South Carolina Real Estate Market Trends & Analysis
The South Carolina real estate market remains the primary beneficiary of a very healthy economy. Thanks to a relatively low cost of living, strong natural amenities, and a desirable jobs industry, South Carolina has become the focal point of positive net migration. South Carolina is now one of the fastest-growing states in the country and looks as if it will continue to attract job seekers and retirees. Perhaps even more importantly, The Palmetto State’s strengthening economy has generated a high demand for housing. That, combined with new fundamentals left in the wake of the Coronavirus, have made South Carolina a great place for real estate investors to set up shop.
The Top South Carolina Real Estate Markets
While the best real estate market in South Carolina is up for debate, here’s a list of the cities investors may want to pay special considerations to:
Unemployment Rate: 4.2% (latest estimate by the Bureau Of Labor Statistics)
Population: 5,084,127 (latest estimate by the U.S. Census Bureau)
Median Household Income: $48,781 (latest estimate by the U.S. Census Bureau)
Percentage Of Vacant Homes: 16.58%
Foreclosure Rate: 1 in every 10,133 (0.9%)
South Carolina Median Home Prices
The median home value in South Carolina is a very healthy $204,820. At that price, real estate remains relatively affordable (compared to the national average) but has demonstrated an increased propensity towards appreciation. Over the course of eight years, in fact, the median home value in the South Carolina real estate market has appreciated by as much as 43.2%. In the last quarter of 2012, the median home value bottomed out around $143,000 during the Great Recession. Today's median home value of $204,820 suggests local real estate was able to ride a tailwind of positive indicators for the better part of a decade. A strengthening economy, improving consumer confidence, a lack of available listings and plenty of demand have all contributed to the highest median home value the state has ever seen.
To put things into perspective, the median home value in the United States is $262,604. Not unlike South Carolina, the median home value in the United States has enjoyed quite a run for the better part of a decade. The median home value in the United States reached its lowest point of the Great Recession in the first quarter of 2012 when support kept it from dropping below $162,000. Since then, prices have increased by 62.1%
The median home value in South Carolina has increased for more than eight consecutive years. However, it is worth noting that the introduction of the Coronavirus threatened to break the trend in the first quarter of 2020. When COVID-19 was officially declared a pandemic, real estate activity across the entire state came to a standstill. Prospective buyers refused to tour homes, owners took their listings off the market, and mortgage underwriters were understaffed because of "stay-at-home" orders. In one month, the bustling South Carolina real estate market was brought to a halt.
It should be noted, however, that the lack of activity was only temporary. The disruption caused by the Coronavirus appears to have catalyzed the entire housing sector. In response to the pandemic, the government lowered interest rates, so much so that buyers couldn't help but get off the fence. Government intervention made buying so attractive that people couldn't help but consider purchasing a home in today's market. As a result, demand fueled competition, and prices have increased throughout 2020. In the last year alone, South Carolina's median home value has increased by 6.1%, and there's nothing to suggest it will slow down. Over the next year, price increases are expected to surpass the previous 12 months, to the tune of a 7.6% appreciation rate.
South Carolina Foreclosure Trends & Statistics
South Carolina's foreclosure rate is somewhere in the neighborhood of 0.9%, with a mere one in every 10,133 homes in some stage of distress. Today's foreclosure rate represents a significant improvement from years past but still has room for improvement. For some context, the U.S. foreclosure rate is approximately 0.7%, which means one in every 13,482 homes is either a pre-foreclosure, auction home, or bank-owned. Not unlike South Carolina, the number of foreclosure filings in the United States has improved in recent history.
While South Carolina has improved its foreclosure rate in recent history, the state still has areas with higher distributions of distressed homes. The following counties represent the areas in South Carolina where foreclosures appear at a higher rate:
Calhoun: One in every 3,714 homes is distressed
Lee: One in every 3,880 homes is distressed
Orangeburg: One in every 4,741 homes is distressed
Chester: One in every 4,917 homes is distressed
Marion: One in every 4,969 homes is distressed
While the types of distressed properties will vary from county to county, auction homes make up the majority of the state's foreclosures. Representing 43.6% of South Carolina's distressed homes, auction homes may represent investors' best opportunities to secure deals below market value. Coming in a close second, however, pre-foreclosures represent 42.3% of the state's distressed inventory. Therefore, outside of attending local auctions, the South Carolina real estate investing community should pay special considerations to homeowners who are merely at risk of foreclosure. Doing so will increase their odds of finding deals below market value.
