Real Estate News

Condo market on wild ride

Prices for oceanfront condominiums along the Grand Strand have been on a roller coaster in recent years - and have now plunged to levels seen three years ago before the condo boom.

Condo prices skyrocketed in 2005 - increasing $100,000 in less than six months in many cases - but since then have fallen to the levels in late 2004 and early 2005.

"We're exactly where we were three years ago. If we're not there, we're really darn close. It's like we erased the spike," said Mark Loomis, a real estate agent at Advantage Real Estate who specializes in oceanfront condos.

As prices grew higher, investors couldn't afford to buy units that wouldn't generate enough income to cover their mortgage. Flippers got caught with a property worth less than they bought it for, and supply ballooned. Then insurance spikes and mortgage tightening slowed the market to a crawl.

Real estate agents are telling clients it's like getting a second chance to buy that condo that they didn't buy three years ago.

Only resale condos have seen these dramatic price drops. Newly built condominiums seem to be holding their value better, agents say.

"Preconstruction oceanfront is still doing pretty well," said Tom Maeser, president of the Fortune Academy of Real Estate. "It's the resale that's taking a hit."

Case in point: Camelot by the Sea, a themed 230-unit condo tower that opened in 2001 in Myrtle Beach, sold a one bedroom unit in January 2005 for $209,900. The sales topped out at $345,000 six months later. In June, one sold for $176,000 - lower than the 2005 price.

The condo market's rise and fall has made some folks instant money makers and others money losers.

Loomis said he sold a condo at $169,900 in August of 2004. It was a conversion - meaning a hotel room renovated into a condo - that closed in March 2005. That summer, he had a buyer who wanted to purchase his client's unit for $260,000. They passed up the offer. A year later, the same condo had an offer of $200,000. His clients said that was way too low and passed again. Now, the condo is listed for $157,900 - $12,000 less than what the client bought it for initially.

That condo took only 10 days to go under contract for the low $157,900 price - which proves that buyers are out there, Loomis said.

The fall in prices turned a potential $90,100 profit if the client had sold in 2005 into a $12,000 loss.

The tide of the condo boom turned so quickly few saw it coming.

"It's like an instant brick wall on the roadrunner show and there's no skid marks," Loomis said.

Economists say it's not necessarily bad that condos on the Strand's oceanfront have fallen so much. It makes them more affordable to potential buyers, and the price adjustment has happened quicker here than other areas like Florida, said Mark Vitner, economist at Wachovia in Charlotte.

But he doesn't think prices are done falling. He expects they'll go a little further - and sales will rise before prices do.

Agents say these low prices should spur renewed interest in Myrtle Beach's oceanfront - but they're not sure when.

"We still haven't seen the number of pending oceanfront contracts rise. We have a lot of shoppers but not a lot of buyers," Loomis said.

He says investors are waiting, looking for signs that prices have hit the bottom.

"There are a lot of sharks swimming around the ship wreck. One guy would like to buy 10 to 15 oceanfront condos. But he's not buying today. There's no sense of urgency," Loomis said.

Others are choosing to buy now. Dan Hennigar of Philadelphia, an iron worker, recently bought a new condo at Dunes Village. He wanted it instead of his older condo at Beach Cove because he said it was holding its value better.

His Beach Cove condo sold, but not at its boom-time price. He still made money off of it, since he bought it for $110,000 in 2003 and sold it for $167,000 this year.

"I wish I had sold it a year before. I would have made twice the money," he said. "But you can't cry over spilled milk."

Frank Zambetti of New City, N.Y., wants to buy an oceanfront condo in Myrtle Beach, but he's weighing his options.

"I know [prices] will probably come down a little more but I'm not waiting for that," he said. Zambetti's main concern is getting the needed rental income to cover his costs when he's not in town. He plans to visit often to sell his Zamco Building Products.

High prices had caused many investors to get rid of their oceanfront condos because the rental income wasn't enough to cover their mortgage costs, analysts say. Lower prices should make that more doable, Maeser said.

"For the consistent rental investor - those that don't plan to flip properties - this is a good time to be looking at properties," Maeser said.

But Loomis, who invests in condos himself, said he doesn't think we'll know we've hit the bottom until we are three to six months past it.

Some buyers have told Loomis to call them when prices start to go back up.

Investor and owner of Myrtle Beach Condo Store, David O'Connell, said he's seeing out-of-state investors now looking at the area, saying they think the bottom is near and looking to buy. He's seeing pent up demand. The question is, when will it break free?

An influx of speculators to the Grand Strand's oceanfront caused the lightning fast spike in prices. At the height of the housing boom, Myrtle Beach ranked 20th in the nation for the amount of mortgages to investors, Vitner said.

"The runup in prices was way overdone. It priced a lot of buyers out of the market, who were hoping to flip properties and make a quick profit," Vitner said.

Insurance increases, high prices and now mortgage tightening brought the market to a crawl.

But the pace at which prices have adjusted is a good sign, Vitner said, although sales will grow before prices will creep up.

So how low will they go?

Vitner thinks they'll fall a little bit further.

"We're not going to see strength return to the market for another year," Vitner said.

Loomis said that basic economics dictates that prices may still have room to fall because inventory is still slowly rising.

Contact JENNY BURNS at 626-0305 or jeburns@thesunnews.com.

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