Living and Working in Charleston SC

Here are the numbers I promised directly pasted from the MLS.  Stay tuned for updates:

3 months of inventory to over 14 in 3 years.  Keep watching.  If you’d like a specific report on a subdivision, or section of town let me know. 

The Charleston Real Estate Market is consistently poor for sellers with inventories remaining 10,000 and days on market climbing, and sales to list price rations dropping.  It’s not doom and gloom in Charleston like other parts of the country.  Average sales prices are actually staying around $300,000 plus or minus $10,000 from one month to the next.  What does this mean to sellers?  Merchandising is everything, and as always, pick an agent that is going to be honest with you about price and listen to them.  Pick the agent first based on your perceptions of their integrity and ability first, and leave price discussions for later. 

What does this mean for people buying a home?  This is only my opinion, but I think that prices are going to drop.  They are not dropping as you would expect, but the days on market and sales to list price ratio trends indicate that prices should be dropping.  What you don’t know is, are buyers using all of their purchasing power to buy more home, instead of using the current market conditions to save money. My experience working with buyers is that everyone wants a home that is more than they can spend, so given the opportunity, most people are going to try to get more home.  What this could mean is that even though the average home price isn’t going down, that on a house to house basis, prices are dropping and it’s just not showing up on the market wide statistics. Again, I can’t prove this to be a certainty, but I think you can get a lot more home for your money now than a year ago.

This does sound self-serving of course, but a big problem right now for buyers is finding an agent that will tell them the truth about the market.  The big agencies are all advertising, “Now is a great time to buy!”  That is a mixed truth.  Maybe it is depending on your situation and maybe it isn’t.  I would say that if your career is moving you to Charleston right now, and you want to buy, you will probaby come out OK.  Even when homes were appreciating at 10% plus, it was hard to get out of a home in less than two years. 

There are many factors is such a complex decision.  Talk to an agent you’re comfortable with and get the facts. 

It’s been a couple of months since I’ve written an update, but there really isn’t any new news.  You’ve heard the news about the “mortgage meltdown”.  Inventories in Charleston are high, and sales are flowing like mud.  Thick red clay mud that is.  Prudential is using their huge marketing budget to tell us that now is a good time to buy.  If you need to buy right now because you’re moving, fine.  Prices are not that likely to go down a great deal, and interest rates are very low right now.  Otherwise, if you’re on the fence…stay on the fence and keep coming back to check on the trend.  Look for when the inventory is turning around.  After that, prices should stabilize, and possibly start creeping back up again….we’ll see.  Not to be a gloomy gus, but I can’t in good concience tell buyers that this is a good time to buy.  Keep an eye on interest rates and do the math.  Interest rates don’t move that fast, so you’ll have time if they start creeping back up. 

 Talk to me out there people.  Tell me your thoughts, feelings, whatever. 

I don’t know about you, but one of my favorite things to do is to eat good food.  It can be fine dining, or a really good burger or slab of ribs; food is way up on the list of things I enjoy.  When I go to heaven, I expect to have a body just like I have now, and I expect to enjoy the things I enjoy now, but without the side effects.  Sure, I’ll be loving Jesus and all of you, but we’re going to eat together.  (Some of the other activities, I’d still like to keep private if you don’t mind.) 

 I’ve found the best pizza I’ve had just about anywhere, (Italian Bistro in Summerville).  The best Barbecue on the planet. (too many places to mention, most of them are very, very good)  And of course, there is fine low country specialties.  Shrimp and grits.  She Crab soup.  Piles and piles and piles of steamed oysters.    And did I mention barbecue?  You know?  Pork.  I can’t do the all you can eat anymore, because I just can’t stop at a reasonable point.  I have to order a dinner portion so I don’t have to suffer so bad. 

I’ve been looking at some of the Top 10 and top 100 and all that.  Have you ever been to Suwanee Georgia?  If you like outlet stores and endless subdivisions, it’s great, but where’s a guy gonna eat if it’s not at the Outback Steak House?  What about Cary or Apex North Carolina.  What is there to do in Cary or Apex?  Not a damn thing I tell you.  There certainly isn’t anyplace to surf, that’s for sure.  OK, so we have too much crack in North Charleston and everything that goes with it.  Crack dealers are people just like you and me really.  They just need some help getting pointed in the right direction, I mean, let’s get some perspective here. 

