Market Report for Quarter Ended March 31, 2008

The first three months of 2008 have come and gone. They were rocky ones for the local real estate market. I’On fared relatively well, but there were few bright spots in the Charleston region.

Tri-County Area

1^st Quarter transactions for the Charleston/Berkeley/Dorchester County area were down 26% to 1,964 transactions from the 3,058 transactions in the 1^st Quarter of 2007.[1] These 1,964 transactions were half of the 3,887 transactions that occurred in the 1^st Quarter of 2006.

Median price for the region fell 3% from $210,000 in 1^st Quarter to $203,000 – roughly the same median price of the 3,887 homes that closed in the 1^st Quarter of 2006.

Homes sold in the 1^st Quarter of 2008 were on the market for an average 120 days – an increase of 34% from the 89 days in the 1^st Quarter of 2007 and 102% from the 1^st Quarter of 2006. Many homes are being pulled off the market as prospective sellers and their real estate agents acknowledge the futility of offering over-priced property in this market. There were 10,240 homes on the market as of March 31, 2008 – a 2% increase from the 10,007 homes on the market a year earlier. This leveling off is a positive trend. However, note that the Tri-County Inventory level is more than 2½ times what it was in 2005. The table below shows inventory levels on March 31^st for years 2005-2008.

Tri-County Forecast for 2^nd Quarter

It would be nice if we could return to the bull market of 2005/06. However, even if we could return to those golden absorption rates of two years ago, there would still be 8 months of home inventory available in the Tri-County area as opposed to 3 months of availability in 2005. The REALITY is the sales absorption rate of the 1^st Quarter of 2008 translates into 16 months worth of inventory. Remember Econ 101? Lower demand in the face of higher supply leads to price decreases. We project 1,700 Tri-County transactions in the 2^nd Quarter with a median price of $199,300.

East Cooper Area.

Mount Pleasant. 1^st Quarter transactions in Mt. Pleasant were off 33% to 286 from 430 transactions in the 1st Quarter of 2007 and 53% from the 606 transaction in the 1^st Quarter of 2006. The median price of a home sold in Mt. Pleasant south of SC Hwy. 41 actually went up by 2% to $380,000. Unfortunately, the median price of a home sold north of SC Hwy. 41 fell 24% to $281,450 from the 1^st Quarter of 2007 when the median price was $370,236.

A home that closed south of 41 in Mt. Pleasant was on the market for an average of 144 days. Up 30% from 110 days in 2007; and up 160% from 55 days in 2006. A home that closed north of 41 in Mt. Pleasant was on the market for an average of 158 days. Up 42% from 111 days in 2007; and up 151% from 63 days in 2006. Fortunately for both the areas north and south of SC 41, the total inventory of available homes on March 31, 2008 was down slightly from the peak levels on the same date in 2007.

Daniel Island sales transactions were up 34% from 53 homes sold in 2007 to 71 in 2008. Unfortunately, the median price of a home sold suffered a precipitous drop of 32% from $585,900 to 398,450. The reduction in median price was due to the fewer number of high priced homes that sold on Daniel Island last quarter. For example, only two homes sold at prices of $1 million or more as opposed to nine in 2007 and eight in 2006. There were 56 homes priced at $1 million or more on the market as of March 31, 2008 in contrast to 41 being on the market a year earlier.

Despite the drop in median price from 2007 to the $398,450 median in the 1^st Quarter of 2008, it should be noted that this price is 8% higher than the 2006 1^st Quarter median price of $368,350. And while the homes sold spent an average of 7 months on the market, as opposed to 4 months last year, the number of active listings is down by 23% from this time last year.

East Coooper Forecast for 2^nd Quarter

Mt. Pleasant. Total transactions are expected to remain below 300 for the 2^nd Quarter of the year, with about 200 closings south of 41 and 75 north of 41. In terms of total transactions, this will likely be the slowest quarter this decade. The median price will be up south of 41 and down north of 41 from the 2^nd Quarter of 2007.

Daniel Island will see about 72 closings – a similar amount that was experienced in the 1^st Quarter of the year, but down significantly from the 101 closings in the 2^nd Quarter of 2007. Median price will be in the $470 – 490,000 range. More homes will sell for over $1 million than did in the 1^st Quarter, due to sellers dropping asking prices from previously unattainable heights.

