Charleston’s housing recovery has a downside
Hardly anyone’s rooting against the residential real estate recovery.
Not longtime owners with years of hard-earned equity tucked under their roofs.
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Not the huge public- and private-sector apparatus that’s tied to the cyclical fortunes of the home-selling business.
The exception might be renters trying to scrape enough together to take the leap and buy a place of their own. That chasm is getting even wider as real estate values climb and the broader economy regains its footing.
The issue is magnified in Charleston, where it seems everyone wants to live, but where wages run 15 percent below the national average despite gains in recent years.
In short, housing affordability is back on the front burner, or getting close to it.
It isn’t a new problem.
A panel of home building executives mentioned concerns about escalating lot prices several times at a well-attended Urban Land Institute South Carolina conference on Kiawah Island last week.
The Charleston Metro Chamber of Commerce has been studying the long-term economic risks associated with fast-rising housing costs for more than a decade.
The biggest fear is that future generations of workers will decide to take their talents elsewhere.
“The issue didn’t go away,” said Mary Graham, senior vice president and a longtime economic researcher with the chamber. “It was just dormant for a while because of the economy. ... Housing affordability is an issue here.”
Up, down, up
Homes prices rose at fairly sane levels through the 1990s. They picked up a fresh head of steam in the new century until sales faltered in 2006, when the industry’s version of “The Perfect Storm” roiled the market for about five years.
The ensuing recession forced many would-be buyers to stand by idly as prices plummeted. And as banks licked their wounds, they didn’t exactly make it easy for borrowers who had the wherewithal to jump into the churn.
In a blink, it seems, the tough times of yesteryear are a fading memory.
Property values have snapped back to life. Through August, 8,706 homes changes hands at a median price of $205,417, respective gains of 24 percent and 8 recent, according to the most recent figures from the Charleston Trident Association of Realtors.
And then there are the other bills that come with home ownership. Mortgage interest rates have been edging up. Insurance premiums, utility bills and other “carrying costs” do what they seem to do so effortlessly — rise. Buyers of newly built homes are feeling even more pain, as rising demand for construction drives up labor and material costs.
Paychecks, meanwhile, have been stagnant for most workers.
There’s the rub. And it’s enough of a worry that the chamber and the Charleston Regional Development Alliance identified housing costs as an issue that needs to be addressed to help “keep positive momentum,” according to their 2013 economic “scorecard” released last week.
Their concerns stem from efforts to build up the “knowledge-based” sector of the local economy.
Housing costs can be a deal breaker when it comes to keeping or attracting the higher-skilled workers the region needs now and in the future.
“It’s a big issue for young professionals,” Graham said, citing the results of a different study the chamber released this year. “They want to live in Charleston because it’s an awesome place.”
But some of those workers learn they can buy more house for their money in bigger cities like Atlanta or Charlotte, where they can earn a better wage to boot, Graham said.
“If the cost of housing is out of reach, it becomes a big issue for being able to attract and retain that young talent we need,” she said.
It’s not just a pocketbook problem, she said. Out-of-whack home prices can exacerbate other regional ills, namely traffic congestion and sprawl, because developers typically meet demand for cheaper homes by building farther out, where land is less expensive.
Graham said some progress has been made.
“I think our local governments do understand that the regulations they put in place have a direct impact on housing costs,” she said. “They seem to be more sensitive to that.”
But it’s a tougher task to rein in the competitive private sector and contain capitalistic urges in a rising market, especially after such a long slog.
Finally, the real estate market is roaring back, just like the good old days. Hip, hip, hooray?
Contact John McDermott at 937-5572.