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Real Estate Market Not As Robust As You’d Think

Posted by James Schiller on October 30, 2014
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Well the Fed has finally cut back the bond buying program known as Q.E. or quantitative easing. Now that most of the “deals” are gone, and the economy has come up out of the mire where are we now as it pertains to the real estate market? Some experts think that we might be approaching another bubble. Foreclosures have fallen to new lows since the crisis, and investors, while not selling their homes, are not buying nearly as many. That has taken much of the air out of home prices. In addition, the number of homes for sale is rising, pushing sellers from the driver’s seat to the way, way back. Just last year 2013 was almost what some would call a banner year, and especially as compared to the “crash days” of 2008-2012. Stan Humphries, chief economist at Zillow. “At this time last year, we were worrying about a number of frothy markets that looked like they could be on the edge of another housing bubble, places where homes were appreciating at more than 20% per year and where buyers’ heads were spinning just trying to keep up.” The Standard & Poor’s/Case-Shiller 20-City Index of home prices rose 5.6% from August 2013, S&P said. That’s down from a 6.7% gain in July and well below the double-digit annual increases seen in most of 2013 and earlier this year.

So how does the Charleston SC real estate market look you ask?

While most housing analysts do not expect home prices to go negative on a national level again, some have floated that possibility. Home prices soared from 2003 to 2007 due to cheap and easy credit. When that went away, prices plummeted nationally for the first time in history. In 2011 and 2013 when prices jumped due to the Federal Reserve’s intervention; purchasing billions of dollars worth of mortgage-backed bonds it pushed the average rate on the 30-year fixed to a record low. That pulled buyer demand forward, providing investors with cheap cash to buy foreclosures. Some argue that as that demand goes away, housing will pay a price again. We are starting to see that now.

The broader S&P/Case-Shiller National Home Price Index also slowed in August, posting a 5.1% annual gain compared with 5.6% in July. Although, there is an obvious slow down in the real estate market it’s not time to “head for the hills”.

David Blitzer, chairman of the Index Committee at S&P Dow Jones Indices; “The deceleration in home prices continues, despite the weaker year-over-year numbers, home prices are still showing an overall increase, as the national index increased for its eighth consecutive month.”

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