So, before you start whining about crime statistics and state taxes and all that, bring your pocket book and a good appetite and make the rounds here in Charleston.  You can never run out of new choices.  I write the content at www.charlestondining.com although I haven’t written much lately.  I’m sure that will give you a good start and when you run out of choices there, maybe you could pick out a couple of new ones and write a reveiw for me…it’s not like I get paid for it.  This is a blog you know. 

All I can say is, stay tuned.  I think a better question is, “What’s the best strategy to plan a move?”  We have anywhere from two to three times normal inventory levels, depending on what part of town you’re considering, or what you define as normal.  2005 levels certainly weren’t “normal”.  It’s going to take some time for the smoke to clear.  It might be hard to imagine that there is some good news, but there really is.  Housing has really gotten too expensive.  Sure, it’s nice to be able to cash in on 10% appreciation if you happen to be fortunate enough to be on the right side of the equation.  But income simply isn’t keeping pace with home prices.  In a rising market, everyone was happy cashing in their equity, but what about the homes they were buying on the other end?  They were higher priced as well.  So, to keep the payment down, you take that equity and use it, or most of it as a down payment, right?  Yes, that equity is there, and belongs to you.  But how many people held onto it?  Hopefully, you are one of those people.  For the rest of you, there are always new opportunities if you willing to invest the time to learn. 

Sorry to those of you who bought recently and are going to have to sell in 2007 or 8.  Think of it this way.  What can you buy these days that holds it’s value?  Does that mean that if you want to upgrade that you can’t?  No it doesn’t.  Unless you refinanced and cashed in your equity.  Whatever your reasoning, if you want to move, then falling prices means you can get more for your money when you buy, right? 

One fact that is going to stay constant is that the supply of buyers is going to be much smaller for some time.  In the Charleston area , prices for a 3 bedroom 2 bath home start around $120,000 for a fixer upper.  A 10% down payment is $12,000.  With gas prices and prices on everything else going up, this is going to keep the supply of buyers low.  The same thing will be true at every other price level.  Stiffer lending practices will mean that families that might have upgraded to $600,000 home in Mt. Pleasant might have to stay put, or settle for a less expensive home.  Overall, the affect will be lower demand.  Supply continues to increase, so that means lower prices.  Duh. 

So, what’s the best strategy?  Why do you need to move?  Are you renting and want to start building equity?  Do you need more space?  First, talk to a local lender.  I can refer several.  Find out from them the downpayment requirements.  If you can meet them, then you have to decide if this is a good time to move, and if so, do you have a home to sell?  If so, then you need a complete plan. 

If you’re renting, I’d recommend to continue renting another six months to a year.  If you hate where you’re living, and you want to buy right now, there is some risk that the market will go down somewhat before it comes back up again.  But I don’t think it will be that much.  If you’re going to be there for awhile, say at least five years, buying now is relatively safe.  Any shorter than that, and it could be tight when you get ready to sell in terms of getting out even or avoiding a loss. 

If you have a home to sell, I suggest learning the buyer market for the home you want to buy.  Can you get a good enough deal on the buy side to make the transaction work is the question to ask?  Don’t make any emotional decisions.  Take your time and gather the facts.  Do your homework on selling your home.  What condition is your home in?  Are you prepared to invest the time and money to get it in top condition?  And are you prepared to provide the incentive necessary to attract an offer on your home, versus the 5-20 homes that are competing directly against it? Are you looking at the cold hard facts when it comes to your home?  Again, you have to take the emotion out of it.  You may have spent $10,000 on landscaping, but you can’t expect to get 100% of that back anymore than you would be willing to pay $10,000 more on a home with wonderful landscaping.   And you have to be very wary of the agent that is going to tell you what you want to hear to get the listing.  The best agents right now are only taking listings they think they can sell, because it costs too much money to market ones that won’t.  Weak agents will take anything, because it’s better than having nothing. 

The bottom line is, you can make a move work right now to your best advantage.  It’s just a lot harder to get all the pieces to line up than it was two years ago.  And it’s even more important that you have the right people advising you.  I hope this helps some of you.  Let me know. 

