Mt. Pleasant, SC Market Update – Jan. 2010

Summary

There is light at the end of the tunnel! Inventory in Mt Pleasant continues a downward trend (albeit a slow reduction) and monthly sales are back above 100 a month. Distressed homes (short sales and lender-owned) homes are still appearing in most neighborhoods and have placed additional stress on appraisers.

Inventory and Absorption                       

We can still observe traditional seasonality in our home inventory in Mt. Pleasant. Comparing 2009 with the two previous years, we can definitely see a trend toward inventory reduction: Each peak has been lower than the previous one, and each low has also been lower. From January until May sales were very low (all below 100, January was the slowest month with 56 sales).

However, since July 2009 all months have registered sales above the 100 mark.

Some specific neighborhoods like Belle Hall Plantation have seen faster reductions in inventory. Belle Hall went from a high of 68 active listings in August of 2007, to 37 listings in December of 2009.

As of December 31^st total listing inventory was 1385 listings, the lowest level since March of 2006, but at the rate that we are selling, this still represents more than 14 months’ inventory. If this index drops to below 6 months, (i.e. the “transition point” between a “buyer’s market” and a “seller’s market”) we may start seeing upward pressure on home prices.

New Homes Supply

There are still very few “spec-built” homes available in the area, although some builders have started to offer new construction homes at reduced prices which are competing very effectively with existing homes.

Some smaller projects like Pinckney Place, Phillips Park, Watermark, Carol Oaks and the first builder in Carolina Park are seeing increased activity, especially in the lower ($200-300K) price ranges. Builders in I’On are offering cottages from the high $400K’s.

Builders have enjoyed cost reductions in both the price of land, and in building costs (materials AND labor), as their demand slowed down and are now building homes in prices and sizes that are more accessible to buyers.

Time On Market

The Days on Market Index (DOM) went from a low of 22 days in December of 2005, to 157 days in December (a little over 5 months). This is long, but still not too bad compared with Sullivans Island and Isle of Palms, which have an average time on the market of 247 days.

What’s Ahead?

I believe that the Mt Pleasant market (at least for single-family, detached homes) will be one of the first areas in Charleston to “pull out” of the decline. Interest rates are still at historical lows (although there is some talk of rates going up toward the middle of the year). Price decreases are still happening, but the decline has slowed down considerably.

The chart above shows the relationship between the average inventory and the median price. We still have a long way for prices to increase, but the median price line is close to intersecting with the 4% appreciation line, which is the average long-term historical appreciation for real estate.

Continued absorption depends largely on consumer confidence and the job market. The arrival of Boeing as a major employer in the region is great news for residential areas like Mt Pleasant, within short driving distance to the airport, but offering great quality schools and lifestyles. There has already been a palpable effect of this new employer on the rental market, and the rental inventory is currently very low. My crystal ball tells me that Mt. Pleasant will start “recovering” in earnest towards the end of the summer!

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