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Charleston’s housing prices considered 28% overvalued
By Dennis Quick
Senior Staff Writer
Charleston homes are overvalued by 28%, according to a national report released in March by Global Insight, an economic and financial information provider based in Waltham, Mass., and National City, a Cleveland-based mortgage banker.
The report reviewed 299 metropolitan housing markets in the United States during the fourth quarter of 2005. Charleston, which according to the study had at that time a median home price of $163,000, ranks 78th on the list of overvalued housing markets.
The report notes that 71 of the nation’s metro housing markets are “extremely overvalued,” up from the previous quarter’s 62, with California and Florida accounting for 18 of the 20 most overvalued markets. Naples, Fla., with a median home price of $367,100, is rated the most overvalued market, with homes exceeding the fair market value by more than 96%.
The report considers housing markets extremely overvalued if homes cost 30% or more than the fair market value. The Charleston market is not in that category.
Global Insight and National City researchers determined “statistically normal house values,” or what housing prices should be, by considering interest rates, household incomes, population densities and the premiums and discounts different metropolitan areas have exhibited over time.
The report does not measure or calculate a factor that is driving housing markets like Charleston’s—the desire of people to move here.
Local economists and real estate professionals point out that the Lowcountry’s healthy economy and quality of life are attracting people to the region, that the population growth is creating a strong housing demand and that the demand is boosting residential real estate prices.
“Charleston is ‘Smalltown USA’ with big city amenities, and that’s what’s drawing them,” Sandy Stone, president of Island Realty on the Isle of Palms, said of the area’s newcomers.
Still, the amount and kind of house a buyer gets for the money in the Charleston market is debatable.
For instance, in Byrnes Downs, a quiet, older West Ashley community, a 3-bedroom, 2-bathroom, 1,400-square-foot brick house built in 1945 is selling for $319,000, according to the Charleston Trident Multiple Listing Service.
Geography skews the comparison, Stone acknowledged. Charleston is on the ocean and has much less land available for residential development; therefore, the area has pricier real estate than inland markets such as Phoenix.
Housing prices can also vary dramatically within the tri-county area. While Byrnes Downs houses generally hover close to the $300,000 mark, homes in Bradford Bend at Longleaf Plantation, a new Berkeley County subdivision in Goose Creek, costs on average about $165,000 for a home with around 1,800 square feet.
So far this year, the median home price for the tri-county area is $199,900, and the average selling price is $304,546, according to the Charleston Trident Association of Realtors. During the first quarter of 2005, the median home price was $174,900 and the average selling price $251,063.
Dennis Quick is senior staff writer for the Business Journal. E-mail him at dquick@charlestonbusiness.com.
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