2017 showed steady sales throughout the year matching our performance to this point last year. Following the rollercoaster ride of the last decade, it gives me confidence to see stability returning to the market. That stability will be reflected in consumer confidence and as the stock market soars, many are looking to pull out some of those gains and diversify them into the real estate market. I am a big believer in the long-term holding of land as an asset as well as long-term rental properties which are fetching great returns right now. As inventory slowly diminishes, so to do prices increase in the area across all areas and types of property.
Looking forward we expect the typical holiday lull that often occurs when buyers stray from home shopping and focus on their families between Thanksgiving and New Years, but the last few years have all seen huge Spring buying rallies that have begun as soon as February if the weather warmed up. The land-buying boom that began in 2016 is starting to have an effect on the area as many of the people that bought are moving into their new homes. So don’t be surprised to see more new smiling faces around town.
In examining the market data this issue, I want to focus on a single measuring stick, known as “Months of Inventory”. This data takes the number of active listings at a point (I chose the 1st of each month for consistency) and divides that by the number of sales per month. I have used the average of each year to normalize the data and show the simple trends. Months of inventory is commonly used to gauge the health of real estate markets. It’s a snapshot statistic and obviously changes as the number of properties being listed (supply) and the number of properties being bought (demand) fluctuate.
If we look back at 2012 we will see that there was an average 48 active lots for sale in Awendaw and only 8 sales that year or 0.67 sales per month. 48 ÷ 0.67 gives us 72 months of inventory, meaning that if that pattern continued it would take 72 months (6 years) to sell off all of the current active land inventory in Awendaw.
We use months of inventory data to label markets as a “buyer’s market”, “seller’s market”, or “balanced market”. As a general rule, 5 to 6 months of inventory is considered to be a balanced market. Inventory over 6 months is defined as a buyer’s market and less than 5 months is a seller’s market. Whoever’s market it is is generally in the driver’s seat and calling the shots. Back in 2012, we had some very strong buyer’s markets, especially with land. So at that time buyers were dictating greater concessions from sellers. After all, if the seller didn’t accept their terms, they could go next door and offer the next seller the same thing and probably get it. The trend has been consistently moving down but we’re still in a buyer’s market across the 4 major segments of the market; homes and land sales in McClellanville and Awendaw. In the chart, you will see that homes are hovering closest to a balanced market with months of inventory for currently around 8.5 for both McClellanville and Awendaw.
In our area, land will probably always read higher than homes for the simple fact that it’s easy to list a piece of land for sale. Call any agent, they put a sign in the yard, snap a picture and put it in the MLS (We at MCVL Realty add a lot more steps, but I’m simplifying for the sake of this example) and you don’t have to worry about it anymore. Many people own their land free of a mortgage, so the only time they may even think about it is when they get a tax bill once a year. Listing a home, however, is much more complex as the home must be kept in good showing condition, repairs made, mortgage payments due every month. Because selling a house is much less of a “set it and forget it” process, you won’t see fewer overpriced listings and people “testing the market”.
While the first graph shows the months of inventory across the major segments, the second chart breaks down home sales in the area by price range (the trend tracked fairly consistently between Awendaw and McClellanville, so used both combined). So while I indicated that we’re in a buyer’s market for homes in McClellanville, that really isn’t the case across the board for all homes. Homes under a $100,000 (which aren’t very common in our area and are typically mobile homes) were at just 1.71 months of inventory and homes for sale between $100,000 and $200,000 had just 3 months of inventory placing them squarely in the seller’s market category along with Homes $300-500K. Homes in the $200-300K range came in this year with 6 months of inventory, which we would call a balanced market and only homes above $500,000 were actually in a buyer’s market with their 12 months of inventory. So you can see that the supply and demand within a particular price range also plays a vital roll in the answer to the question, “How’s the Market?”
What does all of this mean to you?
If you’re selling, you need to understand that you may have significant competition within the market. We don’t only analyze sold data, but active competition as well, when determining our listing price recommendations for clients. Pricing is crucial but price alone won’t sell a property, you must also take steps to maximize interest in your property by improving marketability. If you are selling your land, clearing it of underbrush and obtaining a septic permit are often our first recommendations. Homes need great curb appeal and decluttering on the inside. Hiring MCVL Realty to properly market your home is also an excellent step. We will take professional photos and visual tools, write an intriguing property description and get your listing in front of every possible buyer as well through our comprehensive marketing system proven to sell more properties in the McClellanville and Awendaw than anyone else. Just because you are in a seller’s market and can sell your home quickly on your own doesn’t mean that you can’t come out much better with the held of an agent. MCVL Realty properties sell for an average of 6% more than our competition so our commission is typically paid in full by simply choosing us!
If you’re buying, you need to understand that just because it may be a buyer’s market does not mean that you can go around writing low-ball offers. Most sellers in this area are used to higher than normal months of inventory and a house being on the market for 90 days doesn’t make that seller desperate or mean that there is something wrong with the property. We are in a niche market which will always have fewer buyers than our more urban neighbors and that sometimes means pricing a home at market value and waiting for the right buyer. Strengthen your offer with pre-approval letter or (proof of funds if making a cash offer) and reasonable terms. We have seen more and more buyers who must sell their home in order to buy. Understand that a seller is going to be more willing to accept an offer with the contingency of your own home sale if you have already listed your home with an agent and it can be seen in the MLS. If your home is already under contract, that is even better, but be prepared to disclose the terms of the offer, because if your home is contingent on the sale your buyer’s home that creates a chain of deals (I refer to them as “piggy-backing”) that many aren’t excited to gamble on. The knowledgeable agents at MCVL Realty will ensure that you find the perfect property for your needs and get the best deal possible for it.