The Crossroads of Two Markets

Here we are in August 2022 standing at the crossroads of two markets! After two years of runaway home prices, historical low rates, the great migration and first-time homebuyer demand, things seem to be slowing down a little. Frankly, a move to a more normal market would be a healthy change. Much like a downturn in the stock market that gives stocks some breathe to regain momentum to go higher.

Thanks to inflation and the fed, our market seems to be pivoting in real time as I am writing this post. When inflation started creeping into our market last year many folks were in denial, using words like transitory to calm fears. But as you can see from the chart below inflation has been anything but transitory.

Now, in order to “tame the beast” the Federal Reserve Board has been very agreesive raising rates. This action could prove to slow things down but like most economic data they are a lagging indicators. So we most likely won’t know what’s happened until it’s already happened!

However, eventhough the data is lagging, often we can draw lots on conlusions based on this lagging information. Though as for where we are right now, we still haven’t had enough time yet to completely determine if the market is truely shifting. Or, if we are just simply moving to a more normalized market? Time will tell, and it’s a little too early to make those claims in my opinion.

Crossroads of Two Markets – The Evidence

First let me say, the market is NOT crashing!

Mortgage Rates Rising

The feds rate hikes have reduced home buyers buying power by approximately 25%. For each 1% of and interest rate increase, a home buyers loses 10% of their buying power. So as an example, a buyer that could afford a $400k home in February can now only afford a $300k home. That’s a lot of lost value!

---

Prices Trending Down

The average sale price has been stabilizing since April. Histoically this is the busiest time of the year when home prices normally are trending up! From the charts above you can see that interest rates started going up in late March and the home prices started stabilizing in April. Could this be the main force that is putting us at the crossroads of two markets.

If we are truely at the crossroads of two markets we will be able to look back at the rising interest rates as the main cause. With that said, if demand from the great migration continues and younger home buyers keep joining the ranks of homeowners, the Charleston market may just be normalizing?

Number of Homes For Sale

In January the Charleston MLS had around 1,000 single family homes on the market. On August 1st the MLS showed that number had doubled.

Number of Homes Under Contract

We are no longer selling more homes than we are listing.

Supply of Homes

What is a Normal Market?

In a normal market, where supply and demand are equal, you typically will see a 3-6 month supply of homes. Since the beginning of the year we have moved from a supply of homes that was less than a month to over 1.5 months of supply. It’s still a sellers market if homes a priced right but it’s not as exteme as it was before interest rates moved higher.

The Crossroads of Two Markets – Conclusion

The market statistics show we may be and the precipice of change. The indicators are there, the only question remains is, will this continue and how far will this go? So, are we actually at the crossroads of two markets? Or, could this be a headfake and next month the fed changes course, the crisis in the Ukraine resolves, inflation and rates go down and the market is off to the races again! Who really knows and thats what keeps this exciting.

---

Check Out This Video!

---

What I do know is that the only thing that remains consistent in real estate is that people always need to buy homes. And…people always need to sell homes! People don’t buy or sell because of the market, they buy and sell to fullfill a need. If that’s you, we are here to help!