March 2012 Charleston Real Estate Market Summary

March 2012 Charleston Real Estate Market Summary

Is the bottom of the market your friend? It’s interesting to contemplate this question as the U.S. real estate market continues along historic lows at the beginning of March. We recommend making a quick decision – we’re seeing signs that this bottom may be short lived as inventories remain low, prices are inching up and real estate continues to be a compelling investment opportunity.

Where demand among online house hunters is strongest

Here’s how real estate market conditions across the Charleston area closed the second month of 2012:

• Median list price of inventory at the end of February was up 5.6% from February 2011, indicating that sellers believe higher prices are possible;
• Interest rates are stable with 30 year rates hovering just below 4.0% in January- rate history
• January 2012 sales were 0.7% above January 2011 sales, but December 2011 sales were revised downward by an annual rate of 230,000 homes – about 2/3 of a month of sales lost. (NAR report);
• MBA’s purchase loan index didn’t budge: “…The purchase index is still moving sideways at a very low level….” (Mortgage Bankers Assoc. Data From Calculated Risk);
• Finally, inventory was flat from January to February, but down 24% from the end of February, 2011.

Low inventories, prices showing some upward pressure, record low interest rates and an improving economy – can you see a recovery starting? It will be a slow climb, but we believe that you’ll soon look back in amazement at what a great opportunity it was to buy in late 2011 and early 2012. Of course there are many continuing risks: tight credit, the shadow inventory of homes in or ready for foreclosure and overall financial market volatility. But we think that this is a once in a lifetime opportunity to enter the real estate market in many parts of the country. If you’re financially ready don’t miss it.

Is the Government Helping Yet?

In a depressing LA Times article, it was reported that the “Hardest Hit Fund” that was started to provide relief to unemployed home owners, spent only 2.8% of the $7.6 billion in TARP funds allocated to the program during the year of 2011. In the meantime, the alphabet soup of other programs purportedly designed to help homeowners refinance or modify their loans have also been dismal failures, with a miniscule percentage of home owners helped by these programs.
There are several reasons these programs aren’t working. Who owns the majority of the loans that would be modified or refinanced – an event that usually causes a lender to lose money? Taxpayer owned Fannie Mae and Freddie Mac hold those mortgages and Congress has told them not to lose any more of the taxpayer’s money. Let’s see Door #1: modify loans, lose money, get whipped by Congress OR Door #2: Act like you’re going along, but do as little as possible. What would you choose?
Also, you might think the government could easily find the millions of home owners in trouble (try not paying your taxes), but even when they try, they don’t seem to be reaching the people who could benefited from the programs. Last, but far from least, loan servicers don’t have the capacity to manage the complex government programs or a strong incentive to develop the complicated processes and systems needed to shephard home owners to a successful modification or refinance. Horror stories of botched modifications and refinances abound and it doesn’t seem to be improving.
The bottom line? In theory, there’s a lot of government money available to distressed home owners. In practice, it’s helping only a small fraction of those home owners and that’s not likely to change.

Foreclosures Are Still A Critical Piece of the Puzzle

LPS reported on March 6 that homes entering foreclosure (foreclosure starts) and foreclosure sales of homes rose over 25% each. Foreclosure starts in February totaled ~200,000 homes or roughly 67% of one month’s sales. At these rates, it’s clear that distressed homes will continue to dominate many markets and that discretionary sellers are going to stay in their homes for a while longer.

Are Homes Affordable? You Bet!

The National Association of Realtors reported this week that housing affordability conditions have reached the highest level since recordkeeping began in 1970. The index is over 200, meaning the median income household has twice the income needed to purchase the median priced U.S. home (assuming a healthy downpayment). That’s a massive gap in favor of potential home buyers – so why isn’t the market rocketing upward?
It is – sort of. We’re seeing multiple offers and strong competition for nice homes that are priced right. Things are slower than they might be because there are still significant headwinds for Charleston buyers: many potential buyers have damaged credit, families are being prudent with expenditures (the average car on the road is over 10 years old!), it isn’t easy to get a loan and it can be hard to find the right house.
If you’re in the right financial situation, it’s still a good time to buy. Rents are increasing and affordability is at all time highs. ChuckTown Homes is here to help when you’re ready to get serious. To find out if now is the right time to buy, contact Shawn Pillion. Shawn is a full time buyer’s agent in Charleston, SC and part owner of the brokerage.