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Local market ready to emerge from ‘tepid’ times
By Kathleen Dayton
Staff Writer
“Steady,” “tepid” and “flat” are some of the words real estate experts and economists are using to describe the housing market going into 2007, and some say such a market isn’t all that bad.
“In 2006, we started off strong and ended up weak. In 2007, we started off weak and we’ll end up a bit stronger, so the year may end up flat, which isn’t necessarily a bad thing,” said Mark Vitner, senior economist for Wachovia Bank and author of the bank’s 2007 “Housing Market Outlook.”
Vitner doesn’t expect home sales to pick up as much as they normally do in the spring, although discounts from homebuilders are starting to bring in some buyers.
“It will still be one of the best years for home sales in Charleston history; it just won’t be as good as 2005,” Vitner said.
In his report, Vitner said the nation’s housing market turned around from red-hot conditions a little more than a year ago to the tepid conditions of today, sending inventories soaring. After escalating more than 40% in the past two years, new home inventories have begun to relax. Inventories of existing homes, which had swelled even higher, are also slackening.
The Charleston Trident Multiple Listing Service listed 3,868 single family homes under $600,000 on the market in December 2006, compared with 2,623 on the market in that price category in December 2005.
Brad Rundbaken, an agent with Sandlapper Real Estate, said he expects sales to be flat this year, but he does expect a seasonal uptick in the spring.
“I do believe it will pick up, because real estate is seasonal,” Rundbaken said. “I know I have buyers sitting on the sidelines right now. I don’t think we’ll see a market like (2005) for a while.”
Steve Pendley of Pendley Construction, a small local builder, said he has cut back about 75% from an all-time high building pace he sustained during the past three years. Pendley is developing Spring Grove Plantation, midway between Goose Creek and Moncks Corner, and is doing less speculative building and more custom homes.
“The market is slow; you cannot have excess inventory,” Pendley said. “I think 2007 will continue to be a slowdown until the public realizes that there really is not a better time to buy than now. There are steep discounts. Builder pricing has come down because of the excess inventory that large tract builders have put in place.”
David Kent, president of the Charleston Trident Association of Realtors, said he has noticed builders have cut back and that should help control the market.
“Based on talking to agents, appraisers, builders and so forth, we anticipate a very good spring,” Kent said.
Kathy Rawers, president of the Charleston Trident Multiple Listing Service, expects the market to return to a steady growth pattern this spring.
“It’s not going to be the incredible spiking capital appreciation that we have enjoyed over the past three years. It’s going to be a more normal growth pattern,” Rawers said.
Second homebuyers and investors will be the last sector of the market to rebound, she said, and that will probably not happen until late summer.
Keller Williams agent Susan Orick noticed a pickup in sales during the last week of December and hopes that is an indication of how things will continue this year. Area-wide, sales fell 31% in December compared with Dec. 2005, the sharpest decline in the fourth quarter.
“Things are still selling, but we have so many people trying to sell,” Orick said. “There’s been so much inventory out there, you sort of don’t notice that there are sales going on. I think that people who have been waiting to see what the market will do will start getting itchy and will start acting. I think home buyers are going to start getting off the fence and getting into the game.”
Phillip Ford, president of the Charleston Trident Home Builders Association, said the continued migration of people to the Lowcountry has kept builders feeling good about the market.
“They’re having to be a little bit more cautious, because a lot of the markets around the country that these guys are building in went kaput,” Ford said. “I think you’ll see a little bit more of a drop in the number of permits pulled in 2007, but I don’t think you’re going to see a major drop. South Carolina is still a destination for people, and that trend will continue. Job creation still seems to be a priority in this area and interest rates are still low. In some cases it’s nice that the market has slowed, because it was out of control.”
The National Association of Realtors forecasts existing home sales to rise through 2007 and into 2008, while new home sales should recover by summer. Existing home sales for 2006 are expected to be reported at about 6.50 million, the third highest year for sales on record. NAR anticipates 6.42 million existing home sales in 2007. New home sales for 2006 should tally 1.06 million, the fourth highest year for sales, with 957,000 new home sales projected this year.
Brian Crabtree, president of Weichert, Realtors-Dean Kelby and host of “Lowcountry Real Estate” on WTMA 1250-AM, said the Lowcountry market bottomed out in August, September and October, and people have had to lower their inflated view of prices.
“I don’t think people have had to come down a whole lot,” Crabtree said. “We’ve still had appreciation from 2005 to 2006 locally, although nationally I think the numbers were down a little bit.”
Crabtree is optimistic about home sales in 2007 for a number of reasons, including a possible federal reduction in interest rates because of inflation. Another sales pitch for buyers is that mortgage insurance premiums are now tax deductible.
“Rates are still phenomenal and with the availability of inventory, buyers are able to get an affordable rate and an affordable house,” Crabtree said. “There’s a lot of pent-up demand from 2006, a lot of wait-and-see.”
Crabtree even predicts what he calls a “mini-frenzy” sometime in the next six to nine months.
“Look at the baby boomers retiring and the Northern markets are picking up, which means people can get their houses sold and retire to Charleston,” Crabtree said. “We still got two and a half times the sales in 2006 as we had in 2000. That’s a pretty alarming statistic. This market has grown a lot and sustained it. The largest retirement population ever will retire in 2014 and I don’t think we’ve seen anything yet.”
Kathleen Dayton is a staff writer for the Business Journal. E-mail her at kdayton@charlestonbusiness.com.
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