Despite challenges posed by rising interest rates, their impact on buyer-secured mortgage rates, and economic uncertainty throughout the first half of 2023, Charleston's real estate market, particularly its popular downtown district, remained as popular as ever. But as interest rates remain elevated heading into the new year, many would-be buyers and sellers wonder if the time is right for entering the market.
Below, we look ahead to 2024 and explore that central question to determine the effect of interest rates on the
Downtown Charleston real estate market.
2023 in review
Now that we’re in 2024, we can look back and see that Downtown Charleston weathered much of the storm generated by rising interest rates during the latter stages of 2023.
Based on data provided by the Charleston Trident Association of REALTORS®, through November 2023, single-family homes in Downtown Charleston saw the following year-to-date numbers:
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New listings: down 14.6% versus 2022 and
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Closed sales: down 28.6% for the same time frame.
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Median sales price: up 17%, from $1.3 million in 2022 to $1.53 million in 2023
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Average sales price: up 13.3%, from $1,814,512 in 2022 to $2,055,454 in 2023
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As of the end of November 2023, 52 homes are available for sale.
The biggest takeaway is that despite a cooling off in market transactions, home values continue to rise, with the average sales price for downtown breaking the $2 million barrier.
Condo and townhome properties saw similar movement when looking at year-to-date between November 2022 and November 2023:
- New listings: down 11.9%, from 294 in 2022 to 259 in 2023
- Closed sales: down 34.2%, from 243 in 2022 to 160 in 2023
- Median sales price: up 10.3%, from 655,000 in 2022 to $722,500 in 2023
- Average sales price: down 5.1%, from $897,326 in 2022 to $851,605
- As of the end of November 2023, 75 condos and townhomes are available for sale.
Overall, year-over-year median sales prices for single-family and condo and townhome properties remain near historical highs, with the former exceeding $1.5 million for all of 2023 and the latter hovering near $750,000.
What impact will interest rates have on Downtown Charleston in 2024? If 2023 is any indication, not as much as one might think.
Understanding interest rates in 2023
Arguably, the biggest real estate story locally and nationally for 2023 was the return to high interest rates and, in turn, an increase in mortgage rates for 30-year and 15-year home loans. And not simply a few points off from the norms of the past five or even ten years, where, before 2022, the highest rate of the past decade came in November 2018 with a rate of 4.94% for a 30-year fixed-rate mortgage and 4.36% for a 15-year fixed rate loan.
That number was eclipsed in April 2022 and hasn't dropped below 6% since September 2022. In October 2023 — less than three months ago — the rate for a 30-year fixed-rate mortgage was 7.79%, the highest rate in 22 years.
Currently, rates finished 2023 on a downward trend, entering 2024 at 6.61% for a 30-year fixed-rate mortgage. It is slightly more palpable but still higher than any rates between July 2006 and November 2022.
More than any other metric, interest rates impact home sales, which are down 22.7% across Charleston County. Buyers are now proving extremely budget-conscious across the board, and with owners not easily letting go of the historically low interest rates they acquired during the pandemic-driven market of 2020 and 2021.
But, despite the increased rates and higher home prices buoyed by historically low inventory levels, people continue to move to and seek out residential property in and around Charleston.
Why?
As it turns out, interest rates, even those hovering around 20-year highs, are no match for a wildly popular and much sought-after relocation destination.
Forecast for 2024
Looking into 2024, the forecast for Charleston's real estate market, including communities downtown, suggests a continuation of the growth trajectory observed in 2023 as the market remains on solid footing. Current predictions include:
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Across the board, interest rates should hold steady in the range of 6% to 7% early in 2024, with the potential to see sub-6% mortgage rates by year's end.
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Property value growth as high as 3% for 2024. While substantially lower than the pandemic-driven growth of the prior three years, it remains a positive trend even amid broader economic uncertainty nationally.
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Fueled by a robust and diversified job market that includes healthcare, military, university-based research, a thriving manufacturing sector, and emerging tech and engineering capabilities, Charleston will maintain its status as a desirable place to live and work.
The region also boasts a deepwater port — the deepest port along the U.S. East Coast — and one of the world's busiest and most notable tourism industries, giving the region a global reach and international investment that few areas its size can claim.
Expect Charleston's market to continue to attract real estate investors, drawn by the city's economic stability, quality of life, and potential for property value appreciation, and, in turn, increasing competition, including for sought-after Downtown Charleston properties.
Ultimately, Charleston is the rare market with high desirability amongst a wide range of would-be home buyers. Young professionals, growing and established families, retirees, and the aforementioned investment segment come to Charleston and are willing to look well beyond current financial hurdles, including high interest rates.
They play the long game to tap into the market's potential appreciation. Many come to the transaction table with cash in hand, avoiding the burden of a monthly mortgage altogether. Others realize interest rates are negotiable later or are savvy enough to take advantage of seller or developer incentives or unique but, at times, risky mortgage packages.
Guidance for sellers
Based on the Charleston market recalibration in 2023 and continued potential for growth in 2024, here are some key insights and advice for home sellers in the area:
Leverage market strength: The market has favored sellers for most of the decade. That trend is expected to continue, but added competition is likely as mortgage rates stabilize and more homes find their way to the market.
Prepare yourself to let it go: If you're considering selling a pandemic-procured downtown property and are one of the 92% of homeowners with a mortgage rate below 6% or the 62% with a rate below 4%, make sure you're prepared to give up what many consider a once-in-a-lifetime interest rate. While the sale will undoubtedly prove lucrative, the dynamics of your next purchase will be markedly different.
Stay informed on economic trends: Keep an eye on Charleston's and the wider Lowcountry's economic conditions, including job growth and population trends. These influence demand and will help guide your decision on when to list and your pricing and marketing strategies.
Ready yourself for motivated buyers: In any market where investment is prevalent, or cash buyers represent a sizable portion of property seekers, contracts move quickly. Prepare for a potentially fast transaction process, including paperwork, logistics, and post-sale plans.
Guidance for buyers
If you're preparing to enter the highly desirable Charleston market, here's some strategic advice for home buyers in the area:
Be prepared for a competitive market: The Charleston market has been and will continue to be competitive, with scarce inventory and properties often selling rapidly. As a buyer, be ready to act quickly when you find a suitable property. This means having your financing in order, being pre-approved for a mortgage, and being decisive.
Understand the impact of rising interest rates: Higher interest rates can affect your borrowing costs and overall affordability. While forecasts favor decreasing rates, factor this into your budget to avoid overextending yourself financially. Consider locking in your mortgage rate or having viable alternatives if you anticipate further increases or a lengthy home search.
Consider long-term value: Look for properties that offer long-term value. Consider downtown areas with strong growth potential or properties that require updates but are in desirable locations or have sizable commercial upside.
Monitor market trends: Stay informed about the Charleston real estate market trends, including pricing, inventory levels, and economic factors that could influence the market. This knowledge can help you make more informed decisions.
Be flexible and patient: Given the market dynamics, you might need more time to find your ideal home. Be prepared for some compromises and exercise plenty of patience. In some situations, waiting for the right opportunity can yield better results than rushing into a less-than-ideal purchase.
Work with a seasoned real estate professional
Whether buying or selling, partnering with an experienced real estate agent can be invaluable. They provide market insights for both sides of the transaction, help with pricing or offer strategies, and manage negotiations effectively, regardless of which side of your transaction table you find yourself sitting on.
If you're ready to explore your options for listing or buying a home in Downtown Charleston,
contact me, Jameson Cokas, to start your real estate journey.
