WHERE IS THE HOUSING MARKET GOING?

This is a question we get asked many times a day. My sellers want to know if they are going to lose more equity. Buyers want to wait until the market bottoms. Lenders and appraisers are caught between making money and taking risks.

My answer: Contrary to what the media says (daily), we are still selling homes at a reasonably good rate in the Charleston metro area. Sales volumes are now at the 2003 level (which was not a bad year!). Yes, there is downward pressure on prices (but please remember that prices went up 20%-30% per year in certain markets from 2003-2005, and yet the only ones complaining were first home buyers who could not get into the market). And yes, there is a large inventory that is slowing down any recovery.

The toughest competition for existing home sales are now new home builders. Because most of these are national, publicly traded companies looking to improve their quarterly balance sheets, they are discounting their prices aggressively to effect sales. And they do it mostly in the shape of incentives, so their deals are not always evident from looking at the recorded sales prices (closing costs, free upgrades, decorating allowances - there is even one developer offering free two-year membership to the Freedom Boat Club if you purchase one of their townhomes!)

This means that if you are unlucky enough to have bought in the last two years, and you live in a community where the original developer/builder is still offering your floor plan as new construction, there is very little chance that you can sell your home without losing money.

Big developers can take the hit! and they do, when they sell at a loss they take the write-off and their shareholders will be the ones paying for this short-term mentality in the long run. Having said this, I think that it is about the right time to start looking at buying select stocks in corporate building companies, after these writeoffs, when the shares are lower. I believe they will bounce back sharply. One simple reason: Demand and supply. More people, limited land.

That's why I thing that the Charleston market will rebound quicker than the average town and I am very optimistic for next year - despite the doldrums, we have lots of factors in our favor: The retiring baby-boomers (just starting), increasing employment, growing medical and financial services and a strong military presence.