What are the questions people want answers to when it comes to our market?  It depends on who you are.  We come into contact with different groups of people.  Investors from outside the area that don’t know our market want to know is this is a good time to buy here or not.  The answer is clear.  Definitely not.  It’s pretty difficult to find a property that will cash flow because our prices have outpaced rent rates.  And our market has almost certainly not hit its bottom.   Another question is, how low will it go?  We really don’t know what will happen here since the supply of buyers has shrunk so rapidly.  Many of the buyers we were working with in 2005/6 were 100% financing either by necessity or choice.  Most of those would not qualify by today’s practices since the mortgage meltdown.  Sales in my backyard, the more affordable Summerville, have shrunk to half of last years number of August and September.  The buyers simply are not out there.  Inventory levels on the other hand are increasing beyond the 10 month level.  We thought we might not see this out in Summerville, but it’s here.   Is there a silver lining for buyers?  In 2005, homes that were priced correctly and in decent shape were selling in less than 30 days, with the average in many areas of Charleston being around 60 days.  What this meant to buyers is that they had to make decisions very quickly, or face starting the search process over again, only to be rushed again.  Sales/List prices were over 99%.  The big topic at real estate sales meetings was negotiating multiple contract scenarios.  At this time, most everyone, including many experienced investors, expected the trend of appreciation to continue.  There was no hesitation on the part of buyers, because the appreciation trend had been on a steady path for over 10 years.  We had little reason to believe differently.  Today, buyers are in the driver’s seat.  There is much more selection.  Sellers are much more anxious when they get some attention from one of the few real live buyers.  And if things don’t work out on the first pass, there is plenty more to choose from.  In fact, you’ll already have three or four choices lined if you’re working with a decent agent.  While the average sales prices will probably go down some more, it is possible to beat the curve if you do the right things in the buying process.  If this explanation doesn’t provide you with enough assurance to take the plunge you can always rent for six months and see what happens.  I’ve done enough moving for three people, and as painful as it is, this too shall pass, and before you know it, you’re settled into your new home.  In six months, there is still going to be 10-12 months of inventory, and prices are either going to be the same, or just slightly lower.  I’m referring to averages.  If you’d like specific information about certain communities like downtown or Isle of Palms or West Ashley, I’m happy to provide it within reason.   Please use the blog so that everyone can see your question and my response. 

Just a quick note.  If you’re looking for someplace online to find out what’s going on in Charleston, or if you have an event you’d like to post, try

http://www.charlestonsfinest.com/calendar/events/index.php

 It’s becoming very popular.  Also, please let us know what you think.  We’re considering adding it to the rest of our directories and we’d like your thoughts.  Have a great day!

Sales Units for October were at their lowest level since January 2004, but inventory levels are double at about 12 months, versus 6 months in January 2004.  I’m not going to go back and do the research to find the answer…it’s bad.  Less than 850 agents had a sale in October, (out of about 4500), and 300 of those more than one.  (its takes at least 2/mo to have a viable business)  My business is way down in spite of our web presence.  Many of you with whom I am in contact are having difficult selling your homes.  Therefore, you can’t come here and work with me to find your home here in Charleston. 

The saddest news is for homeowners that bought at the peak, which was June 2005.  Prices are finally dropping a bit, and sellers that need to sell becuase of a job change, divorce, etc. are feeling the pinch.  Real Estate companies are advertising that this is a great time to buy.  I guess if you represent a lot of sellers, you owe it to them to present things in the best light.  I happen to think the public is smart enough to see through the smoke and mirrors.  While I’m not happy about what it’s doing to  my income, I’d rather deal with that, than have my buyer clients come up short.  Consequently, I’ve taken on some management consulting work for some small businesses and am very pleased to have it. 

Sorry to be the bearer of bad news.  I simply refuse to spin it.  It’s going to get better; and I’m not one to speculate when.  Others are saying spring of 2009.  So, if you want to get in now knowing that it might get a little worse before it gets better, you’ll be taking a risk.  Wise investment has a lot to do with managing risk.  If my son was taking a job in Charleston right now, and he was going to be here for awhile, I’d say rent for six months and see if inventories are continuing to rise.  If you’d like to know precisely when the inventory and sales trend changes, stay tuned to www.allthingscharleston.com.   

The conditions have been right for home sale prices to drop for some time with inventory levels continuing to increase. Yet, month after month, average home sales prices Charleston wide have continued to increase.  The average sale price finally dropped in September. (see below)  We saw a similar drop in July, and then back to an increase in August so we still don’t know for sure that we have a trend.  October is another month.  You can drill down into just about any part of town, even to the subdivision level, and prices have been increasing…in spite of increasing inventory levels. 

