Charleston SC Real Estate: How The Market Really Is (For Buyers)
When it comes to news about the national and Charleston market, you have to be careful where you get your information from.
National and local media tend to report only the bare minimum, and when they do they tend to sensationalize it for maximum effect.
This is not a new topic for me to cover, but as always, it is important that when trying get a feel for what is going on in real estate, both locally and nationally, you get the full perspective (and not just a sound bite or headline).
Take for instance this recent headline:
Now, here is a look at national sales broken down month by month over since January 2012:
If you notice, from December 2014 to January 2015 the number of home sales did decline. So, reports of home sales being down are actually accurate then, right?
Let’s dive into some truth and perspective, shall we?
Let’s take a look at home sales compared to this time last year:
Both end of 2013 and end of 2014 saw home sales on the decline going into the end of the year, although both saw a spike in December. Both 2014 and 2015 saw a decline in sales to start the year.
However–notice that home sales are still above where they were last year. In fact, there was an increase of 200,000 homes sold in January 2015 compared to January 2014.
Why isn’t this being reported by the media?
This is a prime example of why buyers and sellers need to be aware of what information they are listening to.
You need to make sure you are getting all of the information, not just snippets. You need the truth, the whole truth and nothing but the truth.
So, here is some more information about what is going on in the real estate market, so buyers and sellers can make informed decisions.
Headlines like the one at the top can cause many would be buyers back onto the fence, causing them to think they already missed a great buying opportunity.
However, this is still a great market to be a buyer or seller.
More on that in a minute, but first, let’s continue with the statistics.
Want to have an idea of where the market stands, and where it might be headed? Then you need to look backwards–and more than just the last couple months.
Here is another look at home sales since January 2012:
You probably noticed that big red arrow. That shows that home sales declined starting in September 2013, and didn’t start to increase until April of 2014.
So, of course the real estate market (both national and in Charleston) crashed and burned, right?
Go back up to the second graph showing the home sales through January of 2015.
Although sales did decline in January, they managed to come back up close to where they were in 2013.
This is important information for potential home buyers. If there is any doubts they have about the current real estate market, then this can cause them to hesitate, or worse, cancel their plans to purchase.
This would be a big mistake–the current available data suggests that everything is fine with the real estate market.
Here is a look at Pending Sales, an indicator of future sales:
Notice that Pending Sales are, and have been, above what is considered a healthy level historically. Here’s another look at Pending Sales, over the last few months, compared to the same time last year:
Again, notice how much above last year we are. Yet, you haven’t heard this from any of the media. Want more?
Here is a look at Foot Traffic. This is a count of people actually out looking at homes:
Some of the busiest months in 2014 were in the last half of the year, and those numbers are continuing to do well in 2015.
Here’s some more positive signs going forward. Here’s a look at Buyer Activity for this past January, compared to January of 2014 (courtesy of the National Association of Realtors):
OK, so you can’t trust the media. You might be a little hesitant to trust something from the National Association of Realtors. So, what about a reliable source like Google?
This information comes from Google Trends, and this does not reflect the number of searches performed. Rather, it shows the share the search term “buying a home” had compared to every other term people searched for.
So, the real news is the buyers are out there, and demand remains high. Future Sales are looking good, and it appears most of the real estate numbers will continue to rise. In fact, I don’t expect you to take my word for it, here’s what the experts say:
This information comes from the latest Home Price Expectation Survey, a quarterly report on the state of the real estate market.
This report polls a panel of over one hundred economists, real estate experts, and investment and market strategists to determine projections for where the market is heading.
The above graph shows the mean projections for home appreciation over the next few years. Mean projection is exactly the halfway point of all projections–some have projected higher numbers, some lower.
But it is also interesting to see a further breakdown of these numbers:
This is the cumulative appreciation through 2019 by this panel. The most optimistic prognosticators think we will see almost 30% appreciation in house values through 2019. The mean projection is 19.3%.
But then look at the Bears, the most pessimistic (or conservative) projections of the panel. The most pessimistic experts still predict that housing will see a 11.7% increase in value through 2019.
So, is it all sunshine and rainbows for real estate?
There are some factors that could hurt the market, especially for 2015, and especially in Charleston SC.
Misconceptions about mortgage qualifying, the amount of down payment needed, Millenials attitudes towards home buying opportunity, and buyers not coming off the fence due to false concerns in the market all can keep real estate from having a great year.
However, there is one thing that is really holding back real estate, and is also a big factor in the sales decline you saw from September 2013 to April 2014: Inventory. Rather, a lack of inventory.
I will be discussing this in greater detail in a future post, but bottom line, there isn’t enough inventory out there to meet the demand.
Here is a look at the Month Supply Of Inventory:
Anything under 6 months indicates a Sellers Market, which is where we have been for some time. The fact that number increased in January is actually a good sign.
Simply put, we need more inventory. We are not yet back to the historically healthy, “normal real estate market” level of 6 months, but we obviously took a big dip at the end of 2014.
For would be home sellers, it is a great time to list (but that is for an upcoming post).
For buyers, it means competition is fierce. If you find a home you like, you need to move quickly on it because it simply won’t last.
You could even find yourself in a multiple offer situation–basically a bidding war.
Besides having a limited selection to choose from, another way this situation hurts buyers is that when demand exceeds supply, prices go up.
This is great for sellers, but might be a reason buyers shy away.
However, with home values looking to remain on the increase in the coming years, smart buyers know that they can have that working for them–by building equity, which builds wealth.
In the next few days I will cover in greater detail many of the topics I touched on in this post.
But for today, it is important that you understand two main points:
1) Do not rely on the media for your real estate news. At least, don’t just hear the headlines and sound bites and take them for the gospel.
Always look at the whole picture, and be sure to keep the proper perspective.
2) Buyers should not take the latest headlines and use them to form a decision as to whether or not it is a good time to buy.
Get all the facts and make an informed decision. As always, buyer beware!
Stay tuned as I cover in depth the current state of the real estate market–both nationally and locally.
I will break down the latest data and show you what it means, and how it applies to you whether you are buying a house, selling a house, or both.
In the meantime, visit my Pam Marshall Realtor website for more information about Charleston SC real estate.