This year the Spring Charleston Market Update is being written at what may turn out as one of the most unique periods in real estate history. We are right in the middle of a whirlwind of economic changes that could change our market significantly!
I’d like to look back at our Fall Market Report. In the Fall Market Report we mentioned 7 Key Indicators to watch that could impact our market. Interestingly enough a few of those indicators have come to life!
Fall Market Key Indicator Recap
Inflation Risk
Well, the risk of inflation certainly came to life in a big way! Everyone is feeling the reality of higher prices everywhere we turn. From the grocery store to the gas pump we are all paying a lot more than we were before. Below is a recent CPI Chart from FRED (Federal Reserve Economic Data) based on the Consumer Price Index pulled from Inflationdata.com
As of the Spring Charleston Real Estate Market Update, the numbers haven’t yet significantly impacted our market. Yes, the prices of homes in Charleston have increased, but these increases haven’t slowed down the demand for homes yet.
Interest Rate Risk
Similar to inflation, the rise in interest rates has reduced the amount of home a buyer can buy. For every 1% the interest rate goes up a buyer loses roughly 10% in buying power. Thus, a 1% rate increase will knock someone qualified to buy a $500,000 home down to approximately $450,000. That is a sizable reduction in purchase power.
So far, it hasn’t reduced the demand for our unpressedentedly low inventory.
Fed Policy Risk
The Federal Reserve Bank’s main function is to control monetary policy. The goals of monetary policy are to promote maximum employment, stable prices, and moderate long-term interest rates. To do this they have a few tools at their disposal.
In an over heated inflationary market their goal is to slow things down by tightening the money supply. As we speak, the Fed has been making it’s moves and beginning the process of Quantitative Tightening (QT) to combat what has become 4 decade high inflation. This “QT” is a combination of the Fed reducing it’s balance sheet of securities and raising interest rates.
Again, just like the 2 previous indicators, we haven’t seen the impact yet from these Fed Policy moves. So you’ll want to keep and eye on the Fed moving forward, because they have just started making their changes in the last few months.
Major International Incident or Conflict Risk
I have to admit the Russian Invasion of Ukraine was not on my radar when I wrote the Fall Market Update. This is exactly why I mentioned that an international incident could affect our market. We never know what is going to happen around the world and the significance of these types on incidents can have a huge impact on our real estate market.
Whether it ends up having a significant impact on our real estate market or not, this event has caused turmoil in the stock market and politics. Keep an eye on Ukraine to see if this becomes a bigger global conflict than it already is.
Creative Financing Risk
As rates go up, lenders get creative. As of the Charleston Spring Market Update, we have seen lenders starting to offer ARM’s (Adjustable Rate Mortgage) again. They do this to temporarily bridge the affordability gap for borrowers. This isn’t always a bad thing and for some it can be a great tool. If you are in the market and considering an ARM, do your homework and know what you are signing up for.
Spring Charleston Market Update Numbers
To put this into perspective the numbers below are taken from the MLS Reports as of March 31, 2022
Listing Inventory Still At Record Lows
From the spring of 2019 to the spring of 2022, we’ve seen the local supply of homes for sale go down from 6,309 as of March 2019 to 1,259 as of March 2022. As I write this on April 21, 2022, the MLS shows 1,162 active homes for sale on the market!
Days On The Market Still Low
As of the end of March, our MLS shows an unbelievable median of 3 days on the market for a home to sell!
Home Prices Still Increasing Into The Spring Market
Home prices in the Charleston Spring Market have been steadily rising during the first quarter of 2022. With the median sales price increasing from $350,000 on January 1, 2022 to $361,194 by the end of March.
Spring Charleston Market Update Summary
The market may be changing right before our eyes! With so many different things influencing our economic, political, and financial worlds, where we end up no one knows. What I do know, is housing is a primary need for most people.
Back in the 1980’s when I started in real estate, we sold lots of homes when the rates were very high. This was because people needed a place to live and raise their families. They made it work because they had a need.
Here in Charleston we are still benifiting from the “Great Migration”. People coming here have a need! And when someone wants to move, they have to do what they have to, to get where they want to be!
Spring Charleston Market Update – What To Watch!
Key Indicators to Watch Moving Forward
- Keep watching interest rates. Rising rates may slow down the current high demand for homes.
- Rising interest rates will make the existing lower rate assumable mortgages very attractive!
- Keep watching the Fed. What they do in the next few months may determine the outcome for the next few years.
- Pay attention to what the the folks in Washington either do or don’t do. It all matters on the big stage.
- Watch the inventory of homes for sale. If inventories increase, prices could either stall of drop.
- Watch to see if Hedge Funds start to sell their rental inventories. Hedge Funds have been accumulating properties since 2012 and have built up massive inventories of rental homes. Hedge Funds are opportunistic and typically buy their assets low and sell them high. If our prices start to fall, we could see hedge funds begin to sell off their portfolios! In turn, this could exacerbate a decline in home prices.
- Watch to see if new construction sales slow. Right now that doesn’t seem possible, but things can change.
- Watch Ukraine. The outcome here is very important to the global supply chain – specifically, food and minerals.
- Watch China and Taiwan for the impacts of potential conflict.
In The Path Of An Unpredictable Storm
Throw out the data from the first quarter and forget about last year! Storm force winds are coming ashore. Will the storm veer off back into the ocean or will we take it head on? We’ve got a lot to pay attention to!
I hope you’ve enjoyed my Spring Charleston Market Update. Every time I prepare a Market Update, I discover a few things I didn’t expect to learn.
Thanks for taking the time to read this, if you’ve gotten this far, I am flattered and humbled. Cheers!
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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’s 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
