Real Estate Charleston SC: The National Market

If you have been following the news about real estate Charleston SC (and nationally), then you may have heard the word “Bubble” come up.

I’m always preaching that you have to be careful of what the media reports as they tend to sensationalize things and not tell the entire story.

Here are some of the latest facts and statistics to paint the full picture. First, to gain some historical perspective, here is a look at home values over the last 30 years.

 

It is broken down to the 13 years leading up to the bubble, home appreciation during the bubble years, the crash years, and the recovery years to date.

Prior to the bubble, real estate appreciated at a historically average level–3%-4% per year.

If you look back at the prior 100 years in real estate, this is what the average annual rate of appreciation was.

Obviously, things took off during the bubble, and the market had to correct itself.

Since the crash, we have done a nice job of not only recovering, but prospering again. Here is a look at year-over-year appreciation rates (broken down by month) over the last year and a half.

Note that 2014 started off with double digit appreciation, but that dropped down to a rate closer to the historical average by year’s end.

It is important to note that although appreciation rates slowed down, homes were still appreciating.

This was a good thing–the market was correcting itself to an appreciation rate that was healthier and more easily sustainable.

2015 saw buyer demand strong from the start. Traditionally, buyers don’t come out strong until the Spring and Summer.

But that was not the case this year. As a result, demand exceeded supply and home values accelerated.

Inventory has been an ongoing issue for real estate, and that is a big reason appreciation has accelerated.

Home values have increased year-over-year for 39 consecutive months.

So, does all this mean we are heading for another bubble?

Again, let’s get some perspective. Here is another look at home appreciation rates.

This breaks down the appreciation rates of the last year–the last year, the last quarter, and the last month.

But it also shows how appreciation compares to the peak.

Notice, we are still not back to the levels we saw nearly 10 years ago.

This next graph actually breaks down the numbers by state–showing when the peak of the market occurred, and how home values now compare.

So, what do the industry experts believe?

Here are a couple quotes, one from the Chief Economist at Realtor.com and another from the Managing Director of the S&P Dow Jones Indices.

 

I recently posted about the latest Home Price Expectation Survey from the National Association of Realtors (NAR).

This is quarterly report from a panel of industry analysts and experts for their opinion on what home values will do over the next few years.

Certainly they do not have a crystal ball, and unforeseen circumstances can happen, but these projections are from industry experts.

In other words, they are not simply a journalist trying to create the best click bait.

Here are their projections for home appreciation rates through 2019.

They see appreciation leveling off to historically normal levels in the coming years.

Notice that they still see home values appreciating, and that there is no bubble/crash.

So, what does all this information mean?

First, if you are on the ledge, step away! Remember the story of Chicken Little. Unfortunately, there are some Chicken Littles out there right now.

On the flip side, you shouldn’t think everything is peachy keen. There is plenty of good news for the real estate market, and 2015 is shaping up to be one of the best years in a decade.

There are a couple things we need to keep an eye on. Will the gap between buyer demand and available inventory shrink?

Buyer demand does not look to be going anywhere anytime soon. If inventory doesn’t increase to meet this demand, then prices will continue to rise.

This could lead to some buyers being priced out of the market. In some markets, this is already happening.

Wage increases aren’t keeping up with home value increases even though the job market/employment remains strong.

Rising interest rates could also have an impact. Could we see buyer demand cool simply from attrition–buyers getting priced out of the market?

These are things we should keep an eye on, but we shouldn’t lose sleep on them.

They could have an impact, but it is also possible that inventory increases and these issues will not become issues.

One other thing to keep in mind. The real estate bubble was partially created artificially.

In those days, just about anyone breathing could get a loan. This fueled the real estate frenzy and drove up prices.

Thanks to the mortgage meltdown, lenders tightened up their lending guidelines. In fact, they probably over did it.

Mortgage credit has relaxed over the last year, making it easier for people to qualify. However, we will not see a return to the irresponsible lending days that contributed to the bubble and crash.

Real Estate Charleston SC: Local Bubble?

It is best to break things down to a micro-local level, such as city by city.

For this post, I am simply looking at real estate Charleston SC as a whole.

In looking at the Charleston MLS as a whole (and this covers a lot of area), home values have increased by 6.6% from 2012 to 2013.

From 2013 to 2014, they increased by 4%. And so far this year, we are 3.87% over last year.

Overall, that is a healthy growth. Demand remains strong for Charleston, so I do not see a bubble here.

Keep in mind, leading up to the bubble Charleston was one of the top markets in the US. Although we felt the downturn, it didn’t hit us nearly as bad as it did many parts of the country.

Real estate Charleston SC was also one of the first markets to recover. This is not to say that we are immune. However, real estate really is local.

It is important to keep up with the national trends, but it is equally important to know what is going on in our backyard.

Just be sure when you are looking into the local numbers that you are looking at all of the information and facts, and not just skimming through headlines.

If you would like to know more about buying a house in Charleston, then visit my Pam Marshall Realtor buyers page.

You can search the Charleston MLS, download buyers guides, and have a free list of homes sent to you.

If you are thinking about selling, then visit my Pam Marshall Realtor sellers page.

And to keep up with the latest stats from the Charleston MLS, then check out my Real Estate Charleston SC stats page.