Home prices in SC keep skyrocketing even though sales keep falling. Here’s why
Home prices across South Carolina have risen steadily all year while sales have tumbled.
What gives?
Supply and demand have been out of whack in the Palmetto State for some time, even before the COVID-19 pandemic began — with plenty of people willing to buy homes, but not enough to go around, some industry experts say. And for the time being, there appears to be no signs of the situation changing, meaning more challenge for homebuyers.
South Carolina has seen double digit increases in home prices all year.
Median sales prices jumped 19.7% in the second quarter, year over year, South Carolina Realtors statistics show. And in July, the most recent month of data available, median sales prices increased 17.6%, year over year.
In contrast, home sales declined 9.1% in the second quarter, year over year. Sales drops have continued to accelerate, declining 17% in July, year over year.
“The primary reason housing prices continue to rise despite declining demand is the historic long-term undersupply of housing that South Carolina and the U.S. have both been experiencing,” said Joey Von Nessen, research economist at Moore School of Business at University of South Carolina.
Nessen said that the Great Recession, which took place between 2007 and 2009, led to both fewer existing builders as well as to new regulations that made it more difficult for new builders to enter the market.
“The result was a significant decline in new construction that has now lasted for more than a decade,” Von Nessen said. “The cumulative effect of such a lengthy period of underbuilding is that even in 2022 with a decline in housing demand resulting from lower affordability, house prices continue to rise.”
Morris Lyles of ERA Wilder Realty Inc. and the 2021 president for South Carolina Realtors, said demand was still strong and pushing prices upward.
“As inventory continues to be low — although it is growing — prices of homes go up as buyers demand is still strong and other comparable houses have sold at higher prices,” Lyles said. “I am seeing however, more houses and properties listed at what is a very high price for the condition and market and those are sitting and staying on the market for a longer time period and adding to the inventory, which is why inventories are increasing slightly.”
Lyles added that while there’s low inventory, constantly rising prices have discouraged more people from buying this year.
“As for why fewer people are buying, it is a simple affordability issue and also that they may not be getting the house that they want and they are holding off on buying until demand drops, or prices slow down more,” he said. “What we don’t know is, however, whether prices will slow down or drop — so far we are not seeing this, even as the number of sales slows.”
Von Nessen agreed that rising costs have driven more and more buyers away.
“Regarding the decline in housing sales in 2022 – housing demand is being pulled back towards pre-pandemic levels due to a combination of rising mortgage interest rates and rising house prices,” Von Nessen said. “In addition, over the last 12 months consumers have been steadily shifting their spending patterns towards in-person services like travel and restaurant dining and away from consumer goods, including housing. This reflects a return to more normal spending patterns.”
