, so I saw more healthy growth. We didn’t go up as fast and we didn’t come down as hard. Now what’s happening is people are going farther and farther away because land is drying up. I don’t see as many opportunities today as I did a decade ago for people to build, so there are less opportunities due to a lower supply. So unless you want to be farther and farther away, you’re going to pay a higher premium to be closer in. Demand to move to Charlotte, and North Carolina as a whole, is so strong that they can’t build homes fast enough here for the people who are coming and there’s not enough land. If you want to be close in, a lot of times you are going to be in bidding wars, which raises prices, or you’re going to build whatever the builder wants to sell for. As inflation kicks in, the cost of labor and materials go up and so then prices organically go up as well. There’s very little supply compared with the overwhelming demand to live here.

Why didn’t Charlotte experience the extreme crash in housing prices as in cities such as Phoenix or Los Angeles? We have a very diverse economy and are not relying on just one or two sectors. So if energy takes a hit, we still have finance. If finance takes a hit, we still have health care, services, some manufacturing and tourism. Also, we never got the speculators that were buying in Charlotte like they were in Las Vegas or Miami, where they were buying condos for $200,000 and hoping to sell them a year later for $300,000. Or selling as soon as preconstruction was complete and presales were done. Here, it has just been more of a natural, organic growth. If we have two homes and three people wanting them, then you’ll have an increase (in prices). When the market went down nationally, we did see a drop. But so many people were moving here that the demand was stronger here than in most parts of the country.

How has the market changed here since before the housing crisis? Now, prices are going up to either rent or own a home while wages are fairly stagnant. I think wages are starting to go up and unemployment is below 6 percent. But it’s all relative around the country. Regardless if wages here have gone up a lot or not since the recession, it’s more attractive to own a home here for what you are going to get paid than it will be in most big cities. Most similar-sized cities are going to have higher priced homes with similar salaries. Or maybe the home is 30 percent higher, but the salary is only 5 percent higher. People want to own homes. They got scared during the recession, but now they’re saying, “I have a job. This $250,000 home might be $400,000 in a different city. Even if I don’t get that raise, I can still afford this home.” The percentage of first-time homebuyers has really gone down. When the market was really weak, the government put in those first-time homebuyer tax credits. There are still a lot of first-time homebuyers, but they are starting to buy later. I think technology almost distracts them. There’s a lot of pride in owning a home, in wanting to do yard work and your own projects. I think with all the technology out there, people don’t spend as much time outside or at the hardware store. The younger generation may just start a couple of years later in buying their first home, but it’s still very attractive. A lot more of them are starting their own businesses and careers first and putting all their energy, efforts and dollars into that.

How have institutional investors changed the housing landscape here? They’re smart. They know people are moving here. It’s simple economics. They see the demand create the supply so they’re buying the supply up as fast as they can before prices go up higher because they don’t see demand slowing down. I’ve got a lot of clients who are first-time buyers as well as those in move-up markets, and the investors are pushing prices up. So it’s great for sellers but not the best for buyers.

And if it were no longer economically advantageous to buy and then rent out properties? That would mean that Charlotte implodes. That would mean people didn’t want to live here. I can’t see that ever happening. We have a diverse workforce, so even if one sector of the economy went down we have so many other opportunities for jobs, and a low cost of living that attracts a lot of people. The demand to live in the greater Charlotte area is so strong that if you don’t want to buy a home, you’re going to rent a home. The bigger picture is that as long as people want to move to the Charlotte area, they are going to want to either buy or rent. I think it’s better for most to buy. But even if they want to rent, that’s good for anyone who holds rental properties.

You don’t see them selling off the properties and flooding the market? If they did, they would do that when they feel we’re at a peak. But they’re not doing that so they’re seeing what we’re all seeing, that the market isn’t slowing down anytime soon.

Back to Top