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Home prices hit in most areas by downturn

What goes up, in most cases, must come down.

For the local housing industry, Newton’s law of physics caught up with the residential real estate market in 2008, pushing down the median price of Lowcountry homes to slightly more affordable levels.

Homes last year sold at prices that were about 3 percent lower than in 2007, marking the first year-over-year price decline in median sales price in recent memory.

The Charleston Trident Association of Realtors said the median sales price for residences sold through its Multiple Listing Service was $203,270, down from $209,742 in 2007.

Mark Kearns, a Mount Pleasant real estate appraiser, estimated that most homes are now worth 5 percent to 10 percent less than what they would have fetched when the market peaked roughly three years ago. He said the falling prices come after an extended period of too much supply, too few buyers, economic uncertainty and rising unemployment.

But true to the old industry mantra — “all real estate is local” — some locations are holding their value better than others. Luxury beachside homes have seen double-digit declines in value, while buyers lately have sought out deals in modestly priced neighborhoods, keeping prices in those areas relatively stable. Properties that are in prime spots and located a comfortable distance from new developments also have held their value better.

“Money’s like water. It seeks the lowest level,” said Fudgy Brabham, broker-in-charge of Mount Pleasant-based Harbourtowne Real Estate.

To varying degrees

Association data show that throughout 2008, no part of the Charleston region was immune from the real estate recession.

But the decline in prices between 2007 and 2008 varied among the 38 individual submarkets designated by the association. Prices slipped by sizable margins in West Ashley, Mount Pleasant, Summerville and Goose Creek, while they held steady in Hanahan, North Charleston, downtown Charleston and on Johns Island.

In some areas, the declines seemed to follow basic demand-based economics.

Neighborhoods along Clements Ferry Road near Daniel Island, for example, didn’t see a huge drop in sales volume last year, perhaps because prices quickly fell to match the new market realities. The price of the typical home there went from $259,000 to $218,950 — or 15 percent — over the course of 2008.

On James Island, prices declined a modest 4.6 percent to $248,000 last year. While 699 homes changed hands there in 2007, 444 sold in 2008.

On Daniel Island, home sale values actually edged up by 3 percent to a median of $445,200, which Kearns the appraiser chalked up to the fact that sellers there already had absorbed a deep hit. Between 2006 and 2007, the median price crumbled to $431,495 from $569,000.

Overall price declines in Mount Pleasant were in line with parts of Summerville and West Ashley on a percentage basis. But because homes, on average, cost more in the East Cooper suburbs, the overall drop seemed more dramatic in terms of dollars. The median price skidded about 7 percent, to $345,000 from $370,000, inside U.S. Highway 41, and about 5 percent to $314,165 from $300,00 beyond that point.

Bright spot

The one area that saw a significant double-digit uptick in its median home price last year was in North Charleston, inside U.S. Interstate 526, where prices jumped 32 percent to $156,250. That bump was likely tied to revitalization efforts, relatively modest prices and a centralized location, said Billy Simons of Trident Real Estate.

“You’re 15 minutes away from anything,” said Simons, who lives in Cameron Terrace. “People are realizing how convenient this location is.”

Simons stressed that the 32 percent increase doesn’t necessarily mean a home that was worth $100,000 in 2007 in that area could now fetch $132,000. The jump is more likely tied to the pricier, newly built homes that were sold in that part of the city, which hasn’t seen much new residential construction until recently.

Established neighborhoods that are near new housing developments were more likely to see home prices fall in 2008. One reason: The bigger builders have the advantage of being able to cut prices and offer incentives to move inventory, while individual sellers are often only able to lower their asking prices to attract buyers.

Sellers also are going up against a growing stock of foreclosed properties, which lenders are eager to unload.

Bill Hall, a Summerville-based agent with AgentOwned Realty, realized just how tough the competition had become while sifting through sales data last fall for a client. When looking at the 10 Dorchester County homes that sold in November for between $155,000 and $165,000, he found that six were newly built and that two had been in foreclosure.

“That’s who you have to compete against if you’re an individual homeowner,” Hall said.

The buyer’s market also extends to some of the area’s expensive island communities, where double-digit price declines were commonplace as the market retrenched last year. Folly Beach sale prices fell 19 percent, Sullivan’s Island saw a 26 percent fall and Isle of Palms, excluding Wild Dunes, recorded a 12 percent drop.

“They’re waiting for foreclosure pricing,” said Ron Davis, a real estate agent based on the Isle of Palms. Davis said he expects prices for luxury homes to come down even more off their peak values.

But at least one zone in the high end of the market held its ground: the area of downtown Charleston below the Crosstown. While sales volume in that part of the peninsula fell 36 percent, prices remained level at $570,000.

Ruthie Smythe, broker-in-charge of Lane & Smythe Real Estate, speculated that was partly because of continued interest in expensive and historic properties among well-heeled second-home buyers. Purchasers of primary homes also helped maintain the status quo.

