Shortage of Homes for Sale in Charleston Continues to Drive Prices Up
Everywhere you turn in Charleston SC, there’s a real estate article or comment about how the lack of homes on the market is driving up prices and driving buyers crazy. But what’s the reason behind this trend? Based on the pace of construction in the greater Charleston area, this idea seems counter-intuitive. With many new neighborhoods like Summerville’s Nexton, and Mount Pleasant’s Oyster Point, Carolina Park, and Tidal Walk to name just a few, you would think that the supply of homes for sale would be keeping up with demand. The reality here in Charleston is that demand has been far outpacing supply for quite some time now. Combine those facts with Charleston’s insanely good food, warm sun, and the saltwater lifestyle, and you have a recipe for high real estate prices. I guess no one here wants to move and the best example is in the segment of existing single family homes, Charleston has the lowest inventory in ten years.
There are a number of factors for the decrease in homes for sale according to NAR Chief Economist Lawrence Yun:
- Many home owners are still underwater. One of five homeowners with a mortgage still doesn’t have enough equity to sell. This isn’t the same situation as we saw during the depths of the housing crisis, but it’s still making its mark on inventory levels. Although rising prices may slowly reduce the number of home owners who owe more than their property is worth, Real Estate Economy Watch predicts that significant numbers will continue to be equity-challenged for several years to come, especially in Arizona, California, Florida, and Nevada.
- Boom buyers are still holding out. About 16 million families bought homes in the peak of the boom around a decade ago, and many are still waiting around to make a profit, even if they aren’t underwater. Even if CoreLogic’s prediction that the national median price will reach the peak of 2007 in the next year or so does come to fruition, Real Estate Economy Watch says many of these peak buyers will have to wait another five years or more before they realize much profit on their homes.
- The inventory shortage is squeezing move-ups. Owners who may be ready to move into a larger or more expensive home are often considered hidden drivers of the market. But right now, price instability and the lack of available homes is causing this group to hold off. But Real Estate Economy Watch says that stability is coming, despite the inflationary impact of market shortages, and predicts that this “vicious cycle” will ease.
- Investors aren’t ready to sell single-family homes they’re renting. They’re making money from both rising rents and home price appreciation. And that’s why Real Estate Economy Watch cautions against assuming they’ll “sell their mini gold mines to homeowners anytime soon.” The upside? At least some young prospective owners have access to a relatively affordable alternative to apartments, where they can start families while they wait for entry-level homes to come on the market.
- New-home construction is still very low. It may be tempting to blame this on the builders, but Real Estate Economy Watch points out that after the crash in 2007, thousands of smaller builders closed down, and many of those who survived did so by selling off their inventories of prime real estate earmarked for future construction. They predict that builders will make a dent in the higher-tier housing soon, but that they would help the inventory problem more if they concentrated on the lower-end demand.
- Baby boomers are running behind. Everything from later retirement ages, longer careers, better health, and loss of household wealth/equity during the Great Recession have contributed to a slower-than-expected timeline for this generation. But Real Estate Economy Watch predicts that this will change as many must convert their equity into cash while they can still enjoy it, and says others won’t be able to afford the costs to retrofit current homes in order to age in place.
Existing Single Family Homes – Lowest Inventory in 10 years
This chart should jar everyone’s housing sense to a degree. It shows clearly the trend over the last ten years for existing single family homes available for sale. It does not include foreclosures or short sales.
Realtor, Dunes Properties, Member of the Charleston Trident Association of Realtors,