The State of Charleston’s Real Estate Market

By Dalton Elliott

Nestled in South Carolina’s Lowcountry, Charleston has become a popular location for tourists, people who are relocating to the south, and investors looking to move into the real estate market.

The Holy City is growing – quickly. Charleston’s population has grown three times faster than the national average and double South Carolina’s growth rate. That trend is forecasted to continue over the next decade with the city expected to expand by another 25% by 2030. Retirees, those working remotely, and individuals relocating for jobs continue moving into this coastal region because of its warmer weather, high quality of life, and affordability.

That growth is being felt in several areas in Charleston – on the interstate, in the job market, and in the rental market.

As a result, housing demand should remain robust in the region, making it an ideal location for real estate investors looking for investment properties in Charleston, South Carolina.

The Charleston real estate market has a significantly low SFR housing inventory, but the region has a surplus of rental units. Recent research by WalletHub shows that Charleston is one of the best markets for renters. The city’s rental market received high marks for activity in the marketplace, rental housing affordability, and quality of life.

Charleston’s strong rental demand is also due to the consistent imbalance between housing inventory and supply. The Charleston Regional Business Journal recently reported that the city needs nearly 8,000 housing units to keep up with its population growth. The city hasn’t reached that level of construction since 2006. As a result, more people are renting even though the market for buying is relatively affordable.

While Charleston’s population growth continues to trend upward, the city’s economy barely skipped a beat.

In February 2022, Charleston’s unemployment rate sat at just 3.6% – below the national average of 3.8%, even though Charleston’s economy relies heavily on tourism and hospitality. Despite the hit it took from the pandemic, Charleston’s economy rebounded nicely, allowing for growth in both sectors.

Charleston, SC benefits from a diversified and stable economy because of the area’s extensive employment base in the healthcare, military, and aerospace sectors. Charleston is also home to more than 50 development and research labs and 30 medical device manufacturing companies.

As Charleston’s economy continues to grow, a recent report from the U.S. Bureau of Labor Statistics shows that construction, manufacturing, information services, and professional and business services are leading the way.

Forbes has ranked Charleston as one of the best places for businesses and careers, and the city’s economy has been growing steadily for nearly two decades. Combine that with high quality of life, a rich cultural history, and flourishing tourism industry, and it’s easy to see why Charleston has been a magnet for millennials and baby boomers in recent years.

Charleston, South Carolina welcomes roughly 34 new residents a day, many of which are venture capitalists and real estate developers drawn to the fast-growing economy and the affordability of this coastal hub. The continual arrival of these newcomers has helped shape Charleston into an emerging location for startup activity and helped fuel the tech scene in the area.

This southern city’s growing economy is great news for real estate investors – especially investors who are interested in multifamily, single-family, and building rental properties. In January 2021, there were 551 single-family and 174 multifamily housing construction permits issued in Charleston.

The data shows a strong demand for housing, and the new construction for single-family rentals should help with the city’s inventory issues. The takeaway for real estate investors: Charleston, SC could be one of the best rental property markets to invest in.

Charleston, SC is no different than some of the country’s best rental property markets. Housing inventory is low, demand is high, and prices are increasing as a result.

Currently, there is less than three months’ worth of inventory when it comes to the Charleston real estate market. Entering 2021, the city’s housing inventory was at a 20-year low, with only about a quarter of the inventory needed for a balanced market.

Sellers regularly receive multiple offers because of the housing shortage, while the number of potential buyers in the market keeps growing. In fact, houses listed for sale in Charleston stay on the market for less than a month.

Forbes predicted that Charleston-North Charleston would be one of the top 10 hottest housing markets in 2020. The city’s strong economy and growing job market continue to attract employers and residents to the area, ushering Charleston to the top of several “best places to live” lists.

Buy-and-hold investors should note that Charleston-North Charleston should be a good market to invest in. Charleston’s housing market is expected to remain in the top 10 for the next three to five years.

Charleston has no shortage of investment opportunities for real estate investors. The city’s single-family and multifamily markets are thriving, but Charleston’s construction and build to rent markets are what’s really booming.

Construction permits in the Charleston metro area were at their lowest in February 2021 – 581 permits – while they spiked in June – 1,142 permits – before taking a slight dip in August to 867 permits. The need for housing and the spike in building permits has created the perfect market for build to rent projects.

While real estate investors have plenty of investment opportunities in Charleston, it’s important to note which markets are thriving and which markets aren’t. Venturing into single-family, build to rent, and multifamily rentals should yield positive outcomes based on current data.

The city’s fix and flip market, however, isn’t creating profits for investors at the present time. Based on current data, fix and flip profits in Charleston have decreased 16% YOY. Nationally, from April to June of this year, flippers made the lowest profits since 2008.

The decrease can be attributed to increased competition, high materials costs and increasing demand for starter homes, which has driven prices higher than homebuyers and investors can afford. With higher prices, flippers can’t make as much of a profit in Charleston at the moment.

 

Dalton Elliott is the Director of Inside Sales for Lima One Capital, the nation’s premier lender for real estate investors. Lima One finances borrowers who are building, improving, and stabilizing neighborhoods across the nation. For more information, visit limaone.com.