Charleston is a great place to live.  We have weather to die for with four seasons, lot’s of things to do for all ages, good schools.  Cara and I have lived and worked in this area for 15 years.  After living here for 10 years, we moved to Georgia in 2002-2004 and moved back.  If you aren’t already sold on Charleston, you simply haven’t spent enough time here.  If you’re already sold on Charleston, and are planning your move, the timing is right.  It could get better possibly.  Who can tell?  I definately don’t subscribe to using market timing for investing in real estate.  What you want to avoid is a “bubble” situation.  There simply isn’t any evidence that suggests that we have that sort of thing here in Charleston.  We don’t have any one industry like oil or technology that dominates our economy.  There are a lot of people that still want to move here, and if anything is slowing things down, it’s that they’re having difficult selling their homes where they are now. 

It’s certainly getting more difficult to buy a home now.  100% financing with moderate credit scores are going to go away.  That will definately affect the number of buyers out there. 

Sales and Inventory History

Monday, October 08, 2007
Category - Residential

Let us know your thoughts.  It will be very interesting to see what happens to the supply of buyers out there. 

First, the numbers.  Then we can go into interpretation. 

July 2007 total versus July 2006:  

Overall including all residential

Sold Units: 1070 vs 1465

Average Sales Price: $315,000 vs $300,000

Inventory:  10432 9.8 months vs 8483 5.8 months

Now, the same numbers for townhomes and condos

Sold Units: 251 vs 349

Average Sales Price:  $265,000 vs $225,000

Inventory:  2857 or 11.4 months vs 2347 or 6.7 months

 And Single Family

Units:  784 vs 1026

Average Price:  $342,000 vs $335,000

Inventory:  6801 or 7.3 months vs 5655 or 5.5 months

 Sales Peaked in July 2005 at 1553 overall residential

It doesn’t take a financial expert to see that in 2005, investors were looking for alternatives to the Securities Markets, where they felt vulnerable.  The securities market is stronger now, and let’s face it…it’s a hell of a lot easier to go online or call your broker to invest in securities than it is to flip houses or deal with renters.  That’s the extent of my commentary related to the tie-in with securities.  Interest rates were very low in 2005, still fairly low in summer 2006, and they’re higher now.  That means that for primary residence purchases, those that can wait, are waiting. 

This is a blog, not a newspaper column, so you tell me.  Are some of you waiting for prices to come down?  My guess is, probably so.  Around the water cooler, talk is that prices are coming down.  But the real numbers don’t reflect that.  The buyers we have been working with are willing to pay to get exactly what they want.  90% of the buyers with whom we work start with a monthly budget figure, and work from there.  I don’t know how much of that has to do with the way we guide our buyers.  But that’s a different story.  Of all the buyers we’ve worked with recently, one has started with his criteria, and then negotiated downward, versus starting with a price (directly connected to a payment), and then searched for the most home they could find for that amount.  Does that make sense? 

Averages can be very misleading.  In Charleston, all it takes is a few ocean front or downtown sales to drive up the numbers.  I recently had a buyer client ask me for a report on a specific zip code.  29412, which is in James Island.  Here is the report.

Sales and Inventory History

Saturday, August 04, 2007
Category - Residential

Even though we’ve drilled down into a smaller area, the report still seems to support the same conclusion, that prices are continuing to climb.  There are a lot of different ways to go with this conversation.  What’s relevant us an our clients is, what can we do with this information? 

For those of you that are trying to time your purchase, I would look more at interest rates, than average home prices.  It’s hard to build a solid case that the market is going down.  With the current inventory levels, we can help you use this to your advantage to get more for your money, or pay less for a home that exceeds your criteria.  The inventory levels ARE continuing to rise…but so are the average sales prices. 

For those of you that want to use your market knowledge to get the best price, or to sell your home for the best price, the answer is simple.  Just work with us.  There are many posts in this blog that tell you how to do it…and any agent has access to this same information.  They may not be able to look it up, but they do have the same access we do.  There is one point I can’t emphasize enough for  those of you that want to use your primary residence to get ahead financially.  SELECTION AND IMPROVEMENT CHOICES ARE EVERYTHING!!  When you go to buy your home, you need to look past what are your likes and dislike and consider very seriosly the next person that is going to live in your home.  Sorry for getting off track…we were talking about how to use the market to your advantage.  Will most of you will use the market to get more home, with more upgrades, with more space, on a better lot etc.?  Or will you stick to your criteria and try to save some money?