2020 Housing Update: Expert Advice for Young Professionals

Written by Grace Wachowski, Seamon Whiteside, CYP Steering Committee Member

In a recent virtual YP Wake Up, three experts presented an update on housing in the Charleston region and provided insight and expertise on the homebuying process, especially for first time homebuyers.

Ward Mungo, Mungo Construction

Ward began by sharing some data points to give us a snapshot of the economic outlook, especially as it pertains to housing. Since April, there have been positive signs of a recovery after facing a record high number of unemployment claims. South Carolina remains below the national unemployment average at 8.6% in July – down from 12.8% in April. There has been an unequal recovery of certain types of jobs. Jobs paying less than $27k were down 9.1% since January 2020 while jobs paying more than $60k grew by 3.3% since January 2020. The housing market has reacted to these economic conditions by steadily increasing in the Charleston metro region.

Out of the last 19 weeks, 17 have been above the pre-COVID-19 single week record of 458 properties going under contract. Last week was the first sign of any kind of seasonal slowdown (which should have started about 15 weeks ago) and the market dipped to 408 ratified contracts, +67% to the same week last year. It is worth repeating that our post lockdown boom (nearing 6 months in length now) is the most active housing market that the Charleston area has ever seen by a wide margin. The most popular price range of homes is in the mid 200’s and a lot of the action of buying homes is happening in the outer areas of Charleston within this price range.  

In Ward’s terms “housing is flying off the shelves at this rate.”  New construction is about 36% of the pending contracts in the MLS. This is very high considering this number is normally 25%. Properties over $1 million also continue to sell well. The election is a moderate short-term risk to the high sales, and it is common for sales activity to pause during the election.  Elections tend to disrupt the market no matter which way they go but these won’t be permanent conditions.  

Lumber prices have been increasing astronomically. Since April 2020 to August 2020 lumber prices have increased by 110%. The average price of a new home has increased by about $15,000, which directly relates to the lumber price increase. It remains uncertain how long the market can sustain the increase in lumber costs. A strong housing market and low inventory will allow the new home market in construction to remain strong. The challenge for builders and new construction will be to provide homes under the $250,000 popular price point while fighting the increasing land and lumber costs.  

The rental market has not had the same steady increases as the housing market. According to the Census Bureau, about 28% of SC adults describe themselves as housing insecure, meaning they don’t know if they can pay rent from month to month. Of SC renters, 52% (273,000 households) are at risk of eviction this year. Job losses were concentrated among low wage service workers who disproportionately rent their homes compared to workers in other industries. Federally funded housing and supplemental unemployment compensation has recently expired. As a result, a Columbia University economist projects that homelessness will go up 40% this year.

One in four SC renters experience a severe cost burden, meaning they are paying more than 1/3 of their living wage on housing per month. High land cost and overall prices of housing in the Charleston region account for some of these effects. South Carolina has by far the highest eviction rate in the nation. There are only enough subsidized rental units to serve one in five low income renter households. All three counties in the area could benefit from new construction based on the inventory demand.

Final thoughts from Ward:

Overall, the housing and rental markets are showing two drastic and contrasting pictures. Our region is very behind in land planning. Growth is demonized in the lowcountry and there are many misconceptions about the region. We must embrace density in order to decrease land costs and provide affordable housing. Desirable areas must plan for density and coordinate regionally with neighboring municipalities. We must vote for politicians and policy makers that consider housing infrastructure for the future.

Kara Hicks, The Boulevard Company

Kara emphasized that staying involved in local politics is needed to promote more low income housing that is essential for many SC residents. Kara suggests that you reach out to your local representatives about your concerns on housing. Many of the local representatives are very approachable and want to hear from their constituents.

There are some programs available to get down payment assistance available to folks who make less than 60,000, people in the military, first responders, teachers, and more. Look and see if you can qualify for any of these programs for financial assistance.

In general, as a young professional, buying a house can help you build wealth. If you are a first time homebuyer, consider buying a townhome or a condo first that is lower in maintenance and has a lower price. You should also consider other areas that you might not have thought of before. For example, if you work in Mount Pleasant, you may find a home in Hanahan that is more affordable that you can easily commute to. Try to maintain flexibility on where you look in order to get what you want for your set budget.  