“I think we have enough primary homebuyers,” Smythe said. “That covered us.”

Reach Katy Stech at 937-5549 or kstech@postandcourier.com.

Home prices, sales drop in Dec.

By Katy Stech

The Post and Courier

Wednesday, January 14, 2009

December brought to a close a tumultuous year for the local real estate industry, ending with the largest monthly home price drop in recent memory for the Charleston area.

The typical home sold last month went for $191,600, a 9 percent decrease from the last month of 2007, the Charleston Trident Association of Realtors said.

The total number of homes sold, which is typically smaller in December because of the holidays, fell 33 percent compared to December 2007 to 478.

Throughout 2008, the industry that had built up around the Charleston real estate market during the boom shrank after months of steady double-digit declines in sales volume.

In the end, last year’s home sales fell by 24 percent compared with 2007, and the median sales price dropped roughly 3 percent to $203,270.

Meanwhile, the number of sellers actively seeking buyers remained at what is widely agreed to be an unhealthy level. As of Monday, 10,005 homes were being marketed for sale through the association’s Multiple Listing Service.

The glut has boosted competition among homeowners who want to sell, putting pressure on prices.

“Sellers are realizing that if they need to sell a house, they need to be realistic with their price,” said Kimberly Lease, a real estate agent with Century 21 Properties Plus.

Lease said that some December buyers were investors, including those who bought homes to rent out in modest but conveniently located

neighborhoods. One of her investor clients bought a West Ashley home for $134,000 that had sold two years ago at the peak of the market for $218,000.

“I think people who can afford to invest some money right now are investing in homes,” she said. “It seems to be less of a gamble than the stock market.”

Lease also has helped some longtime property owners, who had built up equity in their home over time, move to larger residences that have recently reduced in price.

First-time buyers have also taken advantage of the lower prices, said Dan Lorentz, an agent and partner in ERA Tides Realty.

He identified the local market’s “sweet spot” as properties priced between $150,000 and $300,000.

“That seems to be the price point that people can afford and manage,” Lorentz said.

And those who have found a deal seem to be buying with a sense of urgency.

Lorentz said he had to make special arrangements to open his office on Christmas Eve and New Year’s Eve for eager buyers.

He attributed the sustained year-end interest in the real estate market to lower interest rates and falling home prices. Prospective buyers who normally tune out real estate during the holidays stayed vigilant for deals, he said.

Reach Katy Stech at kstech@postandcourier.com or 937-5549.

Home sales down; so are home pricesBy Katy Stech (Contact)

The Post and Courier

Thursday, December 11, 2008

Home numbers
$202,702: Median price year-to-date, down 3% from first 11 months of 2007. The median price for November alone was $185,503.
8,199: Number of homes that have been sold year-to-date. That’s down 24% from the same period of 2007.
8,503: Number of single-family homes on the market
1,825: Number of condominiums or co-op units on the market
105: Average days on the market for house that sold in NovemberFirst, the bad news.

Charleston-area home sales plunged a dramatic 46 percent last month compared to the same month last year, marking the steepest year-over-year slide since the local housing slump began.
Only 435 homes sold during November, a figure so low that the Charleston Trident Association of Realtors, which tallies the figures, couldn’t find a lower monthly sales number in its database, which dates to 2003.
But the good news is that the sales drop came with a slide in home prices, which means that Charleston real estate has become relatively more affordable.
The median price of homes sold last month fell 7 percent to $185,503, the lowest monthly level since April 2005.
Home prices in that range were typical during 2004 and 2005, but the housing boom that followed pushed prices well beyond the $200,000 threshold.
Figures released Wednesday by the Realtors group show that the bulk of homes sold last month were priced between $100,000 and $249,000. Only 48 homes priced above $400,000 changed hands.
“If you’re renting or a newly married couple or you’ve relocated, clearly this is a better time to buy a house than last year,” said Frank Hefner, a research economist at the College of Charleston. “But will prices keep dropping? That’s anyone’s guess.”
The slide in prices has led some buyers to question whether they’ll ultimately overpay for their property, he said. Additionally, the global financial crisis has further crippled consumer confidence, shaken job security and restricted the flow of home financing to buyers with questionable credit history.
“We can still say ‘Thank goodness we’re not Las Vegas’ — we’ll always be able to say that — but we’re not insulated just because we’re not doing as badly as other places,” Hefner said.
While the dismal home sales tally isn’t encouraging for the local real estate industry, some agents said they’re seeing buyers take advantage of the falling prices.
David Wertan of Re/Max Advanced Realty recently helped an Upstate couple buy a small Johns Island condominium as a second home at a dramatically reduced price.
“It sold for $95,000 and it’s gorgeous,” he said. “Those opportunities just haven’t been there in the last four to five years.”
Wertan said he doesn’t expect a rush back into real estate, not even from investors or first-time buyers. Instead, the recovery will be gradual, he said.
His Upstate clients, for example, have already shown their condo to a friend who is now thinking of buying a neighboring unit.
Wednesday’s numbers don’t reflect buyers who were encouraged by the recent drop in interest rates. Some local real estate agents said they’ve seen an increase in showings and buyer interest since the rates began falling last week.
The number of homes for sale in the Charleston area remains at record levels. As of Wednesday, a total of 10,462 homes were available, which is more than double the amount that local real estate experts say is healthy for the region.
“You’ve got a lot of foreclosures coming on the market,” said Jana Bantz, an agent with Summerville-based Prudential Southern Coast Real Estate. “That’s contributed to it, and there’s quite a number of homes that need to be reduced (in price). If those prices came down, I think we’d see a drop in inventory.”
Reach Katy Stech at 937-5549 or kstech@postandcourier.com

