Are we summer slumping, or is this the start of a deeper trend?
There is no question in my mind that the real estate market is changing. After a whirlwind last two years and the astounding price appreciation we have seen in the Charleston real estate market, buyers and Realtors alike are waiting for some relief. This cannot go on forever, right? Eventually, the music needs to stop, and the party needs to be broken up before inevitable damage is done.
But making definitive statements about future prices is not something I am willing to do…yet. I, of course, have my theories which are growing stronger each day, but that is basically all I have…a story I am telling myself. I am starting to get calls from loan officers looking for business, agents are slashing prices finally, I am back to making my kids’ breakfasts, and I have time to write a blog post. The news stories are now turning negative, and the sentiment is getting lower every day.
As a Realtor, I have access to a lot of data that I like to overanalyze ad nauseam. I am a numbers person and would gladly stare at charts all day and theorize. Plus, as the Broker of a company, I feel like it is my duty to keep my agents abreast of the changes in our market, whether they welcome the info or not. In my opinion, we do not yet have enough data to make significant and accurate conclusions about the direction prices are headed towards in our real estate market. Further data for August should come out in the next week or so but waiting to see the September and October data will provide much clearer info to solidify a larger trend. I was looking at this particular chart below the other day that is available through our MLS, and that big drop from May to July is looking quite ominous. Is this the telltale sign that the market has topped?
Well, maybe for the immediate future, but not necessarily for the rest of the year. When you look at the rest of the chart and start working on some quick calculations, you will notice that we always have a summer slump before another leg up in the fall. In 2017, we had a 5% dip in median price from July to August. In 2018, we had a 5% dip from May to August. 2018 is a fun year to analyze because we were in a similar rate hiking environment like we currently are in. In 2019, we had a 4% dip from June to July. And then Covid came to town and really changed the dynamics. Even though we were booming with price appreciation, we still had slight summer slumps. The median price dipped 1.5% from August to September in 2020, which was a little late for the summer slump, but the market was weird that year. With the spring being basically off the table for showings, it makes sense that the season was extended. In 2021, we had a 1.5% dip from June to July too, and now we are talking about the craziest market I have ever seen.
So yes, here we are in 2022, and we have a 6% dip from May to July. That is not an insane percentage if you look at the historical data.
We still have a low inventory problem, and the unemployment rate in Charleston is 3% as of June, according to U.S. Bureau of Labor Statistics. All good metrics for further price appreciation ahead, but the macroeconomic environment is very murky and changing daily. From the March lows, inventory has been rising along with the increase in interest rates. According to this chart below taken from the MLS, we saw a 16% gain from March to April, 15% from April to May, 28% from May to June, and almost 24% from June to July.
I have been tracking levels in August, and although we are still adding, the accumulation rate is slowing pretty significantly. We have a long way to go before levels scream buyer’s market. Although unemployment is ticking up slightly from the April low of 2.3% (link), I suspect a more significant move in the unemployment rate would need to come first to swing the pendulum in the other direction from a seller’s market.
As you can tell, I am not willing to say with certainty where our median prices are heading. The summer slump exists, and we are definitely feeling it, but fall is right around the corner. We will keep you posted when the crystal ball gets clearer.