I’On

Traffic through the I’On Realty office was up 25% for the Quarter! 14 homes closed in I’On in the 1^st Quarter of 2008. This is down significantly from the 20 that closed in the 1^st Quarter of 2007. However, the 1^st Quarter of 2007 was something of an anomaly as the 7 year average for the 1^st Quarter is 11 closings, including 13 in 2005 and 12 in 2006. Median price for the 14 transactions that occurred during the 1^st Quarter was $942,250. This was down from the $1,085,000 median price during the 1^st Quarters of 2005 and 2006, but up more than $100,000 from the median price of $832,000 for the 58 homes that sold during the calendar year 2007.

I’On’s market share of total homes sold continues to climb. Looking at 1^st Quarter transactions from 2004 to 2008, I’On homes sold as a percentage of total sales in the Tri-County area more than doubled from .33% to .71%. Limiting the study area to Mt. Pleasant, one finds that I’On’s market share has also more than doubled, going from 1.9% of total transactions in 2004 to 4.7% in 2008. This has happened even though the median price of a home in I’On has grown to three times the median price of a home in the rest of Mt. Pleasant.

Also interesting: During the 1^st Quarter of 2008, 45 single-family detached homes of $1 million or more sold in the Tri-County area. These included 11 on the Charleston peninsula, 6 in Mt. Pleasant other than I’On, 5 on the Isle of Palms, 5 on Kiawah/Seabrook[2], 2 on Sullivan’s Island, 2 on Daniel Island, and 8 in other parts of the Tri-County. The 45 $1 million plus closings also included 6 transactions in I’On. These 6 represent a 13.33% market share in the Tri-County area, up from 12.2% during the 1^st Quarter of 2007, 5.5% during the 1^st Quarter of 2006, and 4.2% during the 1^st Quarter of 2005. Not bad for a little neighborhood that doesn’t have a beach, deep water lots, or grand 200 year old antique homes.

I’On Forecast for 2^nd Quarter

16 transactions with a median price of $952,700. In addition to the slow market, I’On sales continue to be held back by the lack of available inventory in more affordable price ranges. 60% of the homes on the market on March 31, 2008 (50 out of 83) were priced at $1 million or more. This is a 25 month supply base on 1^st Quarter’s absorption rate. Of the available homes priced less than $1 million, only one was a new home. This problem will be alleviated however, as several I’On Guild members (Alka, Jack Burton, Structures, Whitney Projects, and IP Builders have either started or will soon start homes with price tags ranging from $700-900,000.

I’On and Affordability

If price is a measure of desirability, then I’On can be considered a desirable place to live. An unfortunate side effect of this desirability is that it has pushed the price of a typical I’On home beyond the reach of most families. As mentioned earlier, the median price of a home in I’On is roughly triple the median price of a home in the rest of Mt. Pleasant. It is about FIVE TIMES the median price of a home in the rest of the Tri-County area. Thus, I’On is increasingly viewed as an exclusive place. Completely contrary to the inclusive and welcoming spirit of southern hospitality advocated by its Founders.

The I’On Group is currently working on a new neighborhood in the Park Circle area of North Charleston called Mixson (www.insidemixson.com) with new homes offered for sale between $160-350,000. Mixson will thus provide a more affordable opportunity for those desiring a quality home in a walking neighborhood environment.

Many cities are working to incorporate more affordable housing within existing neighborhoods. Can this be done at I’On? Given the will, the answer is “Yes”! The easiest way would be to legalize garage apartments behind homes. A garage apartment, sometimes called a “carriage house”, “mother-in-law suite” or “granny-flat”, provides an affordable housing option for people of lesser means. The upside for the primary home owner is the rent from an apartment can be used to help make a mortgage payment. My first house – an old fixer-upper in the historic district of Beaufort – was fitted out for a 2^nd floor apartment. I would not have been able to afford the payment on my home if not for the extra income from this apartment. Perhaps the Assembly Board can explore licensing this form of home in return for a $400 annual fee. If 100 homes added an apartment, that would be an extra $40,000/year for the Assembly.

Some examples of carriage house apartments alongside their grander neighbors in downtown Charleston:

Happy Spring!

Vince Graham

[1] All data used in this report was assembled from the Charleston Trident Area Multiple Listing Service, which includes most but NOT all real estate information for the Tri-County area.

[2] As Kiawah Island is NOT a member of the MLS, this number falls short of the actual sales of $1 million plus homes for that resort.

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