Charleston Market Report - October 14, 2012The long term trends in real estate and the stock market do not occur overnight. It is a surprise to many because most people do not know how or have the time to track this sort of stuff except for geeks like me. The national media then often reports "crashes" in the markets as though they just happened overnight. The wonderful aspect of trend movement is that they will always move towards an in-balance between supply and demand and show a true direction of price movement.
In order to track the real estate market of the historic and beautiful city of Charleston, SC, which is my hometown, I measure four main indicators which are:
1. Existing Home Sales
2. New Home Building Permits
3. Foreclosure Filings = (Defaults + Auctions + REOs)
4. Interest Rates
Three out of four of these indicators are local except for indicator #4, interest rates. The direction of interest rates tend to increase or decrease the momentum of home prices depending on the direction of indicators #1 through #3.
Main Indicators #1 and #2 are the two best leading indicators and interest rates (#4) have been very favorable and have displayed improvement since Q1 2010. The trends point to a very nice rebound in the Charleston real estate market from depressing levels created by the "credit bubble."
Main Indicator Matrix
When you look at the Main Indicator Matrix below the Charleston, SC real estate market began to deteriorate starting in Q1 2006, which I covered years ago when I first started writing the Charleston Market Report. Starting in Q3 2006 we were in full "red alert" risk mode for home price decline here and most people thought I was a lunatic because Charleston had been such a consistent real estate market for so long. Unfortunately for those who did not listen to the warnings and "trust the trends" they soon realized the hard way that they should have made the "trend their friend."
Q1 2010 is where we first began to see the trends confirm some market improvement as distressed real estate was being worked out, interest rates were favorable and sales turned the corner after some help with stimulus programs.
The Main Indicator Matrix below shows all four indicators in green which has not occurred in over seven years. This can be attributed to a number of factors which include a Zero Interest Rate Policy (ZIRP) being pushed by the Federal Reserve, more affordable home prices and a reduction in distressed properties flowing onto the market. Combine these factors with the quality of life in Charleston, positive demographic trends, a strong cluster of aeronautical, defense and technology companies, and favorable state policy to recruit new businesses is a recipe for a rebounding housing market.
Please keep in mind that these charts are just merely a macro view of what is happening in Charleston, SC and is by no means the sole reason to go buy or sell a home. You will need to drill down in your own area and personal finances with a professional before making that decision.
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The Home Price Appreciation chart below is not a main indicator but rather a result of what happens when supply and demand creates an in-balance or no in-balance at all. Real estate prices act just like the stock market because sometimes they go up, down or simply move sideways. The key is identifying a major change in trend, such as what began to occur in late 2005 before most people in Charleston or the rest of the country realized a major decline in housing prices was upon us.
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