Economy Series Part 3: High end home sales
By James T. Sears, PhD
There has been good news on existing home sales in recent weeks. Nationally, sales of previously owned homes have improved and locally pending home sales have increased as first time buyers take advantage of the federal tax credit. However, a Wall Street Journal article, after previously reporting other improvements in the U.S. housing market, published a caveat: home sales are improving nationally at the “low and moderately priced” range but on the “upper end” ($750k+), “Sales remain mired in a deep slump and price declines are expected to accelerate.”
Many of the home sales (especially single family homes) in island communities within the Charleston area fall into the upper range. For some—notably Isle of Palms, Kiawah, and Sullivan’s Island—even the median listing price is well above the $750k price point. And, as I have reported elsewhere (see www.searspartners.com), about a third of Seabrook Island listings are in this high-end range (another 41% also require “jumbo” loans being at or above $471k).
Just as home sales vary across the country, so do they across various Lowcountry communities and neighborhoods. Table 1 compares all houses (single family and attached homes) listed and sold on the Charleston-Trident Multiple Listing Service (MLS) for the first half of 2009 compared to the same period a year ago. This allows comparison across island communities and across time. For purposes of this comparison, it should be noted that only a minority of Kiawah homes are listed/sold through the MLS.
Although some generalized and common sense patterns were found (generally new listings were down, median sales prices lower, days on the market higher), differences were found on every dimension among these communities.
Table 1: Comparison of All Home Sold through MLS
Jan-Jun 2008 vs. Jan-Jun 2009 for Selected Island Communities
As shown in Table 1, there were more listings on the MLS during the first six months of 2009 than in 2008 for Isle of Palms, Sullivan’s Island and Kiawah. Further, the latter two recorded an increase in the median price of new listings. Sullivan’s Island—unlike the others—also recorded more residential properties sold between this year and last. The greatest percentage of decrease in the number of homes sold was found on the Isle of Palms, which as one would expect also evidenced the greatest percentage increase of days on the market (DOM) before a property was sold (from 76 to 258). In contrast, Sullivan’s Island saw DOM slashed by one-third (from 257 to 168).
There were also island differences in the median price for which a home sold from 2008 to the same period this year. The sales price was up on Daniel Island, level on Folly Beach and Sullivan’s Island, and down on Seabrook, Isle of Palms, and Kiawah. Further evidence of the relative strength of the housing market on Daniel Island is apparent when comparing the difference between final list price and sales price. The average home sold on the MLS was 93% of the listed price. The LP/SP ratio also remained constant (but lower, 91%) on Folly Beach. The greatest absolute drop between 2008 and 2009 was on Seabrook (from 94% to 87%) and the greatest percentage decline was the Isle of Palms.
The relative changes in each community from the first half of 2008 to the same period this year for each of these dimensions is shown in Table 2.
Table 2: Percentage Change of All Homes Sold Thru MLS Jan-Jun 08 vs. Jan-Jun 09
So, what do the data show regarding the upper-end of the real estate market? Comparing the first half of 2008 to 2009 across these island communities, a small increase in share in Sullivan’s Island and Daniel Island was found for residential sales at $750k or above. The former increased 5 percentage points (from 86% to 91%) and the latter by 3 (16% to 19%). All of the other communities found market sales at the higher-end shrinking in comparison to those in the lower ranges. The most dramatic changes were on Folly Beach with 2009 sales at 43% of the 2008 level and Seabrook at just at half of the percentage sold in 2008.
From these data, the Wall Street Journal’s conclusion that the market for high-end homes is “mired in a deep slump” is only partially true. Even within the limited Charleston metro area, there are pockets of improving high-end sales. Further, one can reasonably anticipate improvements in our regional real estate market to be differentiated among the island communities even as national economic conditions improve.
James T. Sears, PhD, is a Realtor and Real Estate Analyst. As an Accredited Buyer Representative, he specializes in residential real estate on the islands and investment properties in Charleston. More data are available at www.searspartners.com and he can be reached at property@searspartners.com
