In the prepandemic years before 2020, the Columbia real estate market experienced steady but not exceptional growth. The response to the COVID-19 pandemic in 2020 created an incredibly disruptive force throughout the economy and the way of life for Columbians and all Americans. After the extensive curtailment of economic activity due to the pandemic, the influx of monetary stimulus, and changes to the workplace in the form of remote work, the market took off in 2021. Demand far outstripped supply — a supply severely limited by the hangover effects from the Great Recession of 2008.
According to Joseph “Joey” Von Nessen, Ph.D., a well noted research economist at the University of South Carolina, the Columbia real estate market is experiencing a return to normalcy after two years of abnormal frenetic activity. “I call it the Great Readjustment,” says Joey. “We are returning to a state of equilibrium from an unusual situation caused by the pandemic.” The infusion of $6 trillion into the marketplace still has a lingering effect but has mostly run its course. The growth in the job market stimulated demand, but higher interest rates than the year before has created a dampening effect. The median sales price has increased 4.8 percent, reflecting the short supply/high demand effect outweighing the downward pressure from higher mortgage rates. This is down from the 15 percent increase of 2022 from 2021 but up nonetheless.
Uncertainty from a predicted recession this past year has been replaced by uncertainty over the direction and timing of interest rates. “The chance of recession has gone from a 50 percent probability to around 30 percent,” says Joey. “Thirty percent is better than 50, but we still aren’t out of the woods.” According to Joey, three primary factors are influencing housing demand in 2024: population growth, strength of the labor market, and mortgage interest rates. Recent census data from 2023 reported that South Carolina was the fastest growing state in the nation. “Population growth is good, the labor market is strong, but mortgage rates are still high and their direction unknown. The biggest factor affecting mortgage rates is inflation and how ‘sticky’ it may be,” Joey says.
Currently, the inflation rate is around 3.4 percent, but the Federal Reserve’s target is 2 percent. The Fed is walking a tightrope by not cutting rates too soon and creating a resurgence of inflation but also by not holding rates too high for too long and creating a recession. To nail the proverbial “soft landing” is tricky. Under somewhat similar circumstances in the late ’70s and early ’80s, the Fed cut rates too early and inflation came roaring back only to be tamed by an aggressive increasing of rates that caused a recession.
The year 2024 looks to be a normal one by historical standards, perhaps even a Goldilocks environment of not being too hot or cold. All bets are off, however, in an election year that could possibly add another disruptive element to the mix. The politically neutral Fed can influence the presidential election no matter what it does or doesn’t do. The fundamentals, though, of the Columbia economy and the long-term trends bode well for both buyers and sellers. Compared to those of most other cities, Columbia’s housing costs and cost of living are below the norm, which is good for buyers, and the steady home appreciation and demand is good for sellers. Bottom line — Columbia is a great place to live.