April 2012 Real Estate Market Summary
Today, the big story in real estate is inventory. There's not enough of it and it's not clear when inventory will start coming back. If you're actively looking for homes, there's a good chance that you're frustrated by the lack of homes available in the Charleston market and you're facing competition when you make an offer. We see little chance of this situation changing soon, so 2012 continues to be an unusual year in real estate.
Here's how real estate market conditions across the Charleston area closed March 2012:
Median list price of inventory at the end of March was down 1.8% from February 2011, reversing some of the price strength from January;
Interest rates crept above 4% during March, but at this writing have drifted just below 4% (rate history);
February 2012 sales were 8.8% above February 2011 sales, but were down 0.9% from January (NAR report);
MBA's purchase loan index is slightly healthier and is up 2% from this time last year (Mortgage Bankers Assoc. Data );
Finally, inventory was down3% from February to March, and down 17% from the end of March, 2011.
Low inventories, prices crabbing sideways, and a strong year-over-year sales increase (though 3.4 percentage points of February's increase come from the Leap Day) - just maybe a slow recovery is starting. As we said above, the biggest story in the market is lack of inventory. There are buyers in the market, but they're competing over a shrinking pool of inventory and we see buyers delaying purchases because they just can't find what they want.
Where are interest rates going?
We don't claim to be interest rate prognosticators, but interest rates will rise in the future and perhaps the future is later this year. You might argue that Ben Bernanke and the Fed have committed that they will keep interest rates low through late 2014 and that means mortgage rates will be stable for 2 more years. Our opinion is: probably not. Markets generally anticipate events and it's likely the mortgage market will price future interest rates into current prices well ahead of the Fed making a formal move.
March's small move above the all-time low interest rates is likely the first of many small moves upward that we'll see this year. Also, keep in mind that the Fed isn't omnipotent - unforeseen events like stronger economic growth or an outbreak of inflation could force them to move interest rates up ahead of schedule. The bottom line? If you're thinking about borrowing to buy to refinance, sooner is better than later.
Rent or Buy?
With demand for rental properties up and rents at or near all-time highs, a lot of renters are considering buying. Whether buying is better than renting for you is a big decision. Here are some factors to consider.
How long do I plan to be in this location? If you think you'll stay in your current area for 4 or more years, then buying looks more attractive. You'll be in the house long enough to have a chance to experience appreciation and you'll avoid rent increases. Also, you'll spread the costs of buying and selling over a longer time period.
Can I handle homeownership? If you're late on your rent payment every once in a while, it's pretty straightforward to recover. Being late on mortgage payments can dig a much deeper hole. Also, do you have the discipline to save for the day when the water heater dies and you need to spend $800 to replace it or would you be taking cold showers for a few weeks?
Does the math work? With 20% down, a 4% mortgage, a 2%/year tax bill and a 20% marginal income tax rate, you can spend $200-$225 on a house for every dollar of rent you would otherwise pay and still be ahead financially. If your rent is $1,000/month, buying a $200,000 ($1,000 * $200) house is likely a better deal than renting. This rule of thumb varies dramatically based on tax rates and current mortgage rates, so check your breakeven with an online calculator like the one at Ginnie Mae.
If you're in the hunt for a house, contact us to help you sort through the issues. We're here to help when you're ready.
To buy a house in Charleston and get the best deal and service, please contact:
150 BEE ST
1120665 - Residential
7th floor with AMAZING RIVER VIEWS!!! Charleston's first urban loft style living...big city living in beautiful, historic Charleston!! Dual wrap around porches overlooking the Ashley River!! Price includes TWO side-by-side deeded PARKING SPACES in attached and gated garage. Full-time, in house community manager and maintenance staff. After taking one of four elevators to the 7th floor you will be welcomed by stylish, contemporary lobbies and hallways lined with local art. Upon entering your loft you will appreciate the open floor plan, stainless appliances, granite countertops, custom tiled showers, stained concrete flooring, 10' ceilings, and much more! The Bee Street Lofts feature two large, elevated courtyards. Enjoy the views of the Ashley River and Marina from the comfortable outdoor furniture or entertain around one of four gas grills. The 1st floor fitness center contains state-of-the-art equipment and the lounge-style clubhouse has plasma TVs and contemporary furniture. The monthly HOA fee covers everything you need...exterior insurance, flood insurance, Property Manager on-site, fitness room, lounge, courtyards, and art gallery corridors. Great location next to MUSC, across the street from the Ashley River, just minutes from Marion Square, College of Charleston, and shops on King Street.