Myrtle Beach area real estate beats U.S. averages

The national real estate market looks pretty bleak, with July sales the lowest in decades, but the Grand Strand real estate market appears to be bucking the trend, with sales, though wavering, not dropping as quickly as other U.S. cities.

Realtors along the Grand Strand aren't too worried yet, because the tax credit, which boosted sales in much of the country earlier this year, had less of an impact here. Low prices, brought down by distressed properties, also are still driving sales along the Grand Strand.

Myrtle Beach has lagged behind national improvements in the real estate market in recent years, said Greg Harrelson, the owner of Century 21 The Harrelson Group.

"I think we've had some really bad numbers at a time when we kind of underperformed the national market and maybe this can kind of be a balancing act," Harrelson said.

Nationally, the number of new homes sold in July was the lowest since 1963 and was worse than expected, according to a Commerce Department report released last week.

Across the country, 276,000 new homes sold - down 12.4 percent from June and down 32.4 percent from July 2009. Existing home sales were also down dramatically, to the lowest level in more than a decade and down 27.2 percent from June, the largest monthly drop since 1968, according to the National Association of Realtors.

"The good news for the Myrtle Beach area is that most of the damage in the Myrtle Beach area was caused by the heat of the price bubble which collapsed ... and subprime mortgages and the effects of both of those is pretty much behind us," said William Harrison, a real estate professor at the University of South Carolina. "[You're] still paying the price, but relatively speaking, not suffering as much."

In metropolitan or more typical real estate markets, buyers are relocating or moving into a bigger house and many sales are fueled by jobs, so when employment drops the market struggles. That's not the case along the Grand Strand. About two-thirds of real estate along the Grand Strand is bought by investors or second-home buyers, so some of the same factors don't come into play, said Tom Maeser, a real estate analyst for the Coastal Carolinas Association of Realtors.

"I think it goes back to what we always allude to, which is our highinvestor market," he said. "We've got some different problems than a lot of the typical big cities do."

Tax credit boosted sales, led to bust

The federal home buyer tax credit helped some buyers along the Grand Strand, but not to the level that it spurred sales in other parts of the country. That means sales here haven't dropped as dramatically as in places where the tax credit was more of a boost since the tax credit ended.

"The way in which really Myrtle Beach is going to be different from the national numbers is that right now the drop that you saw nationally is due almost entirely to the fact that we put an artificial prop into the housing equation, which was the housing credit," Harrison said.

The tax credit, which gave first-time buyers up to $8,000 and other buyers up to $6,500, expired at the end of April but it took several months for the sales to be completed and show up in the statistics.

Harrison said that the improvement in the housing market this past year was almost entirely a result of the demand that was created by the tax credit. The entry-level buyer, who was targeted in the tax credit, does not drive the Myrtle Beach housing market, like it does in other areas, he said.

Along the Grand Strand, single-family home sales were down 7 percent in July when compared with the same month in 2009 and condo sales in July were down 4 percent when compared with the same month in 2009, according to the Multiple Listing Service. Sales for single-family homes and condos dropped again some in August, according to a preliminary report.

Jerry Pinkas, a Realtor with Exit Grand Strand Real Estate, said Realtors he's talked to in other parts of the country said that the home buyer tax credit pulled from future sales so there are now fewer sales.

"We didn't see that here [and] we're just carrying along with our normal sales," he said. "The beach is what's keeping us probably a little more stable than other places."

Prices continue heading down

Real estate prices on the Grand Strand never recovered as they did in other U.S. markets and will likely continue to drop because of short sales and foreclosures here, Realtors said.

The most recent data from the Case Schiller home price index, which was released this week, showed that prices for single-family homes in the 20 metropolitan areas it covers rose 4.2 percent in June compared with the same month the previous year. Harrison, like other analysts, warn that future reports will likely show a drop in prices. Harrison said he predicts a further 10 percent decline in real estate values.

The increase in prices was artificial and created by the tax credit, Harrison said.

"Since [the Grand Strand] market isn't driven by the entry-level buyer ... [it] didn't see prices pop up which was artificial, so [it] won't see part of the fall back down," he said.

The Grand Strand, where prices haven't increased in the past several years, saw the first significant increase in July, when the median price of single-family homes was up 7 percent, when compared with the same month last year. The median price of condos was down 13 percent, according to the MLS.

Several Realtors said that they doubt the increases will stick around and said prices may fall a bit more.

Pinkas said that he expects prices will continue to slip, in part because of all the short sales and foreclosures that will come into the market in the coming months.

Harrelson said that the most recent statistics he gathered show that about one third of all sales are of distressed properties.

Those sales continue to drive prices down but the benefit is that those low prices are attracting buyers, he said.

Buyers are chasing deals

The low prices along the Grand Strand are drawing buyers, mostly investors or those looking for a second home, who see the value in today's market and decide to take advantage, Realtors and analysts said.

The high level of cash sales - close to 50 percent of all July sales were paid for in cash - means that investors are still buying property, he said. Buyers are finding money or changing the type of investments they are making to include real estate, Maeser said.

"We've been very lucky here that people have seen a real benefit of buying now because they see the value of buying now," he said.

If buyers can find the money, they are taking advantage of the low prices, some that are half of what they were at the peak, said Jerry Pinkas, a Realtor with Exit Grand Strand Real Estate.

"Even if they realized in the past they wanted to buy, now it seems it's definitely more affordable for them, so they're actually considering it. In many cases they're doing it," he said.

That's the situation for Bette Kottmyer and Ed Roswog of Lexington, who are looking to buy a second home that will turn into a retirement home when Kottmyer retires. The pair own a condo in Pawleys Island, which they bought in 2002 after vacationing in the area for several years.

"I think before when we were looking we would say, 'wow that's overpriced.' Now we're seeing something and saying, 'wow that's reasonably priced,'" Roswog said.

They've been considering buying a house for several years, but for much of the time it didn't seem affordable, Kottmyer said.

They watched as prices climbed rapidly and it didn't seem to make sense to buy then.

"That was when we felt it was really too high a risk to invest in, even as a second home," Roswog said.

The pair looked at a house in Pawleys Island this week, which is a foreclosure, has never been lived in and is for sale at half the price it would have been a few years ago.

"We don't know where the bottom is. If you wait until it bottoms you'll only know that when it goes back up," Roswog said, adding that they don't want to wait until that happens.

A look ahead

The outlook for the Grand Strand may not be as bad as the national real estate market, but prices likely will continue to decline because of foreclosures.

"We're not as vulnerable in this kind of economy as some of these other cities are," Maeser said, adding that there remains a lot of uncertainty and recovery may still take some time, especially if mortgage lending on oceanfront property remains so difficult, he said.

"Until we see some positive economic signs this could go on for a while," Maeser said.

Harrison said that he thinks that the decline in sales and expected decline in prices nationally will lead to another blow, dipping back down after some improvement, before it is able to recover.

"We are in the beginning of the second double dip in the housing industry," he said.

Radha Herring, the broker-in-charge of Watermark Real Estate, said she is not sure how the national trends will translate, because people buy in an area like Myrtle Beach for different reasons than they do in middle America. While sales were a bit slow in the summer she has appointments lined up this month and said she is optimistic about the fall.

"It's important that we gauge and understand what happens nationally," she said. "[But]I just feel our market is very different."

What worries Harrelson, he said, is a decline of consumer confidence, which he is already hearing from some buyers.

"Myrtle Beach is still popular but we're still a discretionary product," he said. "I personally believe we've got a little bit of a hard time in front of us."