Charleston Real Estate, 2010 – What’s Next?

By Adam Rodgers

The new year promises more great prices and continued high inventories on Charleston area homes.

Although the market momentum was building throughout 2009 the supply of homes for sale remains too high to say the Charleston area real estate market has stabilized or corrected. The prime indicator of what direction future prices will take is the “absorption rate” which is simply the number of months that it would take to “absorb” the current inventory of homes for sale at current sales levels. A six month absorption rate represents a balanced market with stable prices and an absorption rate over 10 months represents a solid buyer’s market with further price declines to come. Thecurrent absorption rate area wide stands in excess of 15 months. All forecasts suggest even more shadow inventory (foreclosed homes being held back temporarily by the banks) will hit the market in the first half of 2010 priced below current market value.

The combination of low mortgage interest, homebuyer tax incentives and huge inventory of homes for sale in 2010 makes this year the best time in a generation to buy a home for those that plan to remain in the home for at least several years. It is highly unlikely the tax credits or mortgage backed security purchases by the Fed will survive past the first half of the year. This takes $8,000 off of the table from the tax credits and cheap mortgage money evaporates as well. It is very likely that interest rate increases will offset home price declines increasing the cost of owning the same home even as the price declines.

It looks as though the last half of 2010 should have the best opportunities for real estate investors. After the incentives discussed above have ended the remaining inventory will need further price reductions to attract remaining buyers. The recent announcements regarding Boeing’s 3,800 employee manufacturing facility, the Wind Turbine Test Facility, and Maersk Sealand’s renewed contract at the port creates thousands (perhaps tens of thousands) of new jobs. Savvy investors should buy homes in areas near manufacturing facilities, especially Boeing, because employees relocating to Charleston will need to buy or rent homes close to work.

Real estate closings after July 2010 will predominantly consist of capital rich buyers that can afford to purchase homes in cash or put down large down payments as interest rates will likely have risen dramatically by late in the year. Many people living in other states or countries that have been waiting to buy a second home in Charleston for vacation or retirement will take advantage of incredible opportunities beginning to appear in high end homes and exchange rates favorable to foreign buyers as the government continues to debase our currency.

Visit my website to learn more about Charleston SC real estate and search all homes for sale. Adam Rodgers is a Realtor with Carolina One Real Estate in Mount Pleasant SC.

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