As you seek to expand your investing pursuits, South Carolina may appear to be an appealing candidate to you for your next purchase. However, it's understandable that you'd want a bit more information to understand what you're getting into.
You can't just listen to everything real estate agents say without doing some research first. What does the state of housing inventory look like? Is there a good enough housing supply?
By the time you're finished, you should have a much better idea of what the landscape looks like to be able to make the most informed decision possible.
South Carolina Housing Market Trends to Keep in Mind
Here's a quick look at some of the real estate numbers for Q2 2022 in South Carolina to set the stage:
- 13,2857 homes on the market
- Median sales price of $363,900
- 1.5 months of housing inventory
- Average home value of $267,835
- Houses on the market for an average of 41 days
- 30-year mortgage rate of 5.54%
What Factors Affect the Landscape of the SC Housing Market?
Obviously, the state of the South Carolina real estate market will be driven by a series of factors, but what are they? There are four major ones, all of which are conveniently covered for you below.
As you look at the population or a sample thereof, you'll find that you can group people according to various common factors. These could include class, race, age, purchasing habits, income, etc.
Based on the current demographic proportions at any time, it makes it a bit easier to understand what demand looks like both in terms of the kinds of properties sought after and the extent to which they are desired.
This one goes without saying. Especially as an investor, you can't simply make impulse real estate purchases. There has to be a level of understanding of the economic conditions and acting accordingly.
Whether for personal or business interests, people will do the same. There are factors such as inflation, GDP, employment rates, costs of living, etc., that will determine the extent to which people can buy homes, and if they even see it as a priority.
Mortgage Interest Rates
Naturally, the cost of getting a mortgage is going to weigh into things heavily. As it is, mortgage interest rates are so high that even people who earn more than the norm find themselves priced out of the market.
What does subsidization look like? What about deductions in South Carolina? Are there tax credits to think about?
These are just a few of the areas that government intervention will bring to the table that you need to keep at the forefront of your mind as you make your purchasing decisions.
Will the South Carolina Market for Real Estate Crash?
You're probably asking this one considering all the rumors out there about a potential crash of the housing market. Some experts think we're in a housing bubble, rising interest rates are a huge concern, and of course, there's the Federal Reserve Bank that affects the state of things with its decisions.
Recent reports will tell you that the South Carolina real estate market has seen an uptick in demand, which is accompanied by rising prices.
A big part of this is the number of people moving from other states, considering SC isn't the most expensive place to live. The temperature is great, and it's ranked as one of the best places to retire.
This rapid growth in demand is very worrisome to some experts who are worried about a potential South Carolina housing bubble, which is expected to be followed by crashes down the road.
Bear in mind though that this is a market that has seen downturns in the past and has done a great job weathering these storms without coming apart at the seams.
Of course, it's difficult to say with any kind of certainty whether a crash is imminent or not. However, you never know what policies, changes in demographics, or even natural disasters will look like, and all of these are a part of the equation.
While the housing supply is not as low as it was between January and June of 2023, it's still low compared to pre-2020 levels.
Housing Statistics to Think About
A study carried out by the SC Housing Fund in conjunction with USC found that the demand and supply for homes in SC are severely mismatched. Over 30% of households that fall between the $35,000 and $75,000 income bracket find themselves cost burdened spending over a third of income on housing costs.
Those who fall below this bracket, as you'd expect, have a huge challenge finding affordable housing.
The matter of mortgage interest rates rising because of the Fed's attempt to control inflation is also another problem. There was a nationwide increase of 20% in the average monthly mortgage payment of single-family existing homes in Q2 2022.
Therefore, affordability has taken a significant hit. This also corresponds with data from ATTOM Data Solution that indicates that just over 30,500 homes in the USA had foreclosure filings as of August 2022.
Through completed foreclosures around this time, lenders would possess just under 4,000 properties, which are classified as "real estate owned."
Existing home sales declined from month to month starting in January and the trend continued through August. From the year before, there was an overall 23.8% decline.
What Is the Forecast for South Carolina?
Looking at the average home value in SC, the figure has appreciated 10.8% from 2022, based on data from Zillow. Between the listing and the pending state of a home, there's currently a 24-day period, which is indicative of the extent of demand for housing in the state,
Zillow has provided an MSA-level forecast that speaks to the expected pricing changes for the next few years. Starting from February 2023, predictions were provided for different timelines within the period such as March and May of the same year, as well as a one-year outlook ending in February 2024.
Take the Columbian metropolitan area for example. A 0.8% is projected between February and the end of May 2023, with an expectation of a 2% appreciation between February 2023 and February 2024.
For the same period, Greenville is expected to see a 0.7% and a 2% increase, respectively. Of course, these are just estimations and realistic price fluctuations can be significantly different. Nevertheless, MSA-level forecasts have proven to be an invaluable tool for investors in the past and the same could hold true for you.
What this means for you as a potential buyer of an investment property is that you could find yourself running into some difficulties finding a reasonable property at a reasonable price. This will likely continue as the costs continue to trend upward.
The best advice for you in such a landscape is to do your due diligence. The reality is that the SC market has a serious demand problem at the moment and the supply is not expected to improve.
The Federal Reserve is expected to continue trying to control the state of inflation by raising interest rates, which means the cost of acquiring homes will continue to increase. Some experts believe that this will motivate a downtrend in demand, which could see the home prices in the local markets becoming more favorable.
Advice for Buying in a Hot Market
With demand being so much higher than supply, the market is currently in a hot state. Here are a few recommendations to help you ensure that your investment is protected.
SC has a highly localized market as trends are different from one region to the next and this is the kind of place you want to target if you want to get the best possible value. Buyer closing costs will be about 5% of the home's selling price and depend on the state.
Since the hot market is a seller's market, you'll find that a home's value will likely appreciate before it falls. This means that as people are driven away from home buying, rentals will become more appealing.
Considering you would be basing your pricing on the market value, you stand to earn more in this kind of landscape.
The South Carolina real estate market can be very appealing considering the relatively low cost of living that attracts potential renters to the state. If you own a rental property, it could be a lucrative venture.
However, you must consider how difficult that may be to do with the rising costs, low inventory, etc. Do your due diligence to come to the best possible decision.
Frequently Asked Questions
Is South Carolina a Buyer's or Seller's Market?
The current state of things with high demand and low supply makes it a seller's market.
Would Now Be the Best Time to Buy a House in South Carolina?
If you can find one for a good price, then it would be a good time since you could take advantage of the market state for your rental property.
What Typically Causes Housing Markets to Crash?
The most significant things that do this are high supply with low demand and the presence of a housing market bubble.