Back to the future [Charleston home prices]
A client mentioned to me the other day that he thought Charleston home prices have now reverted to 2004 prices. While I can understand where that opinion might come from, I think it paints a little sharper price decline than the real market conditions in Charleston.
Let's look at some statistics, a chart and then talk about anecdotal evidence.
The Case - Shiller index might suggest that home prices have reverted back to 2004 (or worse, maybe even 2003 or 2002) but as I've pointed out on more than one occasion, that index is heavily weighted toward some of the most distressed housing markets that also saw the biggest run up in prices.
If you imagine a line running from this year's median price backward, you will find that it meets halfway between 2004 and 2005 prices. But ...
As I've pointed out, the mix of sales over the past 3 to 6 months has been concentrated at the lower end of the market which tends to exaggerate the price decline. The reality is that if there are many fewer sales of mid priced and high end homes, the median will decline even if actual prices on individual homes don't.
But actual prices on all homes for sale in Charleston are under pressure this year due to plentiful inventory and fewer buyers so there certainly have been price declines. But how far have prices really declined.
Let's take my neighborhood. I purchased my home in spring 2004 and thought about selling in spring 2006. Although the sale didn't close because my buyer had to back out of the sale because their buyer backed out of the sale of their house due to home inspection issues, I did have a contract in one day for 32% more than I had paid just 2 short years earlier.
Aah, the good old days.
While my home today certainly isn't worth what it was at almost at the peak of the market, how far has it fallen. Based on sales of very comparable homes to mine, I would say the price has dropped 14.5% from the peak and my home is still worth 13% more than I paid. And while foreclosures are affecting home values across the country and in Charleston and in my neighborhood, the couple of foreclosures that I've noticed selling in my neighborhood haven't brought prices of similar homes as low as the price of the comparable foreclosed home.
So bottom line, I would suggest we are probably back to prices somewhere in 2005 rather than 2004 and while prices may decline another 5 or 10 percent before stabilizing, in many cases, you can probably buy today for that same 5 to 10 percent discount off today's price.
Or you can wait for prices to start to go up again and with lots of people sitting on the sidelines just waiting for that bell to ring announcing that it's "safe" to buy now, the competition for homes at that time may actually cause another price spike.
Back to the future.