By Doug Holmes, contributing editor | Last month in my first article for Charleston Currents, I gave you an historical perspective on the Charleston real estate market and a current snapshot of the tremendous buying activity in today’s market. The buying activity has continued its rampage over the last month and prices look very good, but not out of control.
For the year to date, transactions are up 17.5 percent from 6,432 to 7,560 residential units. We will most likely sell more than 14,000 homes in 2015. That will make it the busiest year since 2006 and the third best year ever in Charleston. Median sales price is up 3.3 percent from $222,900 to $230,200. This is the highest median sales price ever achieved for the Charleston area. The median sales price in 2007 was $210,000.
While median sales price is at an all-time high, we are still undervalued, according to my analysis. I mentioned in last month’s article that I would explain this going forward. We have data back to 1991 on the sales prices in the Charleston market. I have performed regression analysis on those sales numbers to create a trend line. The trend line is formally known as the line of best fit. It is sort of an average line calculated between the previous sales numbers and then extended out into the future. This is a rigorous statistical method and shows that the rate of appreciation for the Charleston market to be 5 percent on a continuously compounded basis. This is quite reasonable considering that the National Association of Realtors quotes an average 4 percent appreciation rate for the national market based on years of evidence.
Charleston, being a coastal city with such a blessed economy, is surely supposed to outperform the national average. During the peak years of 2004 to 2007, our median sales price in Charleston was well above this trend line. That was dangerous and led to a pull back in the 2008 to 2011 period. Since 2011, we have been gaining ground on the trend line, but the median sales price is still well below where it should be.
The trend line shows that median sales price should be over $250,000 by the end of 2015. Again, currently the median sales price in the Charleston market is $230,200. So, that says to me that we are undervalued and there is still more room for appreciation above the typical 5 percent rate for Charleston.
Next month, I will present more data on dollar per square foot sales prices that will show that while median sales prices are at an all-time high, our value has not completely recovered to the heights of the 2004 to 2007 market.
Doug Holmes is a local Realtor with Keller Williams. He also provides markets analysis for a fee to several hundred local real estate agents. He has a bachelor’s degree in physics and math from the College of Charleston as well as a master’s degree in math from the college, where he still teaches a couple of statistics classes in the fall. Visit his website here.