Study shows how much real estate prices have dropped in Myrtle Beach area since bust

jfrost@thesunnews.comSeptember 29, 2012 

— Sales of single-family houses along the Grand Strand are up over last year, but prices have dropped nearly $63,000 since they spiked in 2007 because of foreclosures and short sales, according to a new study.

The median sales price of Horry County houses peaked in 2007 at $223,650, and has declined each year since with today’s home price estimated near 2004 levels at $161,000, according to a report from SiteTech Systems, a local company that tracks the real estate market.

The prices began to decline after 2007 when the supply of houses outpaced the demand. Prices were inflated based on an artificial demand, there were relaxed underwriting standards, unemployment was on the rise, and the economy took a downturn, said Todd Woodard, president and chief operating officer of SiteTech Systems of Myrtle Beach. That caused a growing number of homeowners to go underwater where they owe more on the mortgage than the house is worth and resulted in more default and distressed properties, Woodard said.

Those distressed properties - the foreclosures and properties nearing foreclosure that are sold as short sales- typically sell for significantly less than other properties on the market, which drives down overall property values, said Tom Maeser, a real estate analyst for the Coastal Carolinas Association of Realtors.

Several local Realtors say overall prices are bottoming out, with Grand Strand prices rising 3 percent in August for single-family houses, according to the Multiple Listing Service.

“When we start to see three to four months of prices increasing, we are getting rid of foreclosures, which mean a healthy market,” Maeser has said.

The median sales price of single-family houses has been consistently about $190,000 over the last three years, while the price on short sales and bank-owned properties has steadily dropped each quarter, according to SiteTech’s report.

“Sales activity is up compared to last year; however sales prices are still down…exclusively driven by distressed sales because properties are being sold for less than historically they have been,” Woodard said.

The median sales price on short sales was at $143,500 from April through June this year, down from $155,600 during the same period in 2011 and down from $190,000 during the same period in 2010, the report stated. The price for bank-owned properties was $119,900 during the second quarter this year, down from $126,250 the second quarter in 2011, and down from $140,500 the second quarter of 2010.

Bank-owned sales, which are 62 percent of the distressed sales, have been pulling the overall median sales price down about five to seven percent each year.

Now that percentage is more at about two percent each year, Woodard said.

It may be down but not at the level as before, which means the area is starting to stabilize, Woodard said.

Roger Fouch, a Realtor with Coldwell Banker Chicora’s Carolina Forest office whose specialties include foreclosures and short sales, said overall prices are going up because banks are letting out a few properties at a time into the market.

“Prices are going up a little bit here in the last few months overall,” Fouch said. “One reason is that banks are doling out a few foreclosures and short sales so they don’t drive prices drastically down.”

Prices will stabilize and rise when the rate of distressed sales decline, according to SiteTech’s report.

About 28 percent of all single-family house sales are foreclosures or short sales even though foreclosures and short sales make up 19 to 20 percent of the area’s inventory of single-family houses, according to the report.

A lot of distressed sales of single-family houses are in the Carolina Forest, Forestbrook/Socastee and Conway areas.

“New subdivisions are popping up where we saw the greatest concentration of distressed sales [in those areas] because that’s where more activity is with single-family residential,” Woodard said.

About 397 houses sold along the Grand Strand in August compared to 357 houses during the same month last year, according to a market report from SiteTech Systems.

About 109 Grand Strand houses that were foreclosures or short sales sold in August compared to 81 houses in August 2011, the market report stated.

Danielle Vallario was a homeowner who did a short sale on her three-bedroom Myrtle Beach area condo.

Vallario, who bought her condo for $77,900 in September 2009, said she started to have financial problems and got behind a couple of mortgage payments this year. She ended up selling her condo for $44,800.

“Maybe I was too young and shouldn’t have bought,” said 24-year-old Vallario, who has a 2-year-old son.

Vallario now lives in a two-bedroom condo that she is renting, which makes it easier, but she is still struggling, Vallario said.

The area would be able to get rid of properties faster if it does more short sales because the process is quicker and there’s a better recovery for the banks, Woodard said. He said bank-owned properties have been selling at a higher discount than short sales.

“If the banks still have a large amount of (shadow inventory) foreclosures to place on the market we could continue this trend for years to come,” Scott Ellis, broker associate with Remax Southern Shores in North Myrtle Beach and president of the Coastal Carolinas Association of Realtors, said in an email.

Fouch said it could be two to three years before the area’s foreclosures and short sales are gone completely.

The area’s inventory of distressed properties has been declining.

The area’s inventory dropped from 831 to 781 listings of distressed single-family homes in August compared to August 2011, the market report stated.

Overall, there are close to 5,000 distressed properties along the Grand Strand, meaning one out of 50 parcels is distressed, the report stated. Out of the 5,000 properties, more than 3,400 are bank-owned, with most of those properties being vacant residential lots, the report stated.

The Grand Strand’s inventory for non-distressed single-family houses dropped from 4,821 listings to 4,725 in August compared to August 2011, the report stated.

A declining inventory of single-family houses, job growth and improved consumer confidence will also strengthen the Grand Strand’s real estate market and get many “fence sitters” – those people waiting to buy – back into the market, Woodard said. Buyers are enjoying lower-than-ever interest rates, with the rate on a 30-year mortgage falling to 3.40 percent last week - another record low.

Fouch said those who have been waiting to buy are starting to come off the fence because they “realize we’re at the bottom of pricing and at the bottom of interest rates.”

Ellis said most of those he has been dealing with understand the market conditions and are moving to purchase.

“The feeling I receive from most is that we are close enough to the bottom they feel they will get a return on [their] investment because they are not planning on trying to flip or resale in six months,” Ellis said in his email. “The market appears to be rebounding. If things continue to improve, I think next year could be a very positive year for real estate along the Grand Strand.”

Contact JANELLE FROST at 443-2404.

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