Realtor Advice Charleston SC: Why Buyers Are Out In Numbers Right Now
This is the second part of my Realtor advice Charleston SC post to show sellers in the Charleston SC real estate market why they shouldn’t wait until Spring to list.
In my last post I explained the main reason is because buyers are already in the market looking for homes.
Typically, Spring is time of year people start listing their homes for sale in Charleston SC. Here is a look at home listings nationally for 2014:
In Charleston, new listings peaked earlier for both 2013 and 2014–the biggest month for new both years was in March:
However, there is something different in the market this year from last year: starting in August of 2013 home sales took a big drop that carried over into 2014.
But, 2014 was different in that we didn’t see the drop off–in fact, sales were up over the same period:
So, this time last year home sales had dropped off and didn’t start to rebound until April of 2014. As you can see in the graph, this didn’t happen at the end of 2014 and into 2015. Instead, home sales have remained strong.
In my last post I showed that Pending Sales and Foot Traffic were both up dramatically over this time last year.
I also showed that the Average Months Supply of homes dropped in December, down to 4.4 Months nationally and 4.5 Months in Charleston SC.
Basically, there is a lot of demand for houses, but not enough supply to meet that demand. In other words, home buyers aren’t waiting for Spring to come, they are already out ready to buy now. But why?
This can be partly explained by pent up demand. For most of the last few years we didn’t see as many buyers because there simply wasn’t that many.
People were still nervous about the real estate market after the bubble burst, so many people saw what happened in real estate and didn’t trust the market.
Many home owners found themselves in a negative equity situation, and simply couldn’t sell (unless they did a short sale).
This meant we lost out on an important component of the real estate market–move up buyers. People simply couldn’t buy their next house because they couldn’t sell their current house.
As a result, the average amount of time that people held onto their house increased. In years past, people lived in their homes for 6 or 7 years. But thanks to the bad economy, that changed:
In a recent post I compared the auto market to the housing market.
Because of the economy, people also held onto their cars for longer than the traditionally had.
But, with the economy improving and more jobs being created, consumer confidence is growing. In fact, it is at it’s highest level in 11 years:
As a result, in 2014 more people bought new cars.
It was a resurgent year for the auto industry, and by all indications, 2015 can be a similar “breakout” year for the housing industry as well.
But there are other factors bringing out the buyers. Many would be home buyers recognize the value of home ownership.
Rents aren’t getting any cheaper, and many renters see the value of having a mortgage payment as opposed to a rent payment.
First, either way you are paying someones mortgage.
But more importantly, rents go up over time, but if you get locked into a 30 year mortgage, your housing payment stays the same over that period of time.
First time home buyers are recognizing the benefits of home ownership over renting.
In a recent Freddie Mac survey of renters provides insight to the mindset of renters in today’s market.
First, there are the financial aspects: home ownership provides protection against rent increases, it is an investment to build wealth, and it allows home owners to provide financial security to their families.
Then there are also the non financial reasons to buy:
Another statistic that shows buyers are back is a look at new household formations:
As you can see, new households created far exceeded the previous Decembers, as well as the historical averages.
This data doesn’t simply mean new home owners–it includes people moving out of their parents basement and becoming renters. However, more renters are moving towards buying a home.
One factor that is motivating renters to become home owners is mortgage credit availability becoming less and less strict.
The last few years qualifying for a mortgage was not easy.
After the mortgage meltdown and housing market crash, banks tightened up their lending guidelines.
In the years leading up to the crash, getting mortgage money was easy–almost too easy.
As a result, the banks reacted (overreacted) by tightening up their guidelines making it much harder to get a loan.
But, now the banks are seeing that they maybe over-corrected and are making loans a little easier to get.
The Government has helped in this regard by reducing the Mortgage Insurance Premiums for FHA insured loans. This reduces the monthly payment for buyers, as well as the amount of interest paid over the life of the loan.
FHA also reduced their minimum required down payment to pre-meltdown levels. The minimum required down payment had been 3.5%, but now stands at 3%.
All of these factors have helped to bring more buyers, especially first time buyers, into the marketplace.
First time buyers should not be overlooked. They are out there. The Millennials are a large number of current and future buyers.
In the Freddie Mac survey of renters, it looked at renters that said they are planning to buy a home in the next three years. Here are those results, broken down by age groups:
The middle group is the Millenials, however the other age groups shouldn’t be overlooked. Most of these will be first time home buyers.
First time home buyers are an important component of any real estate market, but they are already showing that they are impacting this current explosive growth cycle we are seeing over the last couple years.
In 2014, first time home buyers made up 46% of the market:
And this is how it all ties together: renters see that buying a home makes better financial sense than renting. Market conditions are favorable to buy a home.
Mortgages are easier to qualify for, and lenders are offering better enticements to attract buyers.
These renters are turning into first time buyers, and as a result, need homes ideal for them–starter homes, smaller homes. And that is what leads us to current home owners.
However, that is no longer the case, as the majority of home owners are now in a positive equity situation.
But they are also in a good situation because there is demand for their houses.
As a bonus, the market is great for buyers–homes are continuing to appreciate at a nice pace.
2013 saw explosive, double digit growth in home appreciation. 2014 continued to see home values rise, although not at the same pace. But that is a good thing, as the market is still appreciating, and doing so at a sustainable, healthy rate.
Home values do not appear to be heading anywhere but up for the next few years.
So, sellers are in high demand right now and can turn around and get a new home that is bigger, in a better location, or simply better suits their current lifestyle/tastes.
Then, you will continue to benefit from appreciation, but more of it by virtue of owning a more expensive house.
Plus, interest rates are still hovering around historical lows, so you can buy more house for less.
It is possible that some home owners got a mortgage a couple years ago when rates were at rock bottom.
And, it can be tough to give up that rate.
However, rates are still historically low, so you can still benefit.
March has been the peak month to list in Charleston SC the last couple years.
However, if you wait, you will be listing along with all of the other sellers. This means more competition. The stats show that buyers aren’t waiting for Spring, and Charleston home sellers shouldn’t either.
If you are thinking of selling your home, then take my Realtor advice Charleston SC: visit my Pam Marshall Realtor website and make sure you list with the right agent!