No Bubble Here: South Carolina Real Estate Expects Predicting Another Record Year

Many overvalued real estate markets are expected to see declines in sales this year with mortgage rates rising and demand lessening. But in South Carolina, industry observers think there’s a good chance 2006 will be another record-breaker. A trend of people moving to the Palmetto State from places such as Florida and Louisiana is beginning to emerge, as lower real estate prices and fewer hurricanes become more appealing.

“My projection is that 2006, if it’s not a record year, will still approach the numbers we saw in 2005,” said Jim Peters, CEO of the South Carolina Association of Realtors. “It will be an exceptionally good year for real estate in South Carolina.”

The Spartanburg Herald-Journal reports that a total of 72,811 homes were sold statewide last year, up 23 percent from 2004. The median home price was $148,000, up nearly 10 percent from the previous year. That growth should continue this year, with high January sales already getting 2006 off on the right track. According to local Realtors, 4,258 homes were sold statewide in January (a typically slow month), which marks 5 percent growth from the same period in 2004. Not exactly a sign of a housing market in decline.

In the Spartanburg market, in the northern part of the state, 207 homes were sold last month. In Cherokee County, 31 homes were sold, while the greater Greenville market saw 494 closings. The median price of the Greenville-Spartanburg area was $121,000 last month, up 11 percent. In Cherokee County as a whole, the median home price was $107,000, up a more impressive 39 percent. As hot markets in selected cities nationwide have started to cool down, stable South Carolina real estate should not be affected.

“It’s not going to affect us. It certainly won’t affect people in Spartanburg,” Peters said. “The only area of cooling we’re seeing is in the Myrtle Beach and the Hilton Head markets.”

Because the rapid price growth they experienced in 2005 is not sustainable, those coastal markets may see a decline this year. In addition, some markets in South Carolina, particularly the Charleston area and the Cliffs developments in Upstate South Carolina, might weaken somewhat due to the fact that they are so expensive to begin with — the market simply will not support much more appreciation.

Statewide, housing prices will likely see 3-5 percent appreciation in value, according to Ronald Rogers, director of the S.C. Real Estate Center and professor of finance and real estate at the University of South Carolina’s Moore School of Business.

“We’re not going to see any kind of a collapse. I think the housing market will continue to be healthy,” he said.

Rogers said the one exception he sees is in the condo market, which is (in S.C. and across the Southeast) traditionally more sensitive to economic indicators such as mortgage rates and fuel prices. If the economy softens, people may choose to hold off on buying a condo, as it is often a discretionary purchase.

This continues a trend that we have seen developing for several months. As overvalued markets (such as Southwest Florida real estate) decline or level off across the country, overlooked areas such as Texas and South Carolina continue to thrive. A South Florida home loan certainly won’t get you as far as a mortgage elsewhere in the the region, that’s for sure. Investors may also be tempted to tap offshore real estate markets.