Is the Charleston Market Close to the Edge of Collapsing? In this September 2024 Charleston Real Estate Market Update we are going to investigate the national numbers. (Charts with Black Background) Then take a look at the local numbers affecting the market. (Charts with a White Background)
Micro-Market
It’s important to understand that the Charleston Real Estate Market is what is considered a micro-market. A micro-market is one of many markets that make up a much larger market within the real estate market. And, with that said, each neighborhood has its own market dynamics that affect the sales in that area. However, you will notice is that the local numbers in the Charleston area look similar to the national numbers. So, let’s take a look and see if the Charleston market is close to the edge of collapsing!
Inflation
First let’s look at the Bureau of Economic Analysis recently published numbers on inflation. Some of this may be surprising to you and some of it may not be.
Since the Fed began its process of raising rates, they have effectively lowered inflation. However, some of the impacts of this are still lingering in our everyday world of personal consumption. The following charts from the Bureau of Labor Statistics offer an interesting look at some of the impacts we are dealing with.
It’s not all bad news. Some items that have dramatically risen due to inflation. Then have begun to fall in 2024. And, I’m sure we can all agree they are not falling fast enough!
According to the Bureau of Labor Statistics, many of the goods and services we rely on everyday are still rising!
Interest Rates
The general consensus is that the Fed has cooled the economy enough and will soon begin to slowly reduce rates. Below is a chart of the history of our interest rates on mortgages. Still below the historical average between 1972 and 2023.
As we consider whether the Charleston market is close to the edge of collapsing, two things that are important when we look at mortgage interest rates. The rising rates have reduced the amount of home a homebuyer can buy. Second, folks that bought a home when the rates were low, are less interested in trading up their home. Many people are reluctant to give up their current low-interest rate mortgage for a higher rate loan. This dynamic has slowed the number of sales by reducing the number of homes coming to market. This low supply has ultimately caused home prices to continue to rise. So now, home buyers are buying higher priced homes and paying higher mortgage rates too! But rates are still well below the historical average between 1972 and 2023.
Buyer’s that wait for rates to go down may end up paying a higher price for a home. Thus, possibly negating any perceived savings by waiting for lower rates.
So, is Charleston Market Close to the Edge of Collapsing? There is more to the story!
Affordability
It is currently more expensive for a homebuyer to buy a home now than it was before the housing crisis.
Unlike the events that led up to the housing crisis, 76% of all households now have more than 50% in Home Equity! During the housing crisis many homebuyers were over leveraged into adjustable rate mortgages with very little equity. So, when their rates adjusted upward they had little equity to absorb the loss in value when market turned down. Many homeowners had to sell at a loss, selling “short”. Sellers either lost their homes to foreclosure or had to sell as a “short sale”. So, is the Charleston Market Close to the Edge of Collapsing today?
According to the experts, rates are going to come down a little!
Many experts don’t expect a return to low 3% interest rates, but they do expect some easing. Maybe into the 5% range. Knowing that rates will soon come down somewhat, a buyer can always buy now and refinance later.
An important reason to buy now before rates start dropping, is that as more buyers come back into the market, the supply of homes will likely decrease. This reduction of inventory and increased demand will drive home prices up! Couple that with local development constraints, builders won’t be able to build enough homes as demand comes back. So, a buyer that waits for rates to go down may end up paying a higher price for a home. Thus, negating any saving in interest by waiting for a lower interest rate.
National Home Prices – Charleston Market Close to the Edge of Collapsing
In the following chart, you can see if you bought and held long term, buying a home has been a great investment! Even if you bought at the absolute top of the market before the 2007-2009 housing crisis, your property still has dramatically appreciated!
Looking at recent home sales in the following chart, the number of home sales have been trending down since 2022.
Between 2022 and 2023 the numbers of sales nationally dropped significantly. In 2024 the projections are that the market will improve slightly, but only minimally.
Looking at both the chart above and below, you can see that the national market and the local Charleston market look similar! However, the local number of sales have not pulled back as far as the national numbers. As you see the national numbers have pulled back to the markets bottom after the housing crisis. Localy, we’ve only pulled back to the pre-covid era levels. During the pre-covid era the real estate market in Charleston was a very balanced market. A balanced market is one where supply and demand are roughly equal.
Local Home Sales and Inventory – Charleston Market Close to the Edge of Collapsing
Locally sales have tapered off since the height of the covid era “great migration” in early 2021 until now. It’s important to note, the covid era migration patterns were an anomaly. As well as the market they created for home sellers. Many experts feel that this unique series of events created an abnormal market of dramatically rising prices. A market that is now beginning to slow down some what.
Evidence of this winding down can be seen in the increasing number of homes on the market. And a slowing of the rate at which they are selling.
In Conclusion – Charleston Market Close to the Edge of Collapsing
In conclusion, I don’t see our market crashing and prices dropping dramatically however, we are currently tapering off somewhat. As rates come down, we will see more buyer demand. Depending on how many homes get listed for sale, we may see prices continue to push higher.
What Could Derail the Market?
The Election
I’ll leave this subject to others! However, just like to Wall Street, I think real estate prefers divided government too!
War
In my opinion, I believe the real estate market here locally will continue to stabilize into a more normal market. I also feel we can expect reasonable price appreciation per year. However, if a wide world conflict starts all bets are off!
The Economy
An improvement in the economy will always help real estate, less regulation and lower taxes will help consumer sentiment. When people aren’t confident in their personal financial lives, they tend to put off major decisions like home purchases. It’s well known that real estate sales are a leading indicator of the economy. A robust real estate market will drive sales in other industries. A healthy real estate market will lead to a healthy national economy.
So, no the Charleston Market is not Close to the Edge of Collapsing! We are simply in a transition into a more balanced and normal market. One where the best-looking homes that are priced right will still sell to the motivated buyers in the market. Some areas and price ranges will do better than others. For the best results, its always important to hire an experienced agent to help you market and sell your home.
Disclaimer of Sources – Charts with the black backgrounds in this post were taken from the Keller Williams Realty 2024 Vision Speech and from the 2024 KW Mega Camp Market Update. Data was compilied from numerous sources by the Keller Williams Realty Economic Research Department. Including: Bureau of Economic Analysis, Bureau of Labor Statistics, National Association of Realtors, Robert Shiller, US Census, Freddie Mac and Core Logic. Charts with the white backgrounds in this post were provided by the Charleston Trident Association of Realtors MLS.
The Author…
Bill Byrd is a Husband, Father, Realtor, Educator, Musician and Athlete. A licensed Realtor since 1986 who loves helping his clients grow their personal wealth through real estate! Having helped hundred’s of families and individuals during his career you can feel comfortable that Bill and his Team’s experience and expertise are unparalleled in our market. Plus, Bill’s a great guy and one heck of a guitar player! More About Bill
