Keeping Your Cool in the Midst of Fear Mongering
People always ask me "how is business?" or "how is the market?" I feel like many of them expect to hear that things are really slow when it is just the opposite. God has provided so much business for me that I have not experienced a slow down. While certain parts of the Greenville market have slowed down it is still a very healthy market to be in and actually a good market in certain areas.
I cannot emphasize enough that we must keep things in perspective. If you listen to most politicians and certain news media today, you would get the impression that our entire way of life is coming to an end and that no one is able to buy a home or get a mortgage. These fear mongers are using the problems caused by bad loans (which they caused!) to scare people and gain more power. This irresponsible behavior by media and politicians hurts the confidence of average people who think that they will not be able to get a loan because of everything that they have heard. I help people with the contract to close process every month and none of them have had trouble getting their loan to go through. I work with lenders who help many people buy homes in Greenville every week and they are ready to help anyone who is ready to buy. Some South Carolina elected officials are telling us that if certain legislation does not pass that you will not be able to get a loan beginning immediately. At the same time these politicians and media are spreading fear, the lenders that I work with are telling me to bring as many people to them as possible that want to buy a home. They are ready to go! I have seen victims of the fear mongers this week. People who thought they would not be able to get loans anymore because of what they had heard on the news but after talking to a lender found out that it would be no trouble at all! Sure, there are those who cannot get a loan who could have a few years ago but these are people who should have never been given a loan in the first place and one of the main reasons for the mess we have now.
Again, we must keep everything in perspective. If you listen to all the bad news you hear you might think that this would be a terrible time to be in real estate. Not the case. I would rather be in Greenville real estate in 2008 than in 2000! The number of single family homes sold in the Greenville area in August of 2000 was 531 with an average price of $142,206. Compare that with August of 2008 where we saw 689 homes sell with an average price of $195,153. Which market would you rather be in? I'll take 2008. I am eagerly awaiting the September numbers for the Greenville Area and interested to see how October shapes up as well.
While all of the bad loans of the last few years have created a very serious problem, we cannot loose our heads over the whole thing. We must deal with facts, not fear.
Greenville Homes Priced Under $150,000 Not Classified As Buyer's Market
We hear Greenville, SC real estate markets referred to as "buyer markets" or "seller markets" but what makes a market good for buyers or good for sellers. The National Association of Realtors® classifies markets based on absorption rates and inventory as follows:
0-5 months = Sellers Market, 5-7 months = Even/Split Market, 7+ months = Buyer’s Market
So what is an absorption rate and what does the 0-5, 5-7, and 7+ months mean? The number of months represents the number of months of inventory on the market. The number of months of inventory is determined by the absorption rate. The absorption rate is determined by taking the number of sold listings for any criteria (price range, city, subdivision, or a mixture) and dividing it by the amount of months (12 for a year or 9 for January to September). You can find the amount of inventory then by dividing the absorption rate number by the amount of active listings.
For instance, lets say that it is August in a local Greenville subdivision and it has 4 homes on the market and 16 have sold since January. This makes an average of 2 homes selling every month and means that there is a 2 month supply in the subdivision. When looking at absorption rates for the entire Greenville area as a whole, it reveals some interesting facts when keeping the definition of a buyer's and seller's market in mind.
Here are some recent Greenville Area real estate statistics:
•Listing Price: $0 - $150K
–Active Listings: 2639
–Sold Listings: 3083
–3083 / 8 mths = 385/mth (Absorption Rate)
–2639 / 385 = 6.85 (Months of Inventory)
–Avg DOM: 83
•$150K - $300K
–Active Listings: 2732
–Sold Listings: 2399
–2399 / 8 = 300/mth (Absorption Rate)
–2732 / 300 = 9.11 (Months of Inventory)
–Sold DOM: 95
•$300K - $500K
–Active Listings: 1123
–Sold Listings: 565
–565 / 8 = 71/mth (Absorption Rate)
–1123 / 71 = 15.82 (Months of Inventory)
Sold DOM: 110
•$500K - $1Million
–Active Listings: 638
–Sold Listings: 174
–174 / 8 = 21.5/mth (Absorption Rate)
–638 / 21.5 = 29.67 (Months of Inventory)
–Sold DOM: 125
•$1Million +
–Active Listings: 144
–Active Solds: 14
–14 / 8 = 1.75/mth (Absorption Rate)
–144 / 1.75 = 82.3 (Months of Inventory)
Sold DOM: 109
These statistics show that Greenville is in a buyer's market in every category except one. The homes priced at $150,000 and below are not in a buyer's market. According the the NAR's® definitions of markets, that price range is an "even/split market." What does this mean? Seller's under $150,000's can expect a better market than those with higher prices and buyers cannot expect the luxury of a buyer's market under $150,000. Seller's under the $150,000's still have to keep things in perspective though since they are not in a seller's market either.
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