Charleston rent prices continue to rise

Rent prices in the city of Charleston continue to rise, increasing 0.7 percent over the month of December and 2.9 percent over the past year, according to trends identified by Apartment List. Median rents in Charleston stand at $960 for a one-bedroom apartment, and $1,140 for a two-bedroom.

December was the third straight month Charleston has seen rent increases, after a decline in September. Charleston's year-over-year rent growth leads the state average of 1.2 percent, as well as the national average of 0.9 percent.

Charleston’s median rent for a two-bedroom apartment is equal to that of Minneapolis, and ahead of more populated cities such as Dallas ($1,110), Phoenix ($1,060) and Detroit ($960). The Holy City remains well behind rent price front-runners San Francisco ($3,090) and New York ($2,540).

The 10 largest cities in South Carolina all saw rents rise, according to Apartment List, with rent in the state as a whole increasing 1.2 percent over the past year. Mount Pleasant is the most expensive of South Carolina's major cities, with a median two-bedroom rent of $1,600. Summerville’s median two-bedroom rent stood at $1,180; North Charleston’s at $1,080.

Apartment demand climbs in S.C. metros

Apartment demand outpaced supply in South Carolina’s three biggest metro areas in 2018 thanks to falling unemployment and a thinning construction pipeline in some markets, according to the real estate investment financing, sales and research firm Marcus & Millichap.

Unemployment in each of South Carolina’s major metros fell below 3.5 percent during the third quarter amid continued hiring, and the expanding metro employment bases have contributed to new housing demand throughout the state. As a result, apartment demand outpaced supply in Charleston, Columbia and Greenville-Spartanburg over the past 12 months, resulting in tightening vacancy for each market.

In the Charleston market, builders finalized 3,800 apartments during the past 12 months, up 1,000 units from the prior year’s level. The downtown/Mount Pleasant/islands submarket received the largest portion with 1,750 rentals completed. Developers also have 5,300 apartments under construction with completion expected into 2020.

Mortgage, HELOC rates likely increasing

Mortgage rates on a 30-year fixed are expected to be volatile in 2019, rising above 5.25 percent before falling again, while HELOC borrowers should feel the impact of two expected Fed rate hikes, according to Bankrate.

Mortgage rates have fallen in recent weeks amid market fluctuations, trade tensions with China, and other political concerns. But that trend should reverse, said Greg McBride, Bankrate’s chief financial analyst.

“After a sharp drop in December, markets are poised to rebound any moment given the solid underlying economic fundamentals, and this will take bond yields and mortgage rates back up,” McBride said. “When investors are ready to embrace risk assets again, that won’t be good news for mortgage rates.”

Home equity line of credit (HELOC) borrowers will see a 50-basis point increase, McBride believes, and the average HELOC rate should be around 6.85 percent by the end of the year.

“Each rate hike means the minimum payment on a $30,000 home equity line increases by $6,” McBride said. “I expect the Fed to raise rates twice next year, bringing the increase in minimum payments to $12.50 per month by year end.”

Interest rates impact home affordability

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National home prices increased 5.1 percent year-over-year in November, but that uptick was still a slowdown from the rise of 6.2 percent in November of 2017, according to a report from the data firm CoreLogic.

The firm projects a smaller 4.8 percent gain for November of 2019. The decline is most likely due to rising interest rates. The 30-year fixed rate was rate was 4.61 percent at the end of 2018, 57 basis points higher than the end of 2017.

“The rise in mortgage rates has dampened buyer demand and slowed home-price growth,” said Frank Nothaft, chief economist at CoreLogic, told CNBC. “Interest rates for new 30-year fixed-rate loans averaged 4.9 percent during November, the highest monthly average since February 2011. These higher rates and home prices have reduced buyer affordability.”

Comparing U.S. buying power worldwide

The median American household income of $44,049 can buy a home of 669.44 square feet in the United States, but much less in other developed countries, according to a recent study conducted by the website Homes.com.

That same amount would afford just 136.66 square feet in Switzerland, 171.11 in South Korea, and 242.16 in Japan. By contrast, that amount would buy a home of 1,915 square feet in Turkey, 1,466 in Mexico, and 1,096 in Russia, according to Homes.com.

The study was conducted using the 36 member countries of the Organization of Economic Cooperation. The study was based on an average price per square foot in each country — ranging from $69 in Turkey to $967 in Switzerland — with a salary multiplier of three used for fair comparison.