CTAR 2022 Year in Review | Residential Market Update

THE 2023 SOUTH CAROLINA
ECONOMIC OUTLOOK
Joseph Von Nessen, Ph.D.
Research Economist
January 18, 2023
joey.vonnessen@moore.sc.edu

IS A RECESSION REQUIRED TO
READJUST THE ECONOMY?

WHY DID WE SPEED
UP SO MUCH?
A RAPID LABOR MARKET RECOVERY
+
$6 TRILLION FEDERAL STIMULUS

-16.0%
-14.0%
-12.0%
-10.0%
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63 65 67 69 71 73 75 77 79 81 83
Great Recession COVID-19 Recession
S.C. EMPLOYMENT AS PCT. OF PRE-RECESSION PEAK
Source: U.S. Bureau of Labor Statistics, CES-SA
S.C. employment levels currently 2.2% above
pre-pandemic peak

SOUTH CAROLINA EMPLOYMENT RECOVERY
Gains and Losses by Industry Sector
100%
100% 95% 100% 100% 100%
100% 100% 98%
100% 100%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
90.0%
100.0%
Pct. Emp. During Shutdown Pct. Emp. Recovered to Date Pct. Emp. to be Recovered

SOUTH CAROLINA EMPLOYMENT RECOVERY
Current employment levels vs. Feb.’20
90.0%
92.0%
94.0%
96.0%
98.0%
100.0%
102.0%
104.0%
106.0%
108.0%
South
Carolina
Charleston Columbia Florence Greenville Hilton Head Myrtle Beach Spartanburg Sumter
102.2%
105.8%
100.1%
97.7%
102.9%
99.2%
103.2%
102.5%
97.2%

STOCK OF EXCESS U.S. HOUSEHOLD SAVINGS BY QUARTILE
Source: Federal Reserve
In trillions of dollars
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
q120 q220 q320 q420 q121 q221 q321 q421 q122 q222
Q1 Q2 Q3 Q4

STOCK OF EXCESS U.S. HOUSEHOLD SAVINGS BY QUARTILE
Source: Federal Reserve
In trillions of dollars
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
$0.45
$0.50
q120 q220 q320 q420 q121 q221 q321 q421 q122 q222
Q1 Q2

REAL TOTAL U.S. CONSUMER SPENDING
Source: U.S. Bureau of Economic Analysis, in billions
$10,000
$10,500
$11,000
$11,500
$12,000
$12,500
$13,000
$13,500
$14,000
$14,500
$15,000

REAL U.S. CONSUMER SPENDING
Goods Services
Source: U.S. Bureau of Economic Analysis, in billions
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
Jan.'13
Jul.'13
Jan.'14
Jul.'14
Jan.'15
Jul.'15
Jan.'16
Jul.'16
Jan.'17
Jul.'17
Jan.'18
Jul.'18
Jan.'19
Jul.'19
Jan.'20
Jul.'20
Jan.'21
Jul.'21
Jan.'22
Jul.'22
$6,000
$6,500
$7,000
$7,500
$8,000
$8,500
$9,000
$9,500
Jan.'13
Jul.'13
Jan.'14
Jul.'14
Jan.'15
Jul.'15
Jan.'16
Jul.'16
Jan.'17
Jul.'17
Jan.'18
Jul.'18
Jan.'19
Jul.'19
Jan.'20
Jul.'20
Jan.'21
Jul.'21
Jan.'22
Jul.'22

-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
U.S. Employment Real U.S. Consumer Spending
U.S. CUMULATIVE GROWTH SINCE FEB.’20
Source: U.S. Bureau of Labor Statistics, Bureau of Economic Analysis
+7.4%
+0.7%

WHY DOES THIS SUPPLY/DEMAND
IMBALANCE MATTER?

A SUPPLY/DEMAND IMBALANCE
HIGH INFLATION
REDUCES THE AFFORDABILITY OF CONSUMER GOODS
LOWERS CONSUMER SPENDING/ECONOMIC ACTIVITY

U.S. AVERAGE HOURLY EARNINGS
Nov. 2022 vs. Nov. 2020
Source: U.S. Bureau of Labor Statistics
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
14.1%
7.8% 7.2%
9.3%
5.5%
9.6% 10.6%
25.8%

RESTORING SUPPLY AND DEMAND
BALANCE IS THE GOAL OF THE FEDERAL
RESERVE’S INTEREST RATE HIKES
…AND IT IS (SLOWLY) WORKING!

-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
CPI: All Items CPI: All Items Less Food and Energy
U.S. INFLATION RATE (YEAR/YEAR)
Source: U.S. BLS, Consumer Price Index, SA
+6.5%
+5.7%

-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
Jan.'18 Jul.'18 Jan.'19 Jul.'19 Jan.'20 Jul.'20 Jan.'21 Jul.'21 Jan.'22 Jul.'22
U.S. CORE INFLATION (MONTH/MONTH)
Source: Consumer Price Index, SA
3-Month Rolling Average

-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
Zillow Rent Index CPI: U.S. Shelter Rents
GROWTH IN U.S. RENTAL RATES: 2018-2022
Source: Zillow and U.S. Bureau of Labor Statistics
3-Month Rolling Average

HOW ARE INTEREST RATE HIKES
IMPACTING THE HOUSING MARKET?

