Falling interest rates and an expanding economy failed to boost home sales across the Charleston region in August as a lack of product and rising prices kept buyers on the sidelines.
Housing industry officials put the blame squarely on local government policies that have held back new construction, throwing supply and demand out of whack.
Residential real estate transactions dropped 4.6 percent in August compared to the same month a year ago, according to preliminary data Wednesday from the Charleston Trident Association of Realtors.
The downturn in sales comes after a 6.5 percent jump in July and a 1.3 percent drop in June. Home sales have been seesawing all year, after near-record sales in 2018. They are now off about 1 percent for the first eight months of this year, even as job growth continues to expand and more people are moving to the region.
The Charleston area needs 7,500 new housing units annually to keep up with the population growth, a benchmark that hasn't been met since 2006, association president Edward Oswald said.
“For 13 years, we’ve been in a cycle of underdevelopment, and this is what you get — unattainable housing costs that are being driven up by regulatory red tape, building moratoriums and uneducated policy being put in place by municipalities," he said.
Oswald said the region is growing, but policies and rules are stymying the market.
“We’re not growing smart right now," he said. "We’re not comfortable with the idea of density, we have a real lack of planning, and it seems that there’s a conscious effort to delay development. We’re simply not meeting the housing needs of our region."
Oswald outlined the consequences of inaction.
“You can’t just turn off the faucet," he said. "That’s not how it works. ... Residents are struggling with longer commute times, failing infrastructure and housing they can’t afford. We need leaders who understand these issues and are willing to address these issues head-on, with an open mind and a commitment to preserving and protecting the quality of life for our region."
A new study shows South Carolina's three major metro areas are among the top 10 moving destinations in the U.S. with Charleston coming in at No. 1.
Patrick Arnold, executive director of the Charleston Home Builders Association, also weighed in on the lackluster home sales.
“The development approval process is much longer for the Charleston region than it is in neighboring markets such as Greenville, which has a direct effect on housing costs and availability,” Arnold said. “We can’t keep up with the lot inventory — we’re running out of land and the land that we do have available takes considerably longer to develop than it needs to be."
Also figuring into the mix is a reluctance by developers to overbuild and get stuck with homes they can't sell, which happened during the last downturn.
Last month, 1,800 homes changed hands throughout the region at a median price of $285,000, up almost 10 percent over August 2018.
So far this year, 12,835 homes have sold across the region at a median price of $278,799, a price that's up 5.2 percent over the first eight months of the year.
The number of residential listings on the market throughout the region stood at 5,512 as "active" for sale in the Charleston Multiple Listing Service at the end of August. That's down nearly 10 percent from a year earlier.
While the cost to own a home mushrooms, mortgage rates have been falling and should spur more interest in home buying.
The latest report from home loan financial firm Freddie Mac puts the average rate on a 30-year mortgage down to 3.49 percent, its lowest level in nearly three years. The average rate on a 15-year loan slipped to 3.0 percent.
“Mortgage rates continued the summer swoon due to weaker economic data," said Sam Khater, Freddie Mac’s chief economist. "Economic growth is clearly slowing due to rising manufacturing and trade headwinds."
But, he said, the nation's economy is on solid footing with low unemployment and higher demand for housing.
Home prices will continue to escalate because of increased demand and limited supply, according to property information service CoreLogic.
“Although the rise in home prices has slowed over the past several months, we see a re-acceleration over the next year to just over 5 percent on an annualized basis," said Frank Martell, president and CEO of CoreLogic.
"Lower rates are certainly making it more affordable to buy homes, and millennial buyers are entering the market with increasing force," Martell said. "These positive demand drivers, which are occurring against a backdrop of persistent shortages in housing stock, are the major drivers for higher home prices, which will likely continue to rise for the foreseeable future.”
The local Realtors group also said housing experts don't believe lower interest rates will help first-time home buyers in the short term.
"The lack of affordable inventory and the persistence of historically high housing prices continue to affect the housing market, leading to lower-than-expected existing home sales at the national level," according to a statement posted on the group's Realtors website.
Nationally, home prices edged up 3.6 percent over the past 12 months through July, according to CoreLogic.
The local Realtors group also adjusted July's sales figures slightly higher to reflect 1,817 homes sold at a slightly higher median price of $278,900.