Homebuying Process and Checklist from Kara:  

  1. Speak to a lender or a realtor: get preapproved for a mortgage in order to know what budget you should set when you are looking for homes.
  2. Always use your own representative, such as a realtor. Usually there is no cost to the buyer to have an agent. Find a representative whose personality you like and who you get along with. You want someone with good knowledge of the area, understands the process, and communicates well.
  3. Layout the general wants and needs in the home while considering your budget. As you look at homes, narrow down what you want until you find the right one.
  4. Preapproval and a written letter will help make your offer more appealing in a multiple offer market. As a buyer, you can ask for contingencies in the offer and can ask for the homeowner to help with closing costs and so forth. Many of these contingencies protect the buyer.
  5. Once you get under contract, that’s when the action happens. The lender will need a lot of documents so stay on top of it and be responsive. The home inspection and home appraisal will happen after going under contract. At this point you can ask the seller to make repairs and you can shop for homeowner’s insurance.   
  6. Closing will generally take 30-60 days.  

Cody Teal, BB&T

Cody says the most important thing to do before you consider buying a home is “get your financial house in order.” The biggest mistake that first-time homebuyers make is not going to the lender first to figure out what budget you are working with. Buying a home can build wealth and be an investment, but there are a lot of emotions involved.

Start saving now. Typically, a minimum down payment on a home is 3% to 3.5% of the total cost. Closing cost vary anywhere from about $4,000 to $6,000 in South Carolina. The more you can save the better off you will be when it comes time to pay closing fees or if there are unexpected costs.

Get a handle on your credit score and get it as high as possible. This affects the interest rate you can get on your mortgage. The higher the credit score the less of a risk you show the lender and the lender will give you a lower interest rate.

Have a 3-5 year game plan in mind. Figure out where you plan to be in 3-5 years. If you have any large life changes, consider if this is the right time to buy a home. If it doesn’t make sense for you, don’t feel rushed to buy a house just because lending rates are good right now.

Make sure you don’t overextend yourself when it comes to a monthly payment. Consider your lifestyle and what other financial obligations you have.

Simple Homebuyer’s Checklist

  1. Shop multiple lenders – Find a lender who communicates well with you and who is responsive and transparent. You want someone who has the heart of a teacher as a first time homebuyer and will explain the process to you. Credit inquiries within a 45 day window will count as one inquiry if it is about a mortgage so don’t be afraid of lowering your credit by talking to multiple lenders.
  2. Get prequalified for a loan with your chosen lender – When you make an offer on a home you want to know how much house you can afford, and this will give you a general budget when looking for homes. Once you have been prequalified, this will help you to look like a serious buyer to the seller.
  3. Know your budget – On paper, you might be qualified for more than you want to spend. Consider your other financial obligations and your lifestyle. It depends on how much you’re willing to pay on a monthly payment. Make sure you think about taxes, homeowner’s insurance, and HOA fees.
  4. Shop around for homeowner’s insurance – Check multiple companies before committing – this can save you a lot of money in the long run.
  5. Understand the documents you sign – Once you’re under contract, make sure you understand the closing documents. These documents have very important information such as the final cost of your home and all closing and realtor fees. If you don’t understand something, make sure you ask questions along the way.
  6. Take ownership of the process – There are a lot of people involved and you want to get to the end game. The more responsive you are, the faster things will go. It’s a team effort but things will start and end with you. You should think about it as if you are working a part time job for the next 30-60 days.
  7. Don’t feel pressured – Make sure you aren’t pressured or rushed into a decision. Don’t feel like you must buy a home just because you’ve been preapproved and gotten other people involved. Don’t do it for the wrong reasons; make sure it makes sense for you.
  8. Take a first time homebuyers’ course – You can take a first time homebuyers’ course in order to better understand the process, search online for options or ask if your first time homebuyers’ program offers one.

Final thoughts from Cody:

Get financially inspired. Save. Invest. Plan your financial future. Educate yourself. You won’t regret it!

Watch the full webinar here.

The experts are listed below with their contact information in case anyone has questions for them or wants to reach out for advice on their home buying process.

Ward Mungo – wmungo@mungoconstruction.com
Kara Hicks – kara@thechsrealtor.com
Cody Teal – cody.teal@bbandt.com

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