DIRECT EFFECTS (2022 & 2023)
ANY REDUCTION IN HOUSING SALES DUE TO
DECREASES IN HOUSING AFFORDABILITY
INDIRECT EFFECTS (2023)
ANY REDUCTION IN HOUSING SALES DUE TO
INCREASES IN UNEMPLOYMENT

2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
U.S. MORTGAGE INTEREST RATES
Source: 30-Year Fixed Rate Average, Freddie Mac
6.4%

SOUTH CAROLINA EMPLOYMENT GROWTH
Nov.’22 vs. Nov.’21 Employment Gains by Industry
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
3.7%
6.8%
-4.5%
2.9%
4.6%
10.0%
5.4% 4.2% 3.9%
7.1%
5.7%

600
800
1,000
1,200
1,400
1,600
1,800
CHARLESTON, SC MONTHLY MLS SALES
Source: CTAR Multiple Listing Service; rolling 12-month average

TOTAL CHARLESTON, SC MLS SALES
Year Annual Total
Sales
2016 14,329
2017 14,638
2018 14,564
2019 14,843
2020 17,420
2021 19,057
2022 15,849
Source: CTAR Multiple Listing Service
- Total sales declined by -16.8% in
2022 vs. 2021
- But total sales increased by +6.7%
between 2019 and 2022
- This translates to an average
annual growth rate of +2.2% from
2019 to 2022

U.S. NEW SINGLE-FAMILY HOUSING SALES
Source: U.S. Census Bureau
200
300
400
500
600
700
800
900
1,000
1,100
in thousands

DAYS-ON-MARKET: CHARLESTON, SC
0
20
40
60
80
100
120
140
160

LIST PRICE MINUS SOLD PRICE: CHARLESTON, SC
-$5,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
Buyer
Discount

GROWTH IN CHARLESTON, SC MEDIAN SALES PRICE
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
Pre-pandemic average annual
sales price growth rate: +4.6%

ARE MORE ADJUSTMENTS FOR THE
HOUSING MARKET COMING IN 2023?
WHAT’S NEXT?

• GETTING INFLATION UNDER CONTROL IS THE FED’S
HIGHEST STATED PRIORITY
• BUT MOST OF THE FED’S PLANNED INTEREST RATE
HIKES HAVE ALREADY BEEN IMPLEMENTED
• RATES ARE ONLY PROJECTED TO RISE BY
ANOTHER 50 BASIS POINTS IN 2023
WHAT DO WE KNOW ABOUT FED POLICY?

THE EFFECTS OF INTEREST RATE
HIKES ARE LAGGED!

REAL TOTAL U.S. CONSUMER SPENDING GROWTH
Source: U.S. Bureau of Economic Analysis
-20.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%

MONTHLY GROWTH IN U.S. RETAIL SALES
Source: U.S. Census Bureau
-3.0%
-2.0%
-1.0%
0.0%
1.0%
2.0%
3.0%
4.0%
Nov.'21 Dec.'21 Jan.'22 Feb.'22 Mar.'22 Apr.'22 May.'22 Jun.'22 Jul.'22 Aug.'22 Sept.'22 Oct.'22 Nov.'22
Month/Month 3-Month Rolling Avg.

TOTAL SOUTH CAROLINA EMPLOYMENT
2,060
2,080
2,100
2,120
2,140
2,160
2,180
2,200
2,220
2,240
2,260
in thousands

2.0
3.0
4.0
5.0
6.0
7.0
8.0
2014 2015 2016 2017 2018 2019 2020 2021 2022
U.S. JOB OPENINGS RATE
The job openings rate was significantly
lower the last time unemployment in the
U.S. was at 3.5% (in Feb. 2020)

THE RACE BETWEEN INFLATION
AND CHECKING ACCOUNTS!
THE WINNER COULD DETERMINE
WHETHER WE SEE A “SOFT LANDING”

S.C. UNEMPLOYMENT RATE: 1976-2022
-0.01
0.01
0.03
0.05
0.07
0.09
0.11
0.13
0.15
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Grey bars denote recessions

UNEMPLOYMENT RATE COMPARISONS
S.C. NON-RECESSION AVG. RATE
1976-2022
5.8%
FULL EMPLOYMENT 5.0%
CURRENT S.C. RATE 3.3%

WHAT IS A JOBFUL RECESSION?
…THE OPPOSITE OF A JOBLESS
RECOVERY!

THE BOTTOM LINE
• The South Carolina and U.S. economies have rebounded from the pandemic-
induced recession of 2020 and are still in a relatively strong position
• Housing markets are in the process of readjusting and coming off of their recent
two-year “caffeine high;” sales activity has returned to pre-pandemic growth
norms
• High inflation remains the biggest short-run threat to the economy, and due to
aggressive Fed policy to combat this inflation, most economists estimate the
probability of a recession within the next 12 months to be greater than 50 percent
• Further pullback in housing demand is likely if the labor market weakens and the
unemployment rate begins to rise
• A recession in 2023 would most likely be mild – and the prevalent labor shortage
will help limit any negative impacts to the jobs market

CTAR 2022 Year in Review | Residential Market Update

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