Treasury weighs action on mortgage rates

Plan would aim to buoy housing market by forcing down the cost of loans

Video

By David Cho, Zachary A. Goldfarb and Dina ElBoghdady

The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal.

Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government’s program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans.

These securities would be purchased primarily from Fannie Mae and Freddie Mac, the financing giants that buy most mortgages from U.S. lenders, according to sources who spoke on condition of anonymity because the plan has not been finalized.

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The cost of the plan and source of funding remain unclear. One possibility is for the Treasury to raise money by issuing bonds to the public at 3 percent interest. This could allow the government to turn a profit because it would be buying securities that pay 4.5 percent.At a meeting attended by the Treasury’s Interim Assistant Secretary for Financial Stability Neel Kashkari and the National Association of Realtors in mid-November, senior Treasury officials said they were optimistic that subsidizing lower mortgage rates with taxpayer dollars would help revive the housing market, sources said.Treasury officials told the Realtors that the plan could be a more effective way to help homeowners than focusing efforts solely on borrowers who are struggling to meet their monthly payments, the sources said. Democratic lawmakers have been advocating a proposal to modify the mortgages of distressed homeowners.A source said Treasury officials suggested at the meeting that the Realtors start a grass-roots campaign to press the mortgage rate plan with lawmakers.Treasury officials described the situation as fluid and said the plan was still being finalized, according to people in contact with the department. The officials expressed concerns yesterday that premature disclosure of the plan could prompt Americans to put off buying homes and hold out for a better rate, sources added.Treasury spokeswoman Brookly McLaughlin said she would not comment on the matter.

Key to solving financial crisis
Treasury Secretary Henry M. Paulson Jr. has said that a recovery in the housing market is key to solving the financial crisis. Such a rebound would restore confidence in the banking system and support the value of troubled assets backed by mortgages.

Though he has said a mortgage modification plan proposed by Federal Deposit Insurance Corp. Chairman Sheila C. Bair could help the housing market, Paulson has expressed concerns about whether it would reward borrowers who bought houses they couldn’t afford. Bair’s plan would use tens of billions in federal funds to modify adjustable-rate mortgages for several million financially troubled homeowners.

The initiative under review at the Treasury would be an alternative. Borrowers would have to meet standards set by Fannie Mae, Freddie Mac or the Federal Housing Administrations that include documenting their income, sources said. Fannie and Freddie were put under government control in September. The Treasury plan would not apply to refinances.

Any efforts by the Treasury to lower rates on new mortgages would work in concert with a Federal Reserve plan announced last week to buy $500 billion worth of existing mortgage-backed securities issued by Fannie Mae and Freddie Mac, and $100 billion worth of those companies’ debt.

The Fed was pleasantly surprised that 30-year fixed mortgage rates fell by as much as three-quarters of a percentage point in anticipation of their program. Homeowners rushed to refinance. Cheaper monthly payments may bolster consumer spending, the most important component of U.S. economic activity.

‘Short-term windfall’
News of the Treasury plan spread quickly through the markets. Shares of home builders rose. At Long & Foster, the Washington area’s largest real estate brokerage, top brass informed agents that they should gear up for increased demand from potential buyers.

“This is going to be a short-term windfall that everybody needs to jump on,” said Dave Stevens, the firm’s president and chief operating officer and a former Freddie Mac official. The move by the Treasury certainly would mean “interest rates will drop,” he added.

But it is unclear whether lower mortgage rates will spark home buying, which is a weightier decision for ordinary people than refinancing a loan.

There are also questions about how much the Treasury would spend to buy down the mortgage rate. One industry source said another idea being pushed by trade groups calls for the Treasury to spend $50 billion of its $700 billion financial rescue package to reduce the fees, or points, that home buyers pay when they want a lower rate for a mortgage.

Yesterday, the average rate on a 30-year fixed-rate mortgage increased slightly to 5.75 percent yesterday, up from 5.54 the previous day, said Keith Gumbinger, a vice president at research firm HSH Associates.

“What’s not known is the timing of the purchasing of the mortgage-backed securities and how quickly money will be pumped into the marketplace and that matters as to how low the mortgage rates will go,” Gumbinger said.

Staff writer Neil Irwin contributed to this report.

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