Columbia-area home sales soared 69 percent in November compared with the same month last year, as buyers snapped up starter homes.
First-time buyers rushed to take advantage of an $8,000 tax credit, then set to expire at the end of November, as well as historically low mortgage rates and low home prices.
But the soaring sales likely will not last, industry experts warned Tuesday - despite an extension of the federal tax credit through April and the addition of a $6,500 credit for existing homeowners who buy a new home.
"We have had it better, and it does feel good," longtime Columbia real estate agent Jay Graham said Tuesday. "But you have to read behind the lines and get the big picture. You can't just keep paying people to buy houses."
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November was the third straight month that home sales increased in the Columbia area after more than two years of decline, according to data from the Consolidated Multiple Listing Service, which tracks real estate transactions.
Area sales are still down about 11 percent for the year as the nation struggles to recover from a brutal two-year recession that has left South Carolina with the country's fifth-highest unemployment rate.
Sales were down about 9 percent from November 2007, one of the best years on record for home sales in Columbia.
The median price of homes sold in November in the Columbia area was $135,500, down from $136,000.
Meanwhile, builders once again are starting to think about new inventory, which has been dwindling slowly throughout the year.
Columbia-area builders took out 26 percent more permits for new homes in November than the same month in 2008. In October, the number of permits issued rose 22 percent compared with 2008.
For the year, the number of new home permits is still down 26 percent.
"Maybe the market's starting to perk up a little bit," said Steven Mungo, president of Irmo-based home builder The Mungo Cos.
Mungo said builders likely are trying to get ready for next year's spring selling season by getting permits to start building homes now.
Smaller builders still are having a hard time getting financing to build homes, but they can get money to replace homes that sell, he said.
"As available inventory shrinks, more replacement permits are getting pulled," Mungo said.
Rob Haney, sales manager for Essex Homes, said his company's inventory spiked about 30 percent last year as homes sat on the market. But Essex has been able to get that number below its normal level with sales this year.
One way the company did that was by dropping prices. Prices started at about $76 per square foot last year. This year, they start at below $60 per square foot in some neighborhoods, he said.
"The $250,000 buyer is now a $200,000 buyer," Haney said. "The $200,000 buyer is now a $150,000 buyer."
However, Essex's average sales price is starting to creep back up, Haney said. Last month, it was $218,000, up from the $180,000s and $190,000s earlier this year.
Homes in the less-than-$200,000 price range are the most popular, industry experts said.
Buddy Lewis, a Columbia real estate agent with Russell & Jeffcoat Realtors, said he typically sells homes in the $350,000 to $450,000 price range. But this year, he has taken on several first-time buyers in the $200,000-and-less range looking to cash in on the government stimulus.
"Eight thousand dollars got a lot of people's attention," he said.
Ralph Taylor, president of Columbia-based First Choice Mortgage, said his business is up between 30 percent and 40 percent from last year. The company, which has 22 offices in South Carolina and three other states, is financing homes mostly in the $120,000 to $200,000 range, he said, using government-backed loans that require little money down.
Home buyers also increasingly are turning to foreclosures or other homes that need some work but can be bought at a discounted rate, Taylor said. Many are using an old Federal Housing Administration loan that has come back into popularity recently that allows buyers to finance the cost of the home and the cost of improvements.
Taylor said his company is doing 80 percent more of those types of loans than last year.
Some hope the increase in sales in lower-end homes will push people selling those homes to trade up, especially now that the tax credit has been expanded to include existing homeowners.
Lewis said more people are starting to look at the upper-end homes, though not many have bought.
"At least they're getting out; they're feeling better about the economy," he said.
The biggest question facing the real estate market is what will happen when the government stimulus runs out, Columbia agent Graham said. He said the government has created a "rigged bubble" that is about to pop.
"Don't let these one-month stats fool you," Graham said. "They have fished people into the market that may not have normally gone in. When the stimulus money runs out, how many buyers are going to be left?"