Lender Owned Properties

Also known as REO's, bank owned properties are the result of a foreclosure.  The bank has taken over the property and now needs to sell it.  They have a lot more that they haven't even released on the market yet.  They are obviously overwhelmed.  When the bank decides to dump one of their foreclosures, they get an appraisal and then put the home on the market at a 10-20% discount.   So, these are tremendous deals for buyers.  Of course, this will have a negative effect on the value of the other homes in the neighborhood. Since they have already marked it down so much, they are not very negotiable.  With the marked down price, they often get multiple offers and end up with more than the low list price.  Unlike short sales, where the homeowner still owns the property, the banks will respond to purchase offers on their REO's very quickly.  Once the bank owns the property, they are very motivated to get rid of it quickly.  They usually claim that they will not make any repairs, but we are starting to see differently.  So far, REO's account for only about 2-3% of the active Charleston market.  However, they make up about 8-10% of the properties under contract. We certainly expect these percentages to climb.

Median Home Prices

In Charleston, the current active market of over 9000 homes has a median list price of $250k.  However, the 1800 properties under contract have a list price of only $187k.  That disparity is far too large.  It shows that much of our market, maybe 80%, is still overpriced.  This may be primarily due to the fact that all those homeowners who bought since 2004 are upside down.  They owe more on the home than it's worth.  If they all price them correctly, they will all be short sales(the bank will have to agree to take less on them than is owed) and that will cause a pretty big ding on their credit.  They don't want to do that, so, they put it on the market at a price that will prevent it from being a short sale, but will also prevent it from getting sold.  Understand that not everthing is overpriced.  About 20% of the market is correctly priced.  Properties that have been foreclosed on and the banks are now trying to sell are usually 15-25% under market value.

Short Sales and Foreclosures

About 25% of the properties under contract in the Charleston market are either short sales or foreclosures.  In Mt. Pleasant, a very popular area, the rate is about 35%.  Isle of Palms is at 43%.  Short sales are where the bank agrees to sell the property for less than they are owed.  They are very difficult to close b/c of the banks.  They still believe that the homeowner will find a way to keep making the payments.  So, they don't respond to offers for several months!  As of April 5th, the Treasury Department is requiring banks to respond within 10 days of an offer on a short sale.  Hopefully, this will speed up the process.

Single Family Detached versus Single Family Attached

The Single Family Detached (SFD) market has 9 months of inventory <$350k vs. 32.5 months >$350k
The Single Family Attached (SFA) market has 17 months of inventory <$350k vs. 70 months >$350k
Obviously the inventory situation is much worse (practically 2 times worse) for townhouses/condos vs. houses based on the stats above.  These stats are from Brad Rundbaken's Charleston Market Report.

Mt. Pleasant Housing Inventory

Mt. Pleasant south of Hwy 41 is known as MLS area 42.  There are currently 599 active listings for single family homes.  That doesn't even count the condos and townhomes(another 400 listings).  The median list price of the single family homes is $500k at $196/sqft.  But the buyers are not buying at that price.  The 141 single family homes currently under contract in area 42 have a median list price of $375k at $149/sqft.  That's a huge disparity.

Buyer Activity

I keep track of the contingents each week on the hot sheet. I do it the same way each week to be consistent. I check the residential contingents from Sunday through Saturday each week in the Charleston tri-county area. This past week saw a total of 201 contingents. That's the first week over 200 since May of 2008. There were no weeks in the 200's in 2009 and only 4 weeks in all of 2008 had over 200 contingents.