Case-Shiller housing index continues to fall
The S&P Case-Shiller housing index continues to fall with broad based declines in the prices of single family homes in every metro market covered by the survey.
According to the data, prices fell 6.1% year over year for the 20 housing markets included in the survey. Prices fell in every single market on a month over month basis for the past 2 months including Charlotte, Portland and Seattle where prices have held up better (and are still the only 3 cities in the index with a year over year gain) than in many of the very heated housing markets during the real estate boom.
As you would expect, the cities with the largest declines included Miami, Tampa, San Diego, Los Angeles, Phoenix, Las Vegas and for different reasons, Detroit, all showing declines on a monthly and yearly basis.
So how is the Charleston South Carolina real estate market holding up compared to these cities since Charleston is not a large enough metro area to be included in the survey.
For starters, the Case-Shiller survey is very complicated so it would be impossible to compute an accurate number for the first column, the current value of houses compared to the base of 100 in January 2000. As you can see, many of the very heated housing markets effectively doubled and more during this decade with indexes at 200 and greater. For example, Miami with an index of 244.35 means that housing appreciated by 144.35% in the past 7 years there and Atlanta, with an index of 133.79 means that housing appreciated by 33.79% during the same period.
One of the reasons the South has been gaining population at the expense of the Northeast and Midwest (other than our lovely weather of course) is the housing affordability available in most markets. So doing my very best to determine how Charleston real estate has appreciated during the past decade, I used the average sales price of single family homes during 2000, $196,284 and during 2007, $316,180 (through 12/26 each year) and calculated a 61.08% gain during the decade and that would mean that if my statistics were the same as those used by Case-Shiller, Charleston's index would likely stand at 161.08.
Click here for the methodology used by Case-Shiller.
While Charleston has been largely spared the pain being felt by homeowners in some of these other markets, our market is affected in several ways. First of all, many people move to Charleston from Northeast and Midwest cities and if they are having difficulty selling their homes there, many can't buy here. Secondly, there is buyer psychology and no one really wants to buy a depreciating asset. Even though everyone needs a place to call home, some may not want to invest while seeing prices declining.
My forecast for housing prices in the Charleston South Carolina real estate market is for more of the same for 2008, stable to slightly lower prices with no return to appreciation until 2009 at the earliest. Inventory simply has to be absorbed and until the credit and mortgage markets sort themselves out, demand will continue to be pressured. Look for some good buys to be available as financially squeezed homeowners (and builders) who have to sell will be more receptive to negotiating lower offers.