Charleston Real Estate: Factors Working Against Buyers

If you are looking at buying Charleston real estate, you may be aware of some factors working against you.

However, there are also many things working for you to be aware of.

In a previous post, I discussed the current state of interest rates and other factors working against buyers in more detail.

One thing that is happening in real estate, both nationally and locally, is the fact that buyer demand far exceeds the supply of homes for sale.

While inventory has improved over the last couple months, it is still not keeping up with demand.

This is causing home prices to accelerate at a faster pace than they were towards the end of 2014 and early 2015.

Buyers that choose to wait until later this year or next year to buy will find that homes are more expensive.

As a result of the strong demand, we are experiencing a sellers market. Sellers have more leverage right now than buyers.

Many home sellers are seeing multiple offers on their home.

Obviously, this is bad for buyers because they lose negotiating power, and many buyers are missing out on houses they really want because some other buyer wins the bidding war.

Another factor working against buyers is rising interest rates.

Rates have crept up the last few months, and have risen above 4%. The Fed is expected to raise rates towards the end of Summer or early Fall.

Most industry experts have projected interest rates to be around 4.75% this time next year.

This works against buyers because this means a higher monthly payment. This too will cause buyers to be able to afford less house if the longer they wait to buy.

I shared this infographic in my last post, but it perfectly illustrates how buyers lose purchasing power when both rates and home prices increase.

The example shows a buyer that wants to buy a $200,000 home and wants to keep their mortgage payment around $925/month.

As interest rates and prices increase, in order to keep the monthly payment about the same, the graph illustrates how much purchasing power the buyer loses:

There are also factors working against first time home buyers.

The price of buying a home is only increasing the longer they wait to buy.

However, owning a home is cheaper than renting in the Charleston SC real estate market (more on that later).

But first time buyers are in a bit of a jam. Rents are only going up, and rental vacancies have been at or around a 21 year low.

Renters pay a higher percentage of their monthly income towards a rent payment than home owners do towards a mortgage payment.

This can make saving up for a down payment more difficult.

Which leads to another thing holding back buyers, especially first time buyers.

There is still a misconception amongst would be buyers that they must have at least a 20% down payment in order to buy a home.

Other buyers mistakenly believe they must have near perfect credit to purchase. Neither of these are true.

Charleston Real Estate: Factors In Favor Of Buyers

Ok, so far I have covered many factors working against buyers in today’s Charleston SC real estate market.

But this post is titled “Buyer’s Advantages”. So, what factors are working for buyers in today’s market?

First, while interest rates are on the rise, they remain close to their historic lows.

 

Right now is the cheapest time to own a home in decades.

The next graph shows the average monthly payment over the last couple decades on a median priced home:

 

Home ownership is also cheaper than renting because home owners are spending a smaller percentage of their monthly income on their housing payment.

This has traditionally been the case, but the gap between renters and owners is much larger today than it has been in decades.

As I mentioned before, renters are facing a pinch–home prices are increasing, but so are rents.

Many would be buyers do not feel they are qualified to buy.

According to a recent survey by the Federal Reserve, these were the two biggest factors cited by would be buyers.

In the report, buyers felt that they needed excellent credit in order to qualify for a mortgage.

The respondents felt that a credit score of at least 780 was required to get a mortgage.

However, that is not the case.

 

 

One advantage buyers in today’s market have is the fact that mortgages are easier to qualify for than they have been in years.

The required credit score has dropped.

In fact, the next graph shows the average credit score for both FHA loans, as well as Conventional loans:

 

 

 

 

 

The other factor holding back buyers is the misconception that you need at least 20% for a down payment.

That is just flat out wrong. Since the end of last year, both Freddie Mac and Fannie Mae decreased their minimum required down payments from 3.5% to 3%.

As a result, we have seen the number of new mortgages with 3% (or less) down payment increase.

Additionally, both Freddie and Fannie have decreased their mortgage insurance rates.

Mortgage Insurance is required on loans that are for more than 80% of the value of the home.

This is a common charge for home buyers, especially first time buyers.

 

This charge is added to their monthly mortgage payment, so the decrease actually helps buyers to be able to afford a little more home.

The fact of the matter is, the majority of renters would prefer to own.

 

According to a recent Ipos survey, 81% of renters said they would prefer to own their own home.

So we know renters would prefer to own. We also know that buyer demand remains strong.

While there are some disadvantages buyers have out there, there are also many things working in their favor.

Buyers in today’s market have advantages that buyers didn’t have even just a couple years ago.

If you are looking at buying a home in Charleston SC, then the internet is a great resource for information.

Another great resource is my Pam Marshall Realtor website. You can search the Charleston MLS, there are home buying guides you can download, as well as informative articles and videos.

You can also see the latest statistics for all of Charleston, as well as each city. You can also sign up for a free list of homes that matches your criteria.

This will save you a lot of time and aggravation searching all over the internet only to find incomplete or outdated listings.

You will receive updates to your inbox of the latest and best listings, giving you a leg up on other buyers.

Despite the advantages that are out there for you, one thing working against you is the competition.

Take advantage of this great resource to help make the home buying process easier and less stressful.

Simply visit my Charleston real estate website today to get started.