For the residential real estate market, the long-dormant revival is now in full bloom, bringing new homes and new opportunities to a changed marketplace across the Midlands. In 2015, sales volumes and home prices moved up to levels not seen since before the Great Recession.
Years of recovery in salaries and jobs — plus a long dose of historically low interest rates — have finally taken full effect in real estate, market watchers say. That growth is going to continue, even as effects from the flooding from this past October continue through 2016.
In general, the economic health of the real estate market lags behind trends in the general economy, says Nick Kremydas, chief executive officer of the South Carolina Association of Realtors. “When the economy is healthy and jobs are being created, real estate is going to follow that economic trend,” Nick says.
The real estate market showed strength statewide and in the Midlands:
Statewide, closed residential sales increased by more than 11 percent over 2014. With almost 72,000 closed sales, 2015 exceeded the 2011 level by more than 25,000.
The median sales price of a single-family home in South Carolina was about $181,000 in 2015, an increase of 6.4 percent over the year before, the South Carolina Realtors reported. It’s much higher than the median price of $155,000 during the depths of the downturn in 2011.
In the Midlands, residential property sales in 2015 took a huge jump of 14.3 percent over the year before, according to Thomas G. Brown, a REALTOR® and president of the board of directors of the Central Carolina REALTORS® Association. Median prices increased a modest 2.2 percent.
Mungo Homes is one of the Southeast’s top homebuilders and weathered the recession when many others left the business. Steven Mungo thinks that mid-priced homes hit the sweet spot for customers in the Midlands. “In Columbia, you’re focused on a two-income family that is employed in some way by government,” Steven says. “That could mean they work for the state, a university, the Army or even a hospital system.”
Inventories are nearing pre-recession numbers, but that’s not enough. South Carolina and the Midlands have continued to add population through the downturn and recovery. Those people need even more places to live than before because the average household size in America has gone down. The country used to average 4.3 people per household, but now that number is barely two per household. That means more places to live are needed.
Nick sees the current credit market as a healthy one, with appropriate caution built into it. Such safeguards should help avert an overheated market like the one in the 2000s.
The real estate market was jostled, of course, when torrential rains from this past October brought dam breaks and flooding to areas of both Richland and Lexington counties. The damage to housing was considerable. The Federal Emergency Management Agency reported that it approved more than 26,000 applications for assistance in the state in the first 90 days after the deluge. During that time, it provided $68.9 million to help with temporary rental and home repair costs.
According to Earl McLeod, Jr., executive director of the Building Industry Association of
Central South Carolina, builders reacted the way many others in the Midlands did amid the flood: they dropped what they were doing and pitched in to help. Many builders didn’t wait to be hired but began helping those with flood damage immediately. The major tasks: tearing out water-damaged materials and removing mold. “Members just went out and helped their neighbors,” he says.
The flooding also immediately produced a need for rental housing for those displaced, adding to demand on the rental market. “After the cleanup, however, there was not an immediate rush of new building projects,” Earl says. In fact, it seemed there was a lull as homeowners evaluated their situations and dealt with their insurance companies (if they had flood insurance) and FEMA.
In some hard-hit places, it hasn’t made sense for many homeowners to repair their houses, so they are bulldozing and starting over. FEMA rules stipulate that any rebuilding project that costs more than 50 percent of the home’s value prior to the disaster is a “substantial improvement,” and it must conform to any updates in building or flood-safety codes. “This can cause those with substantial damage to decide to start anew rather than heavily retrofit a repaired home,” Earl says.
As insurance and permitting issues are resolved, there should be continued flood-recovery work for builders throughout 2016 and perhaps beyond. “It’s going to be an extended demand because of the floods,” Earl says.
Also this year, Columbia will be continuing to repair its infrastructure, including water and wastewater systems that took a beating, according to Joey Jaco, director of utilities and engineering for the city. In one region of the Northeast, the continuing capacity issues are blocking new housing starts for now.
“Flooding that destroys streets also damages the infrastructure that runs underneath or alongside them,” Joey says. The October storm caused numerous breaks in the city’s water system and weakened other parts that continue to cause problems. Even in 2016, damage to the system and the area’s high water table continue to put more water into the wastewater system than normal.
In one part of Northeast Richland, the Crane Creek basin, the storm exacerbated issues with system capacity. “Before the flood,” Joey says, “the city was working to address those issues, including the installation of a bypass pumping station in the area that was completed and in operation in September. The flooding destroyed that station, setting the project back. The city is now working to rebuild that pumping station to complete the increase in system capacity. Until that work is complete, builders in the area are required to put off any new housing starts.”
The city system — which also supplies much of Richland County — was already in the middle of a major system upgrade. Completion of that project and storm repairs are likely to take years, but the payoff for that investment will be a more reliable system with more capacity.
Where is housing growth taking place? In some of the expected regions, but there are surprises too.
One surprise: there is continued growth closer to downtown in the West Columbia area, which Steven Mungo calls “an underserved area” for new housing. Proximity to downtown workplaces is helping these closer-in areas attract new investment, he says.
“The area around the town of Lexington also continues to be a strengthening market. The Northeast is still strong, but Lexington might be even stronger right now,” Steven says.
He also reports that the Lake Murray/Irmo area stands to benefit with new growth from the continuing SCE&G nuclear plant project near Jenkinsville. “Once the plant’s new reactors come on line, the addition of full-time staff is likely to bring a new demand for housing to the area,” Steven says.
The labor market was already tight before the flood, and the added work could be slowed by a limited workforce available to do it. “They might not be available when needed,” Earl says. Recent survey data from the National Association of Home Builders show that shortages of labor and subcontractors have become substantially more widespread since 2013. The incidence of reported shortages is now surprisingly high relative to the current state of new home construction, which has only partially recovered from its 2008 downturn. The shortages are also particularly acute for workers with basic skills like carpentry, which is needed in substantial numbers for the construction of any home.
Earl has been told that out-of-state workers have been coming in as construction work has picked up in the state. “That’s part of the market fixing the labor shorting in the short term,” he says. In the longer term, he would like to see more young people consider construction, especially technical trades such as plumbing or electrical work. These jobs pay well and can be the basis of careers, but students are not getting the message about these opportunities.
“Knowledge of the local market continues to be the reason why realtors are a key asset for those looking for a new home,” Nick says.
As technological changes such as online search changed the real estate business, some thought that real estate agents would be greatly reduced in importance and numbers in the way that travel agents were. “The opposite has happened,” Nick says.
“Websites and searches are tools that a successful agent uses,” he says, “and much of what used to be done on stacks of paper is now electronic.” The service and knowledge are as vital as ever. “Their experience is their knowledge of the local market,” he says. “A website won’t know that a particular neighborhood was under water in October. A successful realtor knows how to use these tools to help their clients.”