By Katy Stech
The Post and Courier
Monday, January 25, 2010
By retail standards, you could say Lowcountry homes have been selling off the discount rack.
Home prices across the Charleston region fell last year by 9 percent, the steepest year-over-year drop in recent memory, to a median of $181,286. That's off nearly 14 percent from the region's peak annual price of $209,742 set in 2007.
The drop reflects Charleston's oversupply of homes, a number that now tops 9,000, which has grown as lenders try to unload their foreclosed properties and cash-strapped homeowners face the harsh reality they can't afford the roofs over their heads anymore.
Against that, the tough economy has rendered fewer qualified buyers with enough savings or stable employment. By lowering price, sellers, banks and builders all are trying to hook one of those buyers.
The region's median price is calculated by the Charleston Trident Association of Realtors based on all homes sold during 2009 through the group's Multiple Listing Service. For that reason, the decline could be skewed to reflect the makeup of who's buying homes -- a mix of investors, young professionals and employed Charleston newcomers -- more so than the typical home's value.
But the trend also suggests that many current homeowners, especially those who bought around the peak of the market without a sizeable down payment, have built up little equity and probably owe more than their homes are worth.
The good news, however, is that the overall price decline didn't affect all Charleston neighborhoods evenly. Areas with fewer homes listed for sale, such as northern Mount Pleasant and outer West Ashley, saw their prices stabilize -- a function of "good ole supply and demand," as Goose Creek real estate agent Ralph Wetherell pointed out.
Trends also show that more purchasers -- some of whom could tap a generous $8,000 federal tax credit if they qualified as first-time buyers -- flocked to modestly priced neighborhoods.
"It's simply addressing a real pent-up demand that people have had for a long time for affordable housing," said Karen Abrams, a Keller Williams agent.
And the data shows that some areas that did see major price drops were given a consolation prize: a steady trickle of home sales. Dorchester County, for example, recorded 1,948 residential transactions throughout the year, just one fewer than in 2008.
Seeking stability
The health of the residential real estate business plays an enormous role in any economy, as the industry provides the underpinnings for variety of spin-off services: furniture sales, bank lending and remodeling jobs, to name a few.
Frank Hefner, an economics professor at the College of Charleston, said the recent leveling-off of sales could foreshadow a market recovery.
"And even if prices are down, the fact that sales are improving or stabilizing is what everyone's going to grasp at this as a sign of the bottom," he said.
At the top end of the housing spectrum, the luxury market -- both oceanfront and in downtown Charleston -- faltered last year. Prices fell by tens of thousands of dollars as buyers shied away from purchasing second homes during shaky economic times.
"Their desire to be here hasn't changed," said Charles Sullivan of Carriage Properties, a downtown Charleston real estate firm. "They were just waiting for that period of time they thought was the right time."
He noted that toward the end of 2009, more high-end buyers started to emerge as their stock market and investment portfolios recovered some of their value.
Feeling better
While most experts agree that the Charleston market recovery is beginning to take hold, it lags behind the housing recoveries in other major cities with larger employment bases.
Charlotte, for example, began to see an uptick in housing permits last fall, and other cities such as Denver, Dallas and San Diego are recording home sales prices that are virtually unchanged from a year ago because their values fell so hard early on in the recession, according to the widely watched Case Shiller home price index.
Jeremy Willits, president of the local Realtors association, said as local home prices level out, the recovery should pick up speed because more consumers will become comfortable with buying real estate again.
"Seeing the stable home prices will give people more confidence, and that was something that was really lacking in 2009," Willits said. "Their confidence was so damaged by the financial meltdown" that began to spread in the second half of 2008.
That renewed sense of confidence could attract to the market more middle- to upper-class buyers, who were scarce last year. Hefner warned, though, that those buyers still could hesitate to move into more expensive homes, acting out of caution.
"If you're looking at the new era of frugality, I don't know how long (the price drops) are going to last," Hefner said. "People who went through this major financial downturn -- will this change their pattern? Will this change them permanently?"
Another open question for the industry to ponder goes to the behavior of first-time buyers: Will they still be in the market for homes once the federal government's $8,000 tax credit expires in April?
Around the state
How South Carolina and its four biggest housing markets stacked up:
Region Homes sold Median price*
--Charleston 7,446 (-6.1%) $183,000 (-9.4%)
--Columbia 7,608 (-9.9%) $150,000 (-15.3%)
--Greater Greenville 6,447 (-14.4%) $140,000 (-7.9%)
--Grand Strand 5,919 (+5.4%) $140,000 (-2.4%)
--Statewide 46,290 (-8.5%) $141,000 (-8.4%)
*Rounded to nearest thousandths
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