Mike's Montage Message - Last Days of Summer

As we enter the last days of summer, I wanted to provide an in depth report into the metro Charleston housing market . Succinctly our market is very STRONG! This past week saw 408 properties go under contract . Indeed 17 out of our last 19 weeks have been above the pre-covid single week record for 458 properties going under contract. In effect this is a whopping 67% increase over the same time a year ago in terms of ratified contracts. More on that below.

The key points to know based on where we are today are as follows:

(1) Post shutdown, the Charleston housing market is consistently seeing record sales levels. The bottom of the market appears to have been about 24 weeks ago.

*Remember why we focus on ratified contracts instead of closed sales...closed sales were ratified 5-8 weeks ago and reflect buyer sentiment at that time. Ratified contracts tell us what buyer sentiment is currently...and what the number of closings will look like in a month or two when the Post and Courier reports on those numbers. Last week was the first sign of any kind of a seasonal slowdown (which should have started about 15 weeks ago) and the market "dipped" to 408 ratified contracts, +67% to the same week last year. To put the "dip" to 408 contracts in perspective, the most ratified contracts we've ever had in one week in the month of September prior to last week was 344. Last week's 408 is a monster number for this time of year. t is worth repeating that our post-lockdown boom (nearing six months in length now) is the most active housing market that the Charleston area has ever seen by a wide margin.

(2)  The Charleston market has been picking up strength relative to the very robust 2019 market over the last 10 weeks. The last 4 weeks have been particularly strong. Typically there is a sizable seasonal slowdown headed into July/August/September. This hasn't happened yet this year.

(3)  We need more than 9,000 additional listings market wide to achieve a balanced market (6 months of inventory). We have less than 3,300 listings in the MLS that aren't in "Active Contingent (AC)" or "Pending (P)" status. This is the lowest number since the start of the new millennium.

The gap between the number of listings available for sale and the number of listings needed to maintain a balanced market is growing each month. We are down to about 3,300 listings market wide that aren't under contract with well over 4,000 properties in "AC" or "P" status. Historically the number of Active properties home for sale exceed those under contract and of concern is that the gap is substantial and widening.

Conclusion to be drawn, broadly speaking, this is the best time in our housing market's history to have your house on the market to sell. If you are waiting for more favorable conditions before selling then the forecast is you will be waiting a while. A long while. For no obligation conversation and in sight into this encourage you to schedule a quick discovery call to learn more. 

(4) The activity is somewhat spread out with high levels of sales in the Goose Creek/Moncks Corner/Summerville arc, in Mount Pleasant and West Ashley as well as James Island.

(5) Some of the most active parts of town have an absorption rate measured in WEEKS. The Charleston market overall is down to 1.8 months of inventory! All of the most active areas are well below the 5-7 months of inventory needed for a balanced market.

(6) New construction represents roughly 36% of all pending contracts in the MLS. This is a very high number. Normally this number is around 25%. 

(7) Foreclosures and Short Sales represent a combined .8% of all available listings currently. This is down from 2.2% of all available listings on 10/15/2019. This market is basically nonexistent currently.

(8) Properties over $1MM continue to sell well.

A "normal" September will see 25-40 properties listed over $1MM go under contract during the entire month. Last week saw 30 go under contract.(9) The potential for a future wave of Real Estate Owned properties (REOs) to sink housing prices in our area appears to be dwindling for 2021. Why?

(a) We are well below the amount of inventory that we need to have for prices to stop rising much less start to decrease. Consider this:

REOs and Short Sales are .8% of our inventory currently. If a huge wave hit and the number of REOs increased tenfold (10X) this would be around 350 REOs We are 9,000 listings short of a balanced market. At our current rate of sale, the 350 "new" REO listings, if they all hit in one day, would be chewed up in less than a week. We would need several thousand REOs to hit the market to even get to the point where prices stop rising. This would mean more than a 500X increase in the number of REOs we have currently.

(b) Prices have been rising for a decade. Of the properties where the mortgage is in arrears, many have significant equity built up meaning that they can sell the property for more than what is owed. These folks will not let the property go back to the bank and let the bank have the equity. They will sell the property and keep the equity for themselves. Most of these "at risk" properties will likely not become REOs.

(c) The economy is doing surprisingly well both nationally and locally. The national unemployment rate is lower than where most "experts" thought it would be at this point, barely above 8%. This is remarkable given all that has happened and below the average unemployment rate from the 3-4 years of the economic crisis which didn't entail government mandated business closures or capacity restrictions like the CV19 lockdowns did. The unemployment rate locally is likely below 7%, not much above the 5%-6% that is generally considered to be "full employment".

To summarize not saying that there is no risk from future REOs. Simply that the risk appears to be declining.

(10) The election is a moderate short term risk to our very high sales levels. 

It is common for sales activity to "pause", not "stop" briefly while election tensions rise.

(11) Future Covid concerns persist but the tend is that individuals are leaving the big cities for the Holy City the secret is out Charleston and the Palmetto State is an awesome place to work rest and play! 

Whilst this was not the 20/20 we all had in mind it is the one we got. I'm sure this edition of Mike Montage Message will prompt many questions in your mind. Be assured this is perfectly natural. Simply drop me a line or give me a call on my personal cell at 843-906-9669. It will be my pleasure to answer your questions as I seek to keep you best informed in all things real estate related. In signing off for now please feel free to share this post with family, friends and business acquaintances they may very well say - THANK YOU.

With gratitude be sure to enjoy the final weekend of summer mindful Fall begins on Tuesday 9/22/2020. Truly where has the year gone ? 

Your friend in real estate aka US SCOT

Mike C