Have You Noticed How Hot the Market Is?

Everybody wants to know what the real estate market has been doing this winter and despite the cold weather, the market remains hot. A chief economist at Freddie Mac expected home sales and housing starts to be at the highest levels since 2007, and he was exactly right. This is exactly what we saw in December and the summer months. The south Atlantic region of the country appreciated by 9% over the last year and in certain areas of Charleston, we saw gains of 10-15%.

The inventory of distressed properties in South Carolina is hovering right around four months of inventory and in the Charleston region, it’s much less. Dr. Stan Humphries, Zillow’s chief economist, has said that “the conditions that led to the robust appreciation experienced earlier this year, including historically low mortgage interest rates, high affordability, low inventory and high demand, are waning. In their place, we’re beginning to see more inventory and rising mortgage rates, which will lead to further normalization in the market going forward.”

In a normal market, with 5-6 months of inventory, it’s typical to see appreciation rates of around 3-5% per year. The greater Charleston area’s month’s inventory was as low as four months in the summer and is currently around seven months. In the spring and summer, I expect this number to dip back down to 4-5 months. Also, if the Feds decide to taper the asset purchases in January, we should likely see a spike in interest rates and home sales.

In 2013, rates have varied from 3-5% and most of the experts expect rates to rise to over 5% by late 2014, if not sooner. If you are still able to lock in an interest rate at 4.3% but decide to wait until next year and lock an interest rate at 5.3%, it will raise your monthly payment by $161.08. In other words, the cost of owning the same home will change by $2,000 next year.

Many people have put their doubts in investing in the real estate market; but as you can see from the data provided by MSN Money and Case-Shiller, the real estate market has outperformed the Dow Jones, S&P and NASDAQ over the last thirteen years. Many people also would like to know where the market is in comparison to the last decade and according to the S&P Case-Shiller, national real estate prices are similar to what they were in mid-2004. The same is true if not closer to the values in 2005 and 2006, according to the Charleston Trident MLS.

A large contributor to this is the fact that only 14% of the transactions nationally are distressed sales in comparison to the 35% 18 months ago; in the Charleston area, it’s much less. This coupled with rising interest rates and buyers and sellers who have been on the fence for the last few years will make 2014 a great year for real estate.

If you have any questions about the information discussed, please call me at (843) 795-7950 or email me at dave@davefreidmanrealestate.com. I look forward to helping you and a great year!