Homes For Sale Charleston SC: Negative Factors In The Market

Homes For Sale Charleston SC: Potential Speed Bumps To A Hot Market

Over the last couple weeks, I have been looking at the market numbers for homes for sale Charleston SC, as well as the national numbers.

Overall, there are many good signs that suggest we could see a very good year for real estate.

homes for sale charleston sc


Home sales have exploded so far in 2015, and are well above last year’s levels in many cases.

Pending Sales are also well above 2014. Home values are continuing to rise as well.

In fact, for several areas of the Charleston SC real estate market, we are seeing numbers that are the highest since the real estate boom of a few years back–highs not seen since 2010, 2008, and even 2005.

In a few instances, we are seeing highs that we haven’t seen in over 10 years, if ever.

2015 has come close to or exceeded 2014 peaks already for many parts of Charleston. Yet, we still haven’t hit our peak late Spring/Summer months when we typically see the highest numbers of the year.

Overall, things are looking very promising for both the national and local market. In a previous blog post I described in greater detail how 2015 could be a big break out year.

Despite all of the good news and good indicators, there are still a few obstacles on the horizon that could have a negative affect on the real estate market.

Don’t mistake this post for saying things could lead to a crash like we saw a few years ago–I’ll leave that kind of headline to the sensationalistic media to report.

Rather, these obstacles could slow the market down to where we would still have a good year, but not quite what the potential looks like right now.

Interest Rates

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Currently, interest rates are around 4% or just under.

The good news is rates were expected to increase this year, and they are actually lower right now than they were projected to be.

The bad news is that they are still projected to increase over 2015, by as much as a full point or more.


Of course, that remains to be seen. The Fed met this week, but did not raise interest rates. With interest rates near their all time low, this is a great time to buy a home–whether it is your first, or if you are moving up.

homes for sale charleston sc


With the hold on rates for now, this is good news for the housing market.

However, this is still something to keep an eye on going forward.

But, will an interest rate hike have a negative affect on the housing industry? Perhaps not as much as we think.

A recent study by the Federal Reserve Bank Of New York surveyed would be first time buyers (i.e. renters) and found that the biggest issue for them was not interest rate, but down payment.


homes for sale charleston sc


For the last couple years, home values have skyrocketed.

We have moved well beyond a simple recovery. In 2013 we saw double digit percentage increases in home values month after month.

In 2014, home appreciation slowed down. Homes were (and still are) appreciating, but at a slower rate.

This is good news as the market is correcting itself and slowing to a more normal, sustainable rate of growth.

However, home values have greatly outpaced wage increases. The fear is that this will catch up to us and make homes less affordable.

Basically, the pool of buyers will shrink because they are priced out of the market.

Based on the latest housing numbers (Closed Sales and Pending Sales), that doesn’t appear to be a problem yet.

However, in the last couple months the rate of appreciation has ticked upward slightly. Not enough to panic, but worth keeping an eye on.

homes for sale charleston sc

Certainly this didn’t have an impact as recently as this time last year–home sales have remained unaffected.

So, would a slight increase in home prices really have that much an impact?

By itself, it might take some time. But, compound rising home prices with a rise in interest rates, and you now have buyers getting hit from both sides.

Either one could have an impact, but combined, and that could pose a serious threat to the housing market. Here is an illustration of that affect:

homes for sale charleston sc

If a home buyer wants to keep their monthly mortgage payment around $1400/month, this is what happens as interest rates rise.

Their price range shrinks in order to keep their payment the same.

Combine this with rising home prices, and you can see how a buyer can lose purchasing power when rates rise, home values rise, or when both happen at the same time.

  homes for sale charleston sc A recent forecast from the Hay Group predicts an increase in wages of 5.4%. However, this was their prediction for Global Wage increases.


For North America, wage increases are projected at 2.8%.

With home prices projected to increase by 3.7%, this will help close the gap.

But will it be enough? Especially seeing that home prices were rising at a 4.6% rate as recently as January?


Right now, inventory is the biggest hurdle for the real estate market. Buyer demand is strong, and has been.

However, there simply has not been enough inventory to meet the demand. For most of 2013, 2014 and into 2015 we have been in a sellers market (under 6 months inventory) nationally, and also for most parts of Charleston SC.

homes for sale charleston sc


6 months inventory is considered a normal, or neutral market.

Despite the demand, inventory levels have actually continued to drop.

In fact, national inventory levels have declined year-over-year for each month of 2015 so far.

This is a big reason appreciation rates have accelerated again.

If you look at the Case Shiller graph above to see appreciation rates over the last year, you will see that appreciation was being reigned in closer to a more normal rate of 3%-4%.

However, due to lack of inventory, that number is starting to trend upward again.

There is good news on this front. New Construction builders are well aware of the demand that is out there and have ramped up their efforts to contribute to the inventory.

homes for sale charleston sc


In fact, new home sales are also exploding. For the first time since 2008 new home sales exceeded 500,000 units for 2 consecutive months in January and February of 2015.

The bad news is the inventory of homes for sale Charleston SC are decreasing.

Here is a look at the number of Active listings for homes for sale Charleston SC over the last year:

Inventory remains the biggest obstacle for the real estate market nationally. It also is the biggest obstacle for homes for sale Charleston SC.

Charleston is a hot market, and it doesn’t appear that home sales or values will be decreasing as we move into the Summer selling season.

But could this lead to slump after the Summer? Between buyer demand and seller supply, one or the other has to give, and it doesn’t look like the buyers are going away any time soon.

If you are searching homes for sale Charleston SC for your next (or first) home, then visit my Pam Marshall Realtor website.

You can search the Charleston MLS, read more informative articles, watch helpful videos, download Buyer Guides, as well as sign up for a free list of homes emailed to you and updated with the hottest listings.

If you are thinking about selling, then visit my Pam Marshall Realtor sellers page and learn more about my internet focused marketing strategies.

Even in a hot sellers market, there are some things you must do to get sold, including hiring the right listing agent!

If you want to see the latest MLS stats for Charleston SC, then check out my Charleston SC real estate stats page.


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