Have Charleston-area home sales peaked?
Charleston-area home sales skidded with the onset of autumn, but a regional economist and local real estate agents believe the market hasn’t topped out.
“I don’t think it has peaked,” said Mark Vitner, senior economist for Wells Fargo in Charlotte. “It’s leveled off more than peaked.”
Affecting sales more than anything are a lack of homes on the market and rising prices, he said.
“We are running into some supply issues,” Vitner said. “And because there aren’t a lot of homes for sale, we are seeing an increase in prices. Affordability has caused a pause in home sales.”
Nationally, the number of homes on the market is down 16 percent year over year. In the Charleston region, volume of available homes dipped 17 percent in September over last year.
Also affecting buying are sluggish income levels. Home prices have risen 6 percent or more while payrolls are up about 4 percent nationally, according to Vitner.
“Home prices nationally and in Charleston have risen much faster than income has,” he said. “Fewer folks can afford to buy a home.”
Other items affecting home sales over the past few years are that people wanted to live closer to downtown and more wanted to rent, driving the apartment boom.
“We haven’t seen a lot of suburban development,” he said.
That could be changing.
Vitner believes higher prices are bringing more sellers to the market, increasing volume and making home purchases somewhat more affordable. He also said buyers are beginning to look farther out from urban centers nationally and in Charleston.
“We are seeing a shift back toward the suburbs,” Vitner said.
Rollbacks in environmental and financial regulations will lead to more land development next year, helping to boost housing inventories as well, he said.
Vitner is also bullish on prospects for 2018.
“All of the survey data on the economy suggests growth is accelerating,” he said.
Vitner believes the Federal Reserve will raise interest rates in December and probably twice in 2018, but mortgage rates are still historically low and lenders are competing aggressively for new mortgage clients, all likely to boost interest in home-buying.
He also doesn’t see tax reform affecting the majority of home buyers if the deduction limit is lowered.
While the House proposal unveiled this week would maintain the current deduction of $1 million in mortgage debt for current homeowners, that cap would be slashed to $500,000 for newly purchased homes.
A boost in home sales for the rest of the year would bring good news to the Charleston housing industry.
Local home sales slipped 3.2 percent in August, the first decline in 13 months. They then plummeted nearly 13 percent in September, partially because of tropical weather.
It was the first back-to-back declines this year, compared with the same months a year earlier, prompting an industry official to suggest the long-running seller’s marker has reached a turning point.
“While the beginning of fall typically marks a slower pace of market activity, we may also be seeing the initial shift of the market,” Dave Sansom, president of the Charleston Trident Association of Realtors, said recently.
The pace of sales nationally also dipped in September, down 1.5 percent year over year, according to the National Association of Realtors.
That’s not to say homes aren’t still selling. They are. Just not at the same pace they were a year ago.
Local real estate agents say the decline has more to do with a dearth of homes on the market than anything else, and with high demand and limited supply, prices aren’t coming down.
“For the most part, I would blame most of it on the lack of inventory,” said Robertson Allen, owner and broker-in-charge at The Cassina Group of Charleston.
Home builders, burned during the recession when they were left with more houses than they could sell, are one culprit. They’re taking fewer risks this time around.
“They are building them as fast as the market is telling them to,” said Allen, who said almost all of his firm’s sales are existing homes.
The recent depressed sales may be erased when October’s local figures are released later this month.
Charleston-area firms are reporting healthy sales during October, and the U.S. Commerce Department recently reported new home sales jumped 18.9 percent to their highest level in 10 years for September.
The median price for all homes sold in the Charleston market in September was $256,355, according to the local Realtors group. The median price nationally stood at $245,100, according to the National Association of Realtors.
Home prices so far this year are up about 4 percent in the Charleston region.
October’s figures could be boosted locally as well since last year Hurricane Matthew affected the market.
Agents are reporting high interest from buyers across the nation and say sales in October were strong.
“We are outperforming last October,” Allen, of The Cassina Group, said.
Liz Loadholt, a 41-year veteran real estate agent in the Charleston area and co-founder of the local AgentOwned Realty Co., said sales generally slow down in the fall and there’s been a lack of inventory for some time, but she emphasized buying activity remains healthy.
“We are slower than we were in January, February and March, but it always slows down this time of year,” Loadholt said. “We still have a good market.”
Jeff Cook, owner of Jeff Cook Real Estate, believes September’s depressed sales were an aberration.
“It was the worst September in five years,” he said.
He blamed the precipitous drop in home sales on the back-to-school season, when potential buyers are preoccupied with the new school year, and back-to-back hurricanes threatening the East Coast, including the remnants of Irma, which swept through the Lowcountry Sept. 11.
Cook expects October’s figures to bounce back, at least from his agency’s perspective.
“We have written the most contracts that we have ever had in any October,” he said.
Last year in October, when Hurricane Matthew struck the state, the Charleston Trident Association of Realtors reported 1,278 transactions, a slight jump in sales of 0.6 percent over October 2015.
Overall, home sales are up in the region for the year.
During the first nine months of 2017, 14,142 homes have changed hands, an increase of about 3.3 percent over last year.
The record for any year was set in 2005, when 18,076 homes changed hands in the Charleston region. It was two years before the housing market crashed and the last recession set in.