Over the years, there's no doubt you've heard the phrase, “the law of supply and demand.” But what is this ‘law’ and how does it affect the housing market? Let's take a look at a few of these concepts and analyze how this is impacting the Charleston real estate market.
What is supply and demand?
According to Investopedia:
“Supply and demand is perhaps one of the most fundamental concepts of economics and it is the backbone of a market economy.”
Very simply, decreased demand coupled with generous supply will equal stable or falling prices. Likewise, if supply is diminished or scarce and demand is high, then price will rise. Though as we will comprehend, rarely is it this simple. There are many factors which can influence supply and demand and the price of real estate
Other factors impacting price
Anytime you have limits on quantity, quality or demand for certain features, price will be impacted.
In real estate, location is also a factor which impacts price. For example, in historic Charleston, the geographically limited peninsula is a very desirable place to live. These historic homes and new, infill homes are situated in the center of an historic district replete with restaurants, shopping and high esthetic appeal. Many homes have proximity to the rivers and marshes which surround our city, thus adding to their desirability. Join these highly advantageous features, to limited geographic area, and limited available land for building and you have a premium pricing situation. Now add to this the rising demand for a walkable / bikeable lifestyle and it is easy to comprehend the premium pricing which sellers expect for properties in the historic district.
Social factors such as when people choose to relocate also impact the real estate market. People knowing about these factors may choose to offer homes for sale in the spring. As a rule, the real estate market heats up in March as people begin their search for homes. People with children usually prefer to move during the summer months when children can more easily relocate. The seasonality of the market leads to rising demand in the spring and early summer, and lower demand in the fall markets.
The Charleston Trident Association of Realtors® (CTAR) observed, “August tends to mark the waning of housing activity ahead of the school year. Not all buyers and sellers have children, but there are enough parents that do not want to uproot their children during the school year to historically create a natural market cool down before any actual temperature change.”
Supply and demand in the Charleston real estate market
According CTAR’s 2017 President Dave Sansom, “Over the past two years, we’ve seen monumental growth in our market as both our population and job markets have increased rapidly...”
Prices for the Charleston market have been rising in conjunction with high demand and limited buildable land. Over the last several years, home prices have been rising in the Charleston market. However, CTAR Reports for September and August 2017 demand has slowed, though overall the year to date trends still display an increase in demand and median price. The graph below illustrates the factors of rising demand and rising price in the Charleston market from 2012-2016 (From the CTAR 2016 Annual Report on the Charleston Area Housing Market).
Charleston’s real estate marketplace has been heavily impacted with rising demand, limited supply which has caused price pressure. Given the pace of job growth in the Charleston area, we can expect that we will see demand remain elevated, however, builders are working steadily to build new homes to meet demand.
Keep reading our blog for ongoing updates on the Charleston new homes market. If you’re ready to search now you can do so by viewing our available homes.
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