Charleston SC Real Estate: Sellers Perspective
As part of my ongoing series of posts looking at the latest national numbers, today I am looking at how they apply to sellers in the Charleston SC real estate market.
If you read my previous post (here), then you know that buyers are out there and demand for housing is high.
You also know that you can’t blindly trust what the media says about what is going on in real estate. Case in point–national headlines talk about home sales dropping in January despite interest rates remaining low.
This is a perfect example of the media only reporting part of the story for maximum headline effects.
While it is true that home sales declined from December to January, if you listen to the media you get the impression that the housing market is doing badly. But here is a perfect example of this not being the case.
This graph compares home sales in January of 2014 to January 2015:
Yes, home sales did drop. However, they are also over what they were last January.
In fact, there were 200,000 more homes sold in January 2015 than in January 2014.
The fact is, buyers are out there and are ready to buy.
Part of the problem is the fact that we simply do not have enough inventory of homes for sale to meet the demand.
Here is another graph that shows there is plenty of demand for houses:
This is a look at Pending Sales, an indicator of future sales.
These are homes currently under contract and will be closing in the next 30-60 days.
Compared to the same time period as last year, the number of homes under contract is way up.
So, how does this information impact home sellers?
First, let’s look at home values to see how they are doing.
By definition, in a Sellers Market home values go up.
Right now, we as a nation, as well as here in Charleston, have been in a Sellers Market for much of the last year.
Here is a series of graphs breaking down home values state by state. There’s a look at price changes year-over-year, quarter-over-quarter, and down to month-to-month:
In one year, South Carolina has seen a 6% increase in home prices. Between the last two quarters we saw an increase of 1.6%. Over the last month, South Carolina saw an increase of 2.3%–the national average was just 1.1%.
Here is another look at home values. This graph shows what month was the peak for each state, and current prices compared to peak levels:
April of 2007 was the peak of the market for South Carolina.
Right now, we are still 4.6% below that level.
Nationally, the peak was April of 2006, and we are 12.7% below that level.
So, the good news is we are almost back to the levels we hit during the big real estate explosion.
However, this information is important to hear the full story.
In the hands of the media, it would be reported in a negative light.
That is, we are heading for another bubble and crash. In fact, I have seen headlines asking “Is housing forming another bubble?”
One thing that lead to the bubble and the bursting of the bubble was runaway appreciation. Here is a look at the year-over-year rates of appreciation broken down by month:
You probably have already read headlines over the last 6 months to year talking about appreciation being down.
By the way this news is reported, many falsely believe that homes are depreciating and the market has cooled off.
However, just by looking at the state-by-state home prices graphs, you can see that is not the case.
What this graph shows is the fact that throughout 2014, home values continued to increase.
What changed was the rate of appreciation–homes are still appreciating in value, but the rate at which they are appreciating has slowed down.
This is actually good news. Double digit appreciation is something that cannot be maintained for a healthy real estate market.
This is exactly what lead to the bubble bursting a few years back. The graph above shows a basic Economics 101 principle at work–a market correcting itself to a more normal, healthy, and ultimately more sustainable rate of growth.
The last month, December, shows an increase in appreciation, and that is something to keep an eye on. If appreciation rates start increasing again, that could lead to trouble.
However, this is something to watch over the next few months. One month is not something to get uptight about.
Of course, with much of the media, they would take one months worth of information and blow it out of proportion.
That is why it is important to gather all the available information and look at the entire picture, rather than just one small perspective.
Here is a look at the Months Supply of Inventory:
Keep in mind, anything less than 6 Months of Inventory is a Sellers Market.
In a Sellers Market prices go up, as you can see in the previous graphs.
Like the previous graph, it will be worth watching these numbers.
January saw a rise in the Months Supply, and that could be a sign of returning to a normal market.
Of course, December saw a big dip, so it could simply be a correction from that.
But, it still illustrates the point that we need more inventory out there. In fact, this next graph better illustrates this:
The fact that year-over-year Inventory Levels have dropped for two consecutive months is something to worry about.
This trend needs to head in the other direction.
It is possible we will see this number recover since many sellers will list come Spring (over the next couple months).
However, smart sellers will know that demand is out there now, and there is little competition.
Buyers aren’t waiting for Spring, and smart sellers shouldn’t either.
With demand there for homes, we simply need more homes on the market.
Given the current market, if you simply list your home for sale, it should be an easy sale, right?
Not at all. Even in this hot market, it is important that sellers still price their home correctly, from the start. Buyers may have a limited inventory, but they are still overlooking homes that are over priced.
Another factor would be sellers must be aware of is new construction homes. Builders are coming back strong nationally and present strong competition for home sellers.
In fact, new home sales are up over last January by nearly 25,000 homes.
Builders are seeing what is happening in the market and are striking while the iron is hot.
Along with sales, the Months Inventory for new construction homes is also up:
This next graph really drives home two points.
First, sellers will face competition from new construction homes.
And second, there is a lack of inventory available to buyers in the marketplace:
Notice one of the most given reasons buyers bought a new home: a lack of inventory of existing homes.
It is also important for sellers to realize that many buyers are willing to pay a premium to get a brand new house.
The next graph shows the median price for all homes, new homes, and existing homes:
That’s quite a difference. However, this is not intended to be a scare tactic–I’ll leave that to the media.
Rather, I think it is important to provide as much available information so people can make informed decisions about real estate.
When trying to determine what is going on in the real estate market, it is important to have the proper perspective on things.
And that is hard to do when you only get a small piece of story.
One last graph I shared in my previous post that will show people that are thinking about listing their house that the buyers are out there:
This information is from Google Trends and shows the “share” a certain search term received compared to every other search.
In this case, it is a look at the search term “buying a home” from last January and this January.
Keep in mind, this is a share of the searches and not the actual number of searches.
Stay tuned as I will continue to dive into the latest national numbers by looking at the latest Price Expectation Survey, look further into new construction and also look at the local numbers to see how we are doing in Charleston compared to the national scene.
In the meantime, if you are thinking of selling, now is a good time to do it.
If you are thinking of selling (or buying) Charleston SC real estate, then bee sure to visit my Pam Marshall Realtor website.