Houses For Sale Charleston SC: Good News Now, Caution On The Horizon
There’s some good news for real estate nationally, and we will take a look and see how it affects the houses for sale Charleston SC.
First, the recent S&P/Case Shiller Home Price Report showed that US home prices increased 4.5% year-over-year for January.
Last January home prices increased 10.5% year-over-year. The slower rate of appreciation hasn’t been seen since late 2012.
However, that is still good news. For one, the rate of appreciation continues to level off to a healthier, more sustainable rate long term.
It also means homes remain affordable as wages remain stagnant.
Kathleen Madigan at WSJ.com wrote in her article “Home Price Growth Moderates, But Affordability Still Faces Headwinds“:
“Despite the slowdown, would-be buyers won’t necessarily find bargains as home values are still outpacing the average pay raise.
According to Labor Department data, the average hourly wage of private-sector employees increased 2.2% in the year ended in January.
Economists expect the March employment report to be released Friday will show wage growth remained around 2% for this month.”
Rising home values are good for the overall health of the housing market, but wages and interest rates are two important factors to monitor going forward.
Home prices have risen at nearly double the rate of wages.
The Fed is expected to raise interest rates later this year, and this double whammy of higher rates and stagnant wages could wind up having a detrimental affect on the housing market. Many would be buyers could be priced out of the market.
There is some more good news, from the National Association of Realtors (NAR). The Pending Home Sales Index increased by 3.1% in February to it’s highest level (106.9) since June of 2013 (109.4).
This index has increased year-over-year for six consecutive months, and is above 100 for the tenth consecutive month.
(A level of 100 is considered an average level of activity. You can read more about the Pending Home Sales Index methodology here.)
Sizable gains were seen in the Midwest and West, which offset small declines in the Northeast and South.
It appears that the pent up buyer demand has started to be released into the market. However, inventory is still a concern and continues to hold back the market.
NAR Chief Economist Lawrence Yun discusses this in greater detail in this video:
As I mentioned, Pending Sales numbers saw slight declines in the South, so how are things in Charleston? Here’s a look at the latest Pending Sales:
The national trend holds true for houses for sale Charleston SC as well. The Pending Sales numbers have shot up so far in 2015.
In January there were 1184 Pending Sales, and February saw 1486. That’s the highest they have been since June 2006, and 42.5% higher than last February.
Here is a look at the Average Sales Price:
That number is actually down, from $301,198 in January to $287,190 in February. It is above February 2014, which saw an Average Sales Price of $283,907.
Keep in mind the S&P/Case-Shiller report showed an year-over-year increase in January of 4.5%. Looking at Charleston, we saw a 3.14% increase year-over-year in January, and for February it was 1.16%.
With national inventory still low, here is a look at the current Months Supply Of Inventory of houses for sale Charleston SC:
That number continues to drop, down to 4.6 Months Supply.
We are entering the traditional time of year for houses to be listed, so hopefully the inventory will start to catch up to the demand. A normal real estate market will have a 6 or 7 month Supply of homes.
With home values and Pending Sales numbers up, there is some good news out there. However, we must temper this optimism as we watch how the market plays out.
Lack of inventory, slow increases in wages, and interest rate increases could work against the market and cause things to slow down:
““Home prices are rising roughly twice as fast as wages, putting pressure on potential home buyers and heightening the risk that any uptick in interest rates could be a major setback,” said David M. Blitzer, chairman of the index committee for the S&P Dow Jones Indices.“
Another factor to consider is the rental market. According to the US Census Bureau, rental vacancies are the lowest they’ve been in 21 years, and as a result rents keep moving higher.
In fact, many renters are entering the market to buy a home because they will pay less for a mortgage.
However, these renters are also facing the squeeze of slow increases in wages which makes rents less affordable.
It is possible they could find themselves priced out of both markets. With these possible setbacks on the horizon, first time buyers should act quickly to purchase a house.
Of course, the limited inventory also works against them. This puts a lot of pressure on them to find something and act quick before prices and rates increase to a point that they cannot afford to buy a home.
For home owners, now is a great time to list. Buyers are out in full force, and with buyers aware of impending rate increases, that demand could create a frenzy over the course of Spring.
Sellers who wait might lose out on a big chunk of buyers once interest rates increase.
Whether you are looking to buy or sell houses for sale Charleston SC, bee sure to visit my Pam Marshall Realtor website to help you.