It needs to be noted that foreclosures are expected to increase for the foreseeable future. If for nothing else, the pandemic has placed a financial strain on far too many homeowners. With businesses shut down and more people unemployed, more people will inevitably find it harder to keep up with monthly mortgage obligations. While it's too soon to tell just how many homeowners will file for foreclosure in South Carolina, the fact remains: there will most likely be more over the course of 2021. If that's the case, investors who position themselves well now could help distressed homeowners in the coming year.
Tax Lien Investing
Tax Lien or Deed: Tax Lien state
Interest Rate: 8-12%
Redemption Period: 1 year to 18 months
South Carolina Real Estate Investing
Investors in the South Carolina real estate market have done well for themselves over the last eight years. In the time proceeding The Great Recession, appreciation rates have continued marching up without pricing buyers out of the market. In fact, demand appears to be healthier than ever. As a result, rehabbers have seen activity and profits increase year-over-year, and 2020 was no exception. It is worth noting, however, that profit margins have grown smaller in the last few years. Historic appreciation rates have made it more difficult to secure deals at a reasonable price. That's not to say flipping real estate in South Carolina isn't profitable, but rather that the Coronavirus appears to have shifted the optimal exit strategy.
With home values on the rise, more investors are turning to rental properties. Long-term "buy and holds" appear to be the optimal exit strategy for South Carolina real estate investors. Not only have home values increased to the point where they are too expensive, but the Coronavirus has created a new marketplace with three fundamental indicators that seem to favor landlords over rehabbers:
As recently as November, the monthly average commitment rate on a 30-year fixed-rate mortgage was 2.77%. At that rate, it's never been cheaper to borrow institutional money, which simultaneously helps to offset today's high prices and increases monthly cash flow for investors who buy rental properties.
With a 12.23 price-to-rent ratio, it is more affordable to buy a home in South Carolina than to rent one. However, insufficient inventory levels will relegate more people to the renter pool, making vacancies less of a worry for landlords. The resulting demand will turn into competition, which will enable landlords to increase cash flow opportunities.
Home values in South Carolina have increased for eight years, which means profit margins on flips have dropped. Investors are still free to conduct rehabs, but long-term rentals are more viable under the market's current conditions.
Investors are lucky to have several viable exit strategies at their disposal, but none appear more attractive than building a proper rental property portfolio in the wake of the pandemic. Too many important market indicators are pointing towards becoming a buy-and-hold investor to ignore.
South Carolina Housing Market Predictions
Predicting South Carolina real estate trends coincides with an inherent degree of error. Regardless of how stable any market seems, there are too many variables to account for to predict any housing market with the utmost certainty. Nonetheless, it is good practice to make decisions based on well-informed, educated guesses about a respective housing market. Keeping a finger on the market's pulse can help South Carolina real estate investors interpret the most likely direction things are heading. Let’s take a look at the South Carolina real estate predictions that are most likely to come to fruition in the next year or so:
Foreclosure activity will increase: South Carolina has seen foreclosure filings decrease in recent history. Year-over-year, filings are down, but the trend is expected to reverse sooner rather than later. The financial strain placed on homeowners by the pandemic will almost certainly increase filings in 2021. It is too soon to tell how many filings will occur, but investors should assume there will be more foreclosures on the horizon.
Available inventory will continue driving prices up: The South Carolina real estate market has felt the constraints of tight inventory for several years. Thanks, in large part, to a lack of available housing, prices have increased for the better part of a decade. That said, there doesn’t appear to be a solution anywhere on the horizon. The pandemic has actually hurt already low inventory levels and should continue to do so until more listings can be brought to market.
Demand for suburban housing will increase: As we get further into the pandemic, work-from-home trends appear more sustainable than ever. No longer do employees need to live within proximity of their workplace. That, in addition to wanting to leave metropolitan areas where the virus continues to spike, should drive more people to consider calling the suburbs their new home.
The South Carolina real estate market appears to have exercised some inherent resiliency over the course of the pandemic. In particular, local employment remains relatively strong. While unemployment spiked in March, it has improved dramatically and has almost returned to pre-pandemic levels. As a result, prospective buyers have more confidence in South Carolina real estate, even if prices have been on the rise for the better part of a decade. All things considered, real estate in South Carolina has a lot going for it, at least more than many other states. Investors, buyers, and sellers can all take solace in the fact that things look